Suomen Osuuskauppojen Keskuskunta SOK Corporation - S

Transcription

Suomen Osuuskauppojen Keskuskunta
SOK Corporation
Annual Report 2005
Suomen Osuuskauppojen Keskuskunta
SOK Corporation
Annual Report 2005
1
Contents
4 CEO’s Review
7 The S Group
13 SOK Corporation
19
19
21
22
24
26
28
Business-by-business review
Market trade
Service station stores and fuel sales
Department store and speciality store trade
Hotel and restaurant business
Motor trade and accessories
Agricultural trade
29 Procurements and logistics
31 Neighbouring countries
32 Corporate governance within SOK Corporation
38
38
43
46
Accountability
Personnel
Environment
Sponsorship and international contacts
48
48
54
55
56
57
58
59
60
63
77
78
79
79
Financial Statements 2005
Executive Board Report on Operations
Consolidated Income Statement
Consolidated Balance Sheet
Consolidated Cash Flow Statement
SOK Income Statement
SOK Balance Sheet
SOK Cash Flow Statement
Accounting Policies
Notes to the Consolidated and SOK Income Statement and Balance Sheet
Key Ratios and their Method of Calculation
Executive Board’s Proposal for the Disposal of SOK’s Profit for the Year
Auditors’ Report
Statement of the Supervisory Board
3
CEO’s Review
The S Group’s cooperative enterprises
– customer-owners’ own store
The S Group’s task is to provide services and benefits for its
members, its customer-owners. This mission guides both strategic
development and practical operations, and it underlies day-to-day
service for customer-owners at all our S Group locations.
Carrying out the mission is thus the starting point and goal
of everything the S Group does. The performance of the entire
Group can be assessed by how well we have succeeded in accomplishing this task.
What kind of retail and service organisation does the S Group
want to be over the next few years? We have jointly sought an
answer to this question during 2005. As a result of discussions and
brainstorming, the new “Your Own Store” vision has been forged.
In every aspect of its operations, the S Group strives to give our
customer-owners the feeling that when they are in one of our locations, they are customers of their own store.
The S Group’s owners are more than 1.5 million Finns. This
group of companies is Finnish in its objectives, in the way it operates and by virtue of its core values.
Furthermore, the Your Own Store vision defines the S Group as
a Finnish group of companies which is decidedly modern in the
way it operates and international – in its sourcing activities, for
example.
The S Group operates through a regional cooperative enterprise structure that bestows a distinct regional identity upon the
cooperative enterprises. In the Your Own Store vision, regional
operations bring the cooperative enterprise’s services close to customer-owners because the cooperative enterprises know the special
needs of customer-owners in their own territory. Decision making
takes place in the cooperative’s own territory and cash flows are
largely retained to further the development and future of each
individual region.
The S Group is a cooperative group of companies. The members
of a cooperative enterprise have a say in deciding how the store
operates by taking part in its different administrative bodies. One
of the central tenets of the Your Own Store vision is that members
are on an even and equal footing. In a cooperative enterprise, the
members are genuinely customer-owners who are involved in
operations and in decision making.
The Your Own Store vision stresses that the S Group is a
retail and service company with a human face. The cooperative
enterprises and SOK Corporation strive to operate in a responsible
manner both within Finnish society and economic life and in the
international operating environment. Purposeful and long-term
development work, healthy finances, openness and trust among
the personnel and other stakeholders coupled with a customer
focus that flows from our regional structure and is bolstered by
a respect for sustainable ethical values in business – these are
the characteristics which the companies in the S Group wish to
emphasise.
The Your Own Store vision furnishes a framework for carrying out the S Group’s mission in day-to-day operations. This is
the kind of retail and service company the S Group aspires to be
– now and in the future.
4
Increasing patronage by our
customer-owners
The S Group succeeded well in carrying out its mission last year.
Bonus sales targeted at customer-owners outstripped the
S Group’s overall sales growth. Customer-owners thus showed their
confidence in the S Group and the way it operates. Over 115,000
new customer-owners became members of cooperative enterprises
during the year. At the end of the year, the cooperative enterprises
had a total of 1,534,710 members, representing 64 per cent of all
Finnish households.
More and more, customer-owners are making the bulk of their
purchases at S Group locations. This is one of the Group’s success
factors. Bonus sales accounted for 63 per cent of the S Group’s
sales in 2005, up 13 per cent on the previous year, whereas the
S Group’s overall sales in Finland increased by 6.6 per cent. Bonus
sales accounted for over 70 per cent of sales in the grocery, service
station store, fuel and department store trade.
When customer-owners make the bulk of their purchases at our
locations, they receive a cash bonus. The Bonus paid to customerowners reached a total of EUR 194 million in 2005. Bonuses paid
to members increased by 16 per cent on the previous year. The cooperative enterprises will furthermore distribute to their members,
for the 2005 financial year, interest on cooperative capital and a
payout from surplus funds to a total amount of about EUR 15–20
million.
The S Group’s cooperative enterprises and SOK Corporation
have participated in a number of nationwide and regional development projects involving business, culture and sports during 2005.
These initiatives have been a means of developing economic, social
and cultural well-being in different parts of Finland in accordance
with the S Group’s principles of responsible business operations.
Part of the earnings of the cooperative enterprises and SOK Corporation are used for the benefit of the membership and local areas
via community activities of this kind.
Financial performance of the S Group
and SOK Corporation
The S Group’s retail sales in Finland in 2005 totalled EUR 8,464
million. The increase on the previous year was 6.6 per cent. Sales
outpaced the market, particularly in the supermarket trade as well
as the service station store and fuel trade. Apart from the motor
trade, the other business areas also achieved sales growth that was
at least on a par with the market average.
The cooperative enterprises reported retail sales of EUR 7,244
million, or 85.6 per cent of the S Group’s sales. SOK Corporation’s
share of this figure was 14.4 per cent last year.
The S Group’s grocery trade grew by 6.9 per cent in Finland,
reaching EUR 4,237 million.
The S Group’s grocery sales last year grew at a considerably faster
rate than the nationwide average. This meant that the Group’s
market share of the grocery trade strengthened markedly last year.
Sales by the ABC service station stores and fuel outlets likewise
clearly outpaced the average rate of growth in Finland.
SOK Corporation’s net turnover in 2005 totalled EUR 4,209
million (up 11.3%). In line with the S Group’s strategy, business
CEO’s Review
that is targeted directly at customer-owners has been transferred
from SOK Corporation to the cooperative enterprises, notably in
the department store business area.
Net turnover from business operations amounted to EUR 1,473
million of SOK Corporation’s total net turnover. Sourcing companies’ share of SOK Corporation’s net turnover has grown rapidly
over the past few years. This happened in 2005 too. Last year the
net turnover of SOK Corporation’s sourcing companies that procure goods and services for the cooperative enterprises and SOK
Corporation’s operating companies already rose to EUR 1,273
million. A notable sales increase was reported by North European
Oil Trade Oy, the subsidiary that is engaged in fuel procurement.
SOK’s operating companies in the Baltic area generated sales of
EUR 169 million last year (up 11.7%). Supermarket sales as well
as the hotel and restaurant business saw an especially favourable
sales trend. Sales by the operating companies in the Baltic area are
not included in the S Group’s retail sales figures presented above.
SOK Corporation’s profit before extraordinary items amounted
to EUR 69.0 million in 2005, an increase of EUR 14.7 million on
the previous year’s earnings.
The S Group’s near-term challenges
International competition will increase in all the S Group’s business areas over the next few years. Consumer behaviour is likewise
becoming more differentiated, and knowledge-based management
is gaining in importance. It is by developing its business and service operations that the S Group must meet these challenges.
The sourcing and service functions which SOK Corporation
carries out for the entire S Group will become an ever more
prominent success factor for the S Group in coming years. SOK
Corporation is increasingly taking on the role of a service, competence and procurement centre for the entire S Group.
In harmony with the Your Own Store vision, the S Group must
further develop the range of services it offers its customer-owners. As our customer-owners’ needs become ever more diversified
and new service needs arise, we must cope with the challenge of
developing our services. Over the next few years this will mean a
substantial increase in investments. The strategies of all our business areas can thus be characterised as growth-driven.
The S Group’s near-term development projects will be geared
towards reinforcing the S Group’s strategic success factors. The
cost-effectiveness of our retail, service and sourcing functions must
be boosted further. The S Group has devoted resources and effort
to putting in place precision management of the long value chains
for our businesses and services, and so far we have made substantial headway.
Customer-ownership combined with a regional cooperative
enterprise structure is a strong competitive advantage for the
S Group. We have launched a number of important development
projects with the aim of being able to make better use of customerowner information in developing our operations.
5
CEO’s Review
Development work over the next years will give our service network greater reach and depth. New investments in operating locations together with major acquisitions will increase sales generated
by our different business areas. The acquisition of Suomen Spar
Oyj, the purchase of the shares in Auto-Kivitila Oy in Tampere
and the transfer of Stockmann plc’s vehicle business in Espoo and
Turku to the ownership of SOK’s subsidiary Maan Auto Oy will
bring a significant improvement in the S Group’s service network
over the years ahead.
The business acquisitions can be considered highly appropriate from the perspective of developing our service offerings to
customer-owners, and they also fit in well with the growth strategies which the S Group has defined. In particular, the investments
in car dealerships will bring higher income flows from SOK
Corporation’s business operations in future years and improve the
Corporation’s financial performance.
The S Group is seeking to develop a wider range of financial
services for its customer-owners. Following extensive exploratory
studies, the S Group founded its own banking company in February of this year. The deposit bank, which will begin operations as
an SOK subsidiary, is a far-ranging and major strategic investment
for the entire S Group. Its significance for customer-owners and
the competitiveness of the entire S Group will show up in the years
ahead in the form of improved financial services for customerowners and a step-up in the efficiency of the S Group’s financing
functions.
Now that the sourcing company Inex Partners Oy has become
an SOK subsidiary at the end of January 2006, there will be
greater scope for enhancing the S Group’s long value chain in the
grocery and consumer goods trade. Making this large sourcing
company a part of SOK Corporation’s organisation will nevertheless call for a carefully planned and co-ordinated integration process in order to secure the sought-after procurement benefits.
The S Group currently has in the planning or implementation
stage a number of strategically important business and service
development projects. A wider range of well-being services for
customer-owners, a stronger vehicle sales organisation, the development of speciality store sales and the expansion of operations to
nearby areas are examples of strategic development projects across
the entire S Group that will bring tangible benefits in the years
ahead.
People stand behind success
The effectiveness of all the strategies we have planned is tested at
the S Group’s different locations in daily encounters between management, supervisors, the staff and our customers. The moment
of truth for carrying out the S Group’s mission and the Your Own
Store vision lies in these situations and in making them click. The
competence of management, supervisors and employees, the ability to pay attention to and understand members’ service needs as
well as a friendly service-mindedness will underpin the S Group’s
success in future years too. The S Group has a good and skilled
staff. I thank all of you most warmly for your work on behalf of
the S Group.
6
A cooperative organisation that is run by its owners has been and
still is one of the S Group’s prime strengths. Our owners’ administrative work and decision making has shown expertise, a deep and
broad grasp of matters and a far-reaching outlook. The dialogue
with management has brought a positive dynamism to the Group’s
development. My thanks go to all those who have been involved
in owner-administration within the S Group for the valuable work
you have done.
The companies that have been our bonus partners have made an
important contribution to rounding out our services for customerowners. We have co-operated together in a good spirit, with an eye
to development. My sincere thanks go to our bonus partners and
all our business partners for your co-operation during 2005.
I wish to express my special gratitude to the S Group’s customer-owners – the members of the cooperative enterprises – for
your strong and ever-growing commitment to using the S Group’s
services. You have taken part in building the ever-developing S
Group. You have been exemplary in carrying out the Your Own
Store vision in practical everyday dealings as customer-owners of a
cooperative enterprise. My warm thanks to all of you.
Helsinki, 23 January 2006
Kari Neilimo
The S Group
What is the S Group?
The S Group is a major Finnish cooperative retail and service
group. It is made up of Suomen Osuuskauppojen Keskuskunta
(SOK) with its subsidiaries, 22 independent regional cooperative
enterprises and 19 local cooperative enterprises. The members, or
customer-owners, own the regional cooperative enterprises, which
in turn own the central organisation, SOK.
The purpose of the S Group’s entire spectrum of operations is to
provide services and benefits for its members. The backbone of operations is our core values: a customer focus, partnership, renewal,
excellence and responsibility.
The S Group’s main strategic goal is to offer its members
everywhere in Finland versatile services and an extensive network.
In line with its strategy, the S Group operates efficiently, working for the benefit of its members and making the best use of the
Group’s information, know-how and co-operation networks.
The S Group’s businesses
The S Group’s business areas are the supermarket trade, the service
station store and fuel trade, the department store and speciality
store trade, the hotel and restaurant business, vehicle and automotive accessories sales and the agricultural trade.
The S Group’s operations are organised into nationwide chains.
Joint support and development services are produced on a centralised basis. When chain operations are combined with the regional
cooperative enterprises’ good local knowledge of the market and
customers, the result is an efficient business model the S Group
way.
The S Group’s nationwide chain brands are Prisma, S market,
Sale and Alepa in the grocery trade; ABC in the service station
store and fuel trade; and Sokos and Emotion in the depart-
ment store and speciality store trade. In the hotel and restaurant
business, the nationwide chains are Sokos Hotels, Radisson SAS
Hotels, Rosso, Rosso Express, Fransmanni, Amarillo, Sevilla,
Memphis, Night, Corner, Coffee House and Presso. The nationwide chain in the agricultural trade is Agrimarket.
In addition to the domestic market, the S Group carries on
international operations in the Baltic countries in the supermarket
trade, the hotel and restaurant business and the motor trade.
At the end of the year the S Group had 1,392 locations in Finland, and 10 locations in the Baltic countries.
The Group had a payroll of 28,092 employees, of whom 23,040
were employed by the cooperative enterprises with their subsidiaries and 5,052 were SOK Corporation staff.
Customer-ownership underpins
our operations
The S Group’s cooperative heritage is reflected today in customerownership. It underpins planning and development in all business
areas and is an overriding success factor.
At the end of 2005 the S Group had 1,534,710 members. Last
year over 115,000 new members joined.
An extensive and versatile service network everywhere in
Finland, good-quality and affordable product and service offerings, and highly skilled staff form the foundation for serving our
customer-owners and realising the S Group’s business idea. The
regional cooperative enterprises are always close to their customerowners.
Purchases by members already accounted for 63 per cent of
the S Group’s retail sales in 2005 and this proportion is on the
increase. Members were paid purchase bonuses totalling EUR 194
million for their patronage of the S Group’s locations.
The S Group is composed of 22
member-owned regional cooperative enterprises and SOK Corporation, which is owned by the
cooperative enterprises. The primary division of labour is that the
regional cooperative enterprises
handle the practical provision of
goods and services for members
and SOK acts as a development
and steering organisation. SOK
furthermore carries on business
operations through its subsidiaries. In essence, the S Group is a
strategic network of companies.
7
The S Group
Apart from Bonuses, customer-owners benefit from their membership in other ways too. For example, they receive a wide range
of constantly changing price and service benefits, and Yhteishyvä
magazine is mailed to their home once a month.
The S Group continually develops the spectrum of services it
offers its members. The Group’s own operations in Finland and
abroad are rounded out by the offerings of carefully chosen bonus
partners. In 2005 the S Group’s bonus partners operated in the insurance, healthcare, optician services, furniture sales, tourist trade,
energy and communications sectors.
Another major benefit is that members have a real say in how
their own cooperative enterprise and the S Group are run.
The S Group’s Your Own Store concept
In a network-type of company like the S Group, the corporate
vision plays a big role in steering operations. During 2005, the
S Group’s vision was updated in CEO Kari Neilimo’s book Your
Own Store.
The main elements of the vision are set out in the CEO’s review
at the beginning of this Annual Report.
The Your Own Store concept builds on the S Group’s previous visions. It deepens the fundamental tenets that have guided
cooperative activities across the S Group throughout its 100-year
history. This logical evolution is portrayed in the triangle diagram
below.
Regional Cooperative enterprises
of the S Group
Cooperative Society Varuboden, Kirkkonummi
Southern Karelia Cooperative Society, Lappeenranta
Southern Ostrobothnia Cooperative Society, Seinäjoki
Helsinki Cooperative Society Elanto, Helsinki
Cooperative Society Jukola, Nurmes
Cooperative Society Keskimaa, Jyväskylä
Koillismaa Cooperative Society, Kuusamo
Cooperative Society Arina, Oulu
Cooperative Society Hämeenmaa, Lahti
Cooperative Society Keula, Rauma
Cooperative Society KPO, Kokkola
Cooperative Society Maakunta, Kajaani
Cooperative Society Osla, Porvoo
Cooperative Society PeeÄssä, Kuopio
Cooperative Society Suur-Savo, Mikkeli
Cooperative Society Ympyrä, Hamina
Cooperative Society Ympäristö, Kouvola
Pirkanmaa Cooperative Society, Tampere
Northern Karelia Cooperative Society, Joensuu
Satakunta Cooperative Society, Pori
Suur-Seutu Cooperative Society SSO, Salo
Turku Cooperative Society, Turku
Cooperative
Activities
Customerownership
Members
Services
Market economy
with a human face
Regionality
A cooperative is based on
the idea of producing services
for its members. This was
made possible by means of
a company set up in the form
of a cooperative.
Efficiency
In the Your Benefits in Finland and Your Partner
in Finland visions, the cooperative philosophy was
embodied in the idea of customer-ownership.
Services are produced for members regionally
and efficiently.
Community
of people
Successful
company
The Your Own Store vision means a cooperative enterprise cluster that stands for market
economics with a human face. The S Group is in business for the long term. It operates
in a way that emphasises both human values and efficiency, whilst also ensuring the
company’s success over the long term. Membership in cooperative enterprises that work
for the good of their local area has also become a matter of pride and commitment:
the cooperative enterprises are taking on an ever-more central role in the community.
8
The S Group
The S Group’s key figures in 2005
S Group’s retail sales
S Group’s retail sales in Finland
S Group’s profit before
extraordinary items
Cooperative enterprise retail sales
Cooperative enterprise profit before
extraordinary items
S Group’s investments
S Group’s bonus sales
Bonus paid to customer-owners
€ millions
8 633
8 464
Change %
+6.8
+6.6
398
7 244
+24.0
+8.8
329
315
5 331
194
+23.2
-2.5
+13.0
+16.0
4 745
972
365
635
688
1 043
169
+6.8
+22.2
+5.0
+2.0
-3.9
+4.4
+11.7
S Group’s retail sales by business area
Supermarket trade
Department stores and speciality stores
Motor trade and accessories sales
Agricultural trade
Baltic operations
S GROUP´S BONUS SALES
MEMBERSHIP
S GROUP RETAIL TRADE BY BRANCH 2005
S GROUP RETAIL TRADE
9
S-ryhmä
10
The S Group
S Group Key Figures 2001–2005
2001
2002
2003
2004
2005
±%
2 915
35
35
2 998
35
55
3 112
34
46
3 781
40
53
4 209
43
62
11.3
5.8
17.1
-3
-1
2
3
7
113.7
39
32
55
44
52
35
54
40
69
57
1 337
530
129
678
435
16
21
865
1 372
496
133
742
457
17
12
887
1 449
473
135
841
445
17
9
978
1 609
423
137
1 049
456
17
6
1 130
1 827
398
161
1 268
492
14
2
1 318
413
322
90
465
420
45
495
503
-8
555
658
-102
661
790
-129
4 537
4 645
4 949
4 790
5 052
5.5
1 494
1 399
1 669
1 579
1 693
1 597
2 194
2 086
2 536
2 442
15.6
17.1
-9
11
4
14
28
23
25
30
6
32
494
505
538
631
696
10.3
COOPERATIVE ENTERPRISES + SUBSIDIARES
5 340
Sales
43
Number of enterprises
987 037
Membership
5 640
43
1 078 649
5 894
43
1 187 074
6 652
42
1 468 572
7 244
41
1 534 710
8.9
-2.4
4.5
18 078
18 169
18 488
21 563
23 040
6.8
6 554
1 216
6 858
1 222
7 149
1 252
7 929
1 371
8 464
1 392
6.6
1.5
22 615
22 814
23 437
26 353
28 092
6.6
EUR million
SOK CORPORATION
Net turnover
Depreciation
Operating profit
Financial income and expenses
(without value adjustments)
Profit/loss before extraordinary items,
appropriations and taxes
Profit/loss for the financial year
Totalt assets
Fixed assets
Stocks
Current assets (without stocks)
Capital and reserves (incl. capital loan)
Minority interest
Provisions for liabilities and charges
Creditors
Interest-bearing creditors
Liquid funds
Net interest-bearing creditors
Personnel at 31 Dec.
SOK
Sales (excl. VAT)
Sales to cooperative enterprises
Operating profit before extraordinary
items, appropriations and taxes
Profit/loss for the financial year
S GROUP
Retail sales
Outlets
15 €M
17 €M
13.5
-5.9
17.5
20.9
7.9
-21.1
-56.0
16.7
19.0
20.1
-26 €M
-20 €M
2 €M
CALCULATION OF KEY RATIOS
Liquid funds = Cash in hand and at bank + investments
Net interest-bearing creditors = Interest-bearing creditors - liquid funds
11
The S Group
S Group Retail Locations
at 31 December 2005
Prisma hypermarkets
S Markets
Sale and Alepa stores
Market chains
Other market outlets and
Neighbourhood stores
Supermarket trade
The S Group’s retail sales by
business area 2005
Number
47
372
260
679
Change
1
3
18
22
23
702
-2
20
Sokos department stores
Emotion speciality stores
Other speciality stores
Department stores and
consumer goods outlets, total
20
11
15
4
3
46
7
Sokos Hotels
Radisson SAS Hotels
Other hotels
Hotels, total
38
6
3
47
2
-3
-1
Restaurant catering to diners
Drinks and socialising restaurant
Restaurants providing entertainment
Other restaurants
Cafes
Separate restaurants
71
93
10
22
34
230
3
-7
3
-2
1
-2
Hotels and restaurants, total
277
-3
Agrimarkets
Machine Centres
Other farm supply and hardware stores
Farm supply and hardware locations
131
8
14
152
-1
1
-2
46
1
71
31
54
3
159
9
-6
-6
-3
10
1
1 392
21
Car lealerships
ABC service station stores
Other service station stores
ABC unmanned stations
Other unmanned stations
Service station stores and fuel sales 1)
Other locations
S Group locations, total
EUR million
1 881
2 341
495
4 717
Change
+6.4
+6.6
+7.2
+6.6
28
4 745
+71.9
+6.8
ABC service station stores
Other service station stores
ABC unmanned stations
Other unmanned stations
ABC fuel oil service
459
131
347
12
23
972
+33.6
-5.1
+22.3
-13.6
+42.3
+22.2
Emotion speciality stores
Other consumer goods
Department stores and speciality stores
312
12
41
365
+4.7
+25.0
+2.5
+5.0
Restaurant catering to diners
Drinks and socialising restaurant
Restaurants providing entertainment
Other restaurants
Cafes
Restaurants
169
99
21
132
31
453
+4.0
+2.8
-1.2
+0.9
+0.5
+2,3
Sokos Hotels
Radisson SAS Hotels
Other hotels
Hotels (accommodation)
137
42
3
182
+11.1
+4.9
-82.8
+1.1
635
+2.0
Automaa
Other car dealerships
188
499
688
-9.8
-1.5
-3.9
751
130
100
61
1 043
+6.4
-2.6
-4.5
+13.4
+4.4
16
+26.3
8 464
+6.6
Prisma hypermarkets
S Markets
Sale and Alepa stores
Market chains
Other supermarket trade
Supermarket trade
Agrimarkets
Machine Centres
Grain trade
Other agricultural trade
Agricultural trade
Others
1)
S Group retail sales, total
The number of locations does not include stores or stations
at other locations.
Total number of ABC service station stores
Total number of other service station stores
Total number of ABC unmanned stations
Total number of other unmanned stations
Total
12
71
27
191
15
304
9
-5
23
-3
24
SOK Corporation
SOK Corporation comprises Suomen Osuuskauppojen Keskuskunta (SOK) and its subsidiaries: Sokotel Oy, which runs
the hotel and restaurant business; the Maan Auto Group, which
sells vehicles and car accessories; Hankkija Maatalous Oy, which
is engaged in the agricultural and hardware business; the Sokos
companies that carry on the department store and speciality store
trade; Intrade Partners Oy, which is responsible for consumer
goods sourcing and logistics; Rainex Yrityspalvelu Oy, a hardware
and building supply wholesaler as well as the fuel procurement
company North European Oil Trade Oy (NEOT).
In addition, the subsidiaries AS Prisma Peremarket, AS Sokotel
and the Kommest Auto Group operate in the Baltic countries.
The Inex Partners Oy Group, which produces grocery assortment, sourcing and logistics services, was an associated company
of SOK up to 28 February 2006. SOK purchased from Tradeka
(Cooperative Tradeka Corporation) all the shares it owned in Inex
Partners Oy, which thereby became a wholly-owned subsidiary of
SOK.
SOK’s operational scope and
strategic positioning
SOK’s purpose is to create competitive advantage for the S Group’s
businesses. SOK carries out its operational aim by developing and
guiding the S Group’s strategies, value chains and chain operations
in co-operation with the cooperative enterprises. SOK provides
the joint, competitiveness-enhancing services that the S Group
requires and carries on the business activities specified for it, which
supplement the S Group’s service offerings.
The S Group’s strategy sets the framework for the competitive
strategies of the S Group’s business areas and defines SOK Corporation’s strategy and the strategies of the cooperative enterprises.
The S Group’s strategic business areas are the supermarket trade,
the service station store and fuel trade, the department store and
speciality store trade, the hotel and restaurant business, vehicle
and automotive accessories sales and the agricultural trade. SOK’s
chain management functions ensure that the strategies of the S
Group’s business areas are carried out in accordance with the entire
organisation’s objectives. SOK Corporation’s strategy sets out the
tripartite task described below.
Within the S Group, the areas of responsibility assigned to
SOK are:
Joint development and steering functions
– Strategic development, decision-making and management
– Development and control of value chains and chain operations
– Development of new business models
– Development and support of customer-ownership
– Safeguarding the S Group’s interests and operations
Joint services
– The provision and arrangement of sourcing and logistics services
in a way that boosts the efficiency of the value chains.
– Continuous development and maintenance of the operational
models for the other joint services so that they provide cost-effective and value-added services for the S Group.
The principal joint services are connected with financing, accounting, IT, human resources, training, development, real estate,
customer-ownership, marketing as well as communications and
publications.
The S Group’s strategies for sourcing and service functions support the competitive strategies of the business areas and define the
objectives for producing added value for each business across the
entire value chain.
SOK Corporation’s net turnover
by business area
EUR million
1.1.–31.12.
2005
Supermarket trade
81
Fuel sales
744
Deparment stores and speciality stores
36
Hotels and restaurants
177
345
Agricultural trade
827
Consumer goods sourcing
534
EDI invoicing
1 406
Real-estate, rental and other service operations
210
Share of associated companies’ profits
Eliminations
-150
Total
4 209
SOK Corporation’s operating
profit by business area
EUR million
1.1.–31.12.
2004
59
444
97
169
356
827
492
1 304
204
± prev. year %
-171
3 781
-12.6
11.3
37.5
67.3
-62.6
4.5
-3.1
0.1
8.6
7.8
2.6
EUR million
1.1.–31.12.
2005
2.5
1.6
0.8
14.6
4.8
8.3
-0.0
0.2
6.8
2.4
20.3
62.3
EUR million
1.1.–31.12.
2004
0.6
-0.9
4.2
10.6
9.1
12.8
2.5
0.3
12.4
1.8
-0.3
53.2
13
SOK Corporation
Profitable business operations that round out the
S Group’s offerings
– In Finland
– In neighbouring countries
– Pilot operation of new business concepts in co-operation
with the regional cooperative enterprises
SOK Corporation’s financial
performance in 2005
SOK Corporation posted operating profit in 2005 of EUR 62.3
million (53.2), up 17.1 per cent on the previous year. SOK Corporation’s profit before extraordinary items was EUR 69.0 million
(54.4). The figure includes other operating income, a share of the
associated companies’ profits, write-downs on non-current assets
and investments, including reversals on them, and the change in
obligatory reserves. SOK Corporation’s operational result, which
does not include the items mentioned above, was smaller than the
previous year’s earnings. SOK Corporation’s capital expenditures
in 2005 totalled EUR 68,2 million (53). A more detailed discussion of SOK Corporation’s good performance in 2005 is given in
the Executive Board Report on Operations in the latter part of this
Annual Report.
SOK Corporation’s service functions
The aim of the service functions provided by SOK Corporation
is to develop operational models and processes that generate the
maximum added value for the S Group’s businesses. The task of
the service functions is to develop and maintain business models
that increase the competitiveness of the entire S Group, thereby
producing cost-effective services for the S Group. The role specified for joint service functions is to provide for the S Group’s other
units the kinds of service functions that can be consolidated to
yield cost savings and/or a qualitative improvement in operations.
SOK strives to carry out the tasks defined for it in a customer-oriented, cost-effective and competitive manner so as to strengthen
the S Group’s operational efficiency, quality and resources.
Strategic development and human resources
The purpose of Strategic development and human resources
functions is to generate added value for the business and service
functions by supporting the S Group’s management and units in
developing and implementing strategies as well as by acquiring and
developing the correct know-how and information.
The strategic development and human resources functions work
using a customer-oriented and innovative approach in close cooperation with the S Group’s management, chains, the regional cooperative enterprises and service functions, making effective use of
their own internal synergies. Carrying out these tasks is organised
into five different units: Development Functions, eBusiness, HR
Administration and Development, Occupational Health Services
and the Jollas Institute training unit.
The Strategic Development unit supports the S Group’s management and other units in developing and implementing strategies,
and reports on the achievement of strategic objectives.
14
The S Group’s strategy was revamped during the financial year.
It is based on the mission, vision and core values. The strategy
underlies the formulation of the competition strategies of all the
business areas. It is also an integral element of the strategies that
are mapped out for the regional cooperative enterprises and SOK
Corporation.
SOK Corporation’s strategy was also overhauled during the report year. The strategy defines SOK Corporation’s role and tasks in
carrying out the Group strategy as well as the strategic objectives
for tasks at the S Group level and for the operating subsidiaries.
An important aim of the Development Functions is to enhance
the S Group’s management processes. During the financial year
the priority was to support knowledge-based management. This
effort involved producing operations and competitor analyses and
developing management-support data bases.
Development Functions also coordinates the S Group’s environmental compliance. The environmental policy was updated during
the report year. Environmental experts worked on a broad range of
issues together with the authorities and were active in national and
European co-operation organisations in the retail sector.
The task of the eBusiness unit is to coordinate and develop the
S Group’s electronic business operations. The unit produces the
main jointly used electronic services and is in charge of controlling
electronic services within the S Group. The task of the eBusiness
unit is to promote and plan the utilisation of electronic services as
part of the S Group’s multichannel operations.
The number of visitors to the S Channel website (www.s-kanava.
fi) that is targeted at consumers has grown steadily. The service
reaches over 200,000 customer-owners monthly and registers over
450,000 visits monthly. In an Online Brand Equity study conducted last year by Taloustutkimus, a consultancy, the S Channel
rose to 19th place, receiving very good marks for user satisfaction.
Service for customer-owners was improved, notably, by offering
improved browsing of Bonus information and a search function
for viewing the Group’s locations.
The HR Administration and Development unit deploys Groupwide tools and operational models to support and develop the human resources functions of the S Group’s different units over the
entire employment life cycle. The unit furthermore serves as SOK’s
personnel department, and it coordinates and issues guidelines for
SOK Corporation’s HR affairs.
Human resources activities are guided by the S Group’s HR
strategy, which is based on the S Group’s mission, vision and
strategic objectives. The objective of the HR strategy is to turn our
personnel into a competitive advantage for the S Group, whilst
supporting and ensuring the implementation of competitive strategies via effective human resources actions and the S Group’s ways
of working.
The unit’s priority in 2005 was the development of an HR
information system across the S Group. The system is a significant
aid in managing the employment life cycle and it furnishes tools
for human resources development. Training programmes have
contributed to improving the HR skills of both supervisors and
staff specialists.
SOK-yhtymä
15
SOK Corporation
The S Group’s employer organisation, S-ryhmän Työnantajat
SOKTA ry, is responsible for co-operation in labour market affairs.
A major development priority last year was employment contracts
for the S Group’s supervisors.
The S Occupational Health Services unit is responsible for the
S Group’s occupational health services in the Greater Helsinki
area. Over the years the unit’s priority has shifted from the treatment and prevention of accidents and illnesses to promoting and
developing health and job well-being. Yet effective medical care
provided at the general practitioner level and with an emphasis on
occupational health remains an important objective.
The development of job well-being at SOK units was supported
in co-operation with the human resources functions and the
Jollas Institute. Active efforts were made to improve job well-being. Three working groups received Job Verve diplomas and merit
awards. In addition, the S Occupational Health Services organised
a development seminar for the occupational health personnel in
co-operation with other retail groups.
The Jollas Institute is a special vocational institute that provides
training and coaching services for all the chains and personnel segments of the S Group. Its aim is to use competence development
as a way of boosting the Group’s competitiveness. Its main focuses
are to develop supervisor skills, reinforce concept-driven ways
of operating and implant the best practices across the S Group.
Training courses are designed in co-operation with SOK’s chain
management units and customer companies. The Jollas Institute
furthermore arranges apprenticeship training that prepares entrants
for various vocational diplomas.
During 2005 Jollas completed about 1,300 training days for
some 17,500 participants in all. There was continued strong demand for Jollas’ long training courses for supervisors as well as for
courses dealing with product groups and store openings.
Administrative Division
The task of SOK’s Finance functions is to ensure that the S
Group has access to adequate, balanced and competitively priced
finance in all conditions as well as to manage SOK Corporation’s
financial risks. The cooperative enterprises are responsible for their
own financial position. The objective of the Finance function is to
offer the S Group high-quality services and competitive advantage
in the area of financing and treasury activities, customer finance
and the commodity markets. It reaches this objective by harmonising and stepping up operational models, processes and systems
and by leveraging the S Group’s volume in managing financial
transactions.
During 2005, the Finance functions explored alternative future
models for customer finance services. Agreements on an overhaul
of account and card systems were made in the autumn. The systems enable the S Group to continue its present customer finance
services, and the agreements also provide for expanding functionality to an array of finance services. Towards the end of the year,
after affirmative decisions were taken by the cooperative enterprises, SOK’s Executive Board and Supervisory Board took decisions
in principle on founding the Group’s own bank. On 14 February
2006, the Financial Supervision Authority granted a credit institu-
16
tion licence to the S Group to operate a bank. On 16 February
2006, SOK’s Supervisory Board decided to found S-Pankki Oy
(S-Bank Ltd), which will carry on deposit banking operations.
In the spring a new finance/treasury system was introduced
that makes it possible to handle the SOK Corporation’s financial
instruments all the way from trading to bookkeeping entries, and
it also includes facilities for managing financial risks. The system is
to be used to produce the above-mentioned functions as a service
for the S Group’s other companies as well.
Risk management in trading on the electricity market was developed during 2005 and the invoicing process was streamlined. The
number of electricity delivery agreements in force at the end of
the year – so-called bulk electricity contracts – accounted for more
than half of the S Group’s electric power consumption.
The Accounting unit is responsible for overseeing the SOK Corporation’s and the entire S Group’s finances on the basis of joint
principles and guidelines (management accounting, book-keeping,
financial statements and taxation), and the unit also provides the
necessary joint financial services for the Group. In addition, the
unit is in charge of developing and maintaining the S Group’s accounting information systems, and it furthermore serves as a chain
management unit for the S Group’s accounting functions.
Implementation of the S Group’s Development Programme for
Financial and Accounting Processes (Talke) has been continued.
The working priority during 2005 was to get the new integrated
financial administration IT system up and running. The objective
of the development effort is to support business decision making
more efficiently, to increase the cost-effectiveness of accounting
and financial processes and to realise concrete cost savings.
Operations have been developed according to plan and the
objective set out in the programme will be reached during 2006.
SOK Corporation expanded its financial administration service
centre last year so that the unit provides the financial administration services for nearly all the subsidiaries.
Apart from the development programme, the unit focused
on carrying out its fundamental task. This involved maintaining
and developing the principles and guidelines governing financial
and management accounting as well as overseeing Group-level
taxation matters and supporting the information systems of the
finance functions. As part of the fundamental task, the unit was
also in charge of implementing SOK Corporation’s management
and financial accounting. During the year preparations continued
for making the transition to International Financial Reporting
Standards (IFRS).
The Information Systems unit devoted resources in 2005 to
projects for the different business areas and support functions, notably, by developing the joint infrastructure. The server and storage
solutions that were made jointly available to different user groups,
the development of a systems operation service as well as work on
standardising the workstation network improved cost-effectiveness
and service quality, and contributed to maintaining data security.
A PKI solution (Public Key Infrastructure) based on smart cards
was developed to provide strong user authentication. Work on
revamping the information interchange system moved ahead to
the implementation stage.
SOK Corporation
The operational concept of the Corporate Security and Risk
Management unit that operates as a chain management link
for the S Group’s risk management is to support the trouble-free
operation of the S Group’s main functions and processes as well
as their continuity by deploying risk management means and
methods with the aim of achieving the Group’s business objectives.
The main task of the Corporate Security and Risk Management
unit is to develop and define the principles, rules of the game and
objectives of corporate security and risk management as well as to
support, manage and monitor their application and implementation within the S Group.
Major development projects in 2005 were the definition of
an integrated risk management model, the introduction of a risk
management and security management information system and
the designing of risk management measures for identified threats
to the S Group’s corporate security.
In 2006 development of Enterprise Risk Management will be
continued by formulating the S Group’s risk management strategy
as well as by sharpening risk management processes and procedures. A further objective is to create continuity plans for missioncritical information systems. Staff and customer security will be
improved further by continuing our Security Pass training sessions.
SOK Corporation’s Legal Affairs unit seeks to ensure that the
Corporation operates in accordance with the law, draws up highcalibre agreements and avoids needless disputes and litigation. The
Legal Affairs unit assists and guides SOK Corporation’s units and
cooperative enterprises in tasks requiring legal expertise.
Various agreements connected with business operations figure
prominently in the Legal Affairs unit’s activities. Preparatory work
done during the report year included agreements connected with
the purchase of shares in Suomen Spar Oyj and with Baltic operations, and work moved ahead on a project for developing the
S Group’s finance services.
The Real Estate launched an overhaul of the property and business location strategy in 2005 with the aim of making use of chain
management to arrive at a more effective operational model for
the entire S Group’s property business. The priority for developer
building operations was development work on technical concepts
for different business areas and procedures for checking the safety
of buildings owned by the unit. In the area of property maintenance, the most important measures were connected with monitoring energy consumption and waste amounts and with correctly
carried out maintenance. During 2005 SOK Real Estate took part
in launching a feasibility study on a new head office project.
prises’ capability of focusing more closely on customer-owners’
needs, expectations and purchasing potential as part of the planning and management of their normal operations. The marketing
planning and implementation process was stepped up by increasing the centralised production of marketing materials connected
with chain concepts by placing in use an electronic marketing
calendar serving all the chains and cooperative enterprises as
well as by harmonising customer promises and ways of working.
The effectiveness of the service concept for customer-owners was
increased by introducing new functions for enhancing member-administration, marketing and data analysis that were made possible
by the revamped integrated information system that went into
operation in autumn 2004.
Electronic service for customer-owners was improved by renewing the monitoring system for the S Channel’s Bonus and Account
Balance Service and earned bonuses, and customers were given the
option of joining as members over the Internet.
Communications and publications
The Communications and Publications unit supports the
S Group’s operations and the achievement of its objectives both
strategically and operationally. The strategic objective of the Communications and Publications unit is to make the communications
perspective a part of all existing business processes.
In 2005 the S Group’s communications strategy was updated
and approved by the Communications and Publications Board.
The guiding concept of the theme of the year for 2005 – rewards
– was mapped out and the initiative will be monitored on an ongoing basis. Other major challenges for the unit were the strategic
communications related to Your Own Store, communications on
the development of finance services and communications related
to the Spar acquisition.
The chain management dimension of communications was
put on a firm footing by means of training and organising chain
management days and training sessions for company management
and experts.
The communications value chain was developed further by
highlighting process thinking. A new operational model and processes for the Yhteishyvä magazine went into use as planned together
with Sanoma Magazines, Helsinki Cooperative Society Elanto and
Hansaprint.
The guiding concepts for communications services were laid
out on the basis of a survey of communications needs, and the
work on concept formulation will continue during 2006. SOK’s
Communications and Publications unit also acted as a pilot unit in
2005 for the pricing review that was decided by SOK’s Executive
Board.
Customer-owner services and marketing
The task of the Customer-owner services and marketing unit is
to see to it that customer-ownership develops and strengthens as a
central driver of the S Group’s success. The unit’s task is to see to
it that the mission is realised in the operations of the cooperative
enterprises and the chains, and its strategic objective is to produce
for the businesses a decisive competitive advantage through superior customer relationship management know-how and an effective
marketing planning and implementation process.
In 2005 a special effort was made to boost the cooperative enter-
17
SOK Corporation
SOK Corporation organisation 2006
18
Business-by-Business Review
Supermarket trade
The S Group carries on supermarket trade using four store concepts: hypermarkets (Prisma), supermarkets (S Market), grocery
stores (Sale and Alepa) and the home and DIY store (Kodin Terra).
At the end of 2005 the supermarket chains comprised a total of
679 locations in Finland as well as 4 in Estonia, where AS Prisma
Peremarket, a subsidiary of SOK Corporation, is engaged in the
supermarket trade.
Operating environment in 2005
The competitive situation in the sector remained tough in 2005.
One of the distinctive features in the sector was the more active
role played by venture capitalists.
Prices in the grocery trade remained at the levels of the previous
year, and the major players took steps to beef up their networks.
Last year also witnessed some significant mergers and acquisitions which will have far-reaching implications on the structures
within the grocery trade: Tradeka Ltd and the Wihuri Group
merged their retail trading operations and SOK entered into
negotiations, initiated by Axfood AB (publ.), concerning the
acquisition of all shares in Spar Finland Plc held by Axfood. Following the decision by the Finnish Competition Authority, SOK
concluded the transaction with Axfood in January 2006.
The international players within the consumer goods trade
continued their expansion in different parts of Finland and new
players also launched operations. During the year, privately owned
chains were combined into larger chains, which also brought
venture capitalists on board as owners.
2005 in the S Group’s supermarket trade
The S Group’s supermarket chains continued to press ahead with
developing operational models that enable and bolster overall
thrift, resulting in good price competitiveness, which in turn led to
doing well in the competitive situation. Within the grocery trade,
this was borne out by growth in the market share. The S Group’s
market share of the grocery trade was 35.9 per cent at the end of
2005, putting the S Group in the market leader position in the
grocery trade.
The S Group’s supermarkets had retail sales in 2005 of EUR
4,745 million, an increase of 6.8 per cent on the previous year. The
sales growth, which outpaced the general trend as well as competitors’ growth, was attributable to several factors, making it difficult
to single out any one reason for the strong growth.
The supermarket trade occupies a central position in serving the
S Group’s members, and Bonus sales to members outpaced growth
in other sales, up by 11 per cent. Members’ purchases accounted
for 82 per cent of total purchases at supermarket locations.
All the S Group’s supermarket chains registered increases in sales
that outpaced market growth and they all reported a profit.
The S Market chain is the S Group’s largest chain of grocery
markets. At the end of 2005 it had 372 locations, an increase of
three on the previous year. The chain’s aggregate sales, excluding
fuels, amounted to EUR 2,341 million, an increase of 6.6 per cent
on the previous year.
In 2005 two new stores joined the Prisma chain, making 47
units by year-end. In addition, four Prismas were operating in
Tallinn. In Finland the chain reported sales of EUR 1,881 million
(excluding restaurants, fuels and other additional services), representing an increase of 6.4 per cent.
The Sale and Alepa chains had aggregate sales of EUR 495 million, a rise of 7.2 per cent. The number of locations increased by
18 and totalled 260 at the end of the year.
The first Kodin Terra pilot store opened for business in
Renkomäki, Lahti, in April 2005. The store’s target group are
members, with particular emphasis on women members. Kodin
Terra has received plenty of positive feedback from its customers
during its first months of operation. Decisions concerning the
opening of the next Kodin Terra units will be made during 2006.
Competitive strategy and scaling up processes
The efficiency-boosting projects concerning the entire value chain
in the supermarket trade and its processes, which got started in
2003, continued through 2005, as did the development of new
system properties to support them. The aim is to enhance the
availability of goods and the appropriateness of product ranges and
to get the entire process from the supplier to the retail outlet to
operate cost-effectively.
A major development project was the continuation of the store
space management project that got underway in the previous
year. It aims at putting into action the precision management and
analysis of space by chain, store, area of demand and merchandising group as a continual real-time process. Furthermore, the objective is to produce automatically accurate shelf maps for a store’s
profiled range of products, matching these maps to the furnishings
and fittings in each store. Shelf-map data and actual sales data
will be used to enhance the product-specific use of space and to
S GROUP’S MARKET SHARE OF
THE SUPERMARKET TRADE
19
Liiketoimintakatsaus
20
improve availability. A key subproject of space management was
the setting in motion of measuring store floor space, furnishings
and fittings, which was comprehensively carried out to completion
in the Prismas, and it got off to a good start in the other units.
The space management project has also progressed to the adoption
by 46 pilot stores of unit-specific shelf maps for four different
merchandising groups.
The updating of the competitive strategy for the supermarket
trade got underway in autumn 2005 and it is being implemented
in 2006. The key aspect of the strategy is fine-tuning the network
structure to respond to the changing competitive environment.
Last year also saw the start of the planning work, with respect
to sourcing and logistics, for the operational model for the 2010s.
Planning was affected by the entry into negotiations with Tradeka
(Cooperative Tradeka Corporation) concerning the transfer of Inex
Partners Oy to full ownership of SOK. The transaction involving
the acquisition of shares in Inex held by Tradeka was concluded on
31 January 2006.
Market Chain Management
Market Chain Management is the S Group’s management and
development unit for the supermarket business. Its main task is to
develop business area strategy and chain-operation ideas as well as
to assist the regional cooperative enterprises and provide guidance
in the development of the business area.
Service station store and fuel sales
The S Group’s outlays on the development and extension of a network of service station stores and fuel sales continued at a vigorous
pace in 2005.
The main services offered by the chain of ABC service station
stores are versatile and moderately priced café, restaurant, supermarket services as well as fuels. A significant factor for customers
is that ABCs are open for service every day of the year. On a single
stop, customers can eat a meal, do some shopping and fill up their
tanks. Long opening hours (24 h or 6:00 am-midnight) ensure
customer convenience.
At the end of 2005 the ABC chain comprised 71 service station
stores located along traffic arteries and in urban areas and 191
ABC unmanned stations that operate primarily at the Prismas,
S Markets and Sale grocery stores.
The ABC chain of unmanned stations specialise in selling fuels.
The ABC network operates in the areas of all the 22 regional cooperative enterprises as well as 4 local cooperative enterprises. The S
Group’s cooperative enterprises had a total of 304 fuel-selling units
at the end of the year. Of these, 98 were service station stores and
the remaining 206 units consisted mainly of unmanned petrol stations. The net increase on the previous year was 24 units.
The ABC chain is the first company in the service station sector
in Finland to have been awarded the right to use the Key Flag
standard by the Association for Finnish Work.
Operating environment
Petrol consumption increased at a moderate rate in 2005. The
price of crude oil remained high and the year was characterised by
considerable fluctuations. This was largely attributable to increased
demand for crude oil and even more so, to the hurricanes which
raged in the Gulf of Mexico in August-September. Retail prices
for fuels remained relatively high and in the aftermath of the hurricanes, retail prices for petrol and diesel rose to record levels. Price
competition in retail sales of fuel was extremely fierce at times.
Dialogue concerning bio-fuels got underway in Finland in
summer 2005. ABC Chain Management and the North European
Oil Trade Oy (NEOT) launched a study, which also pertained to
ABC, last autumn.
Despite the rise in prices for petrol, leisure mobility and vehicle
mileage have been on the rise. Consumers have come to expect
services and products to provide enriched, new experiences. Eating
out increased in 2005, with the strongest growth in the low-end
price segment of fast casual dining, in which category ABC is
also included. However, consumers want to spend an increasing
amount of time with family and friends, so there is a call for faster
services. The significance of price as a criterion when choosing a
service is gaining strength, and price competition is expected to
become even fiercer in 2006.
Buying behaviour varies according to the situation; customers
make their decisions about where and when they buy according to
different criteria at different times. The versatility offered by ABC
has responded to this through providing services for people on
business trips or holidays as well as for local residents.
Shopping at service station supermarkets increased, but there
were no major changes in the competitive situation. The possible
21
amendment to the act on shop opening hours continues to be a
topic of discussion.
The requirements set by the Environmental Protection Act have
made finding business locations more of a challenge, and permit
application processes have become lengthier. ABC employs the
latest safety technology in setting up its units.
2005 in the S Group’s service station store
and fuel trade
The service station stores and fuel stations reported retail sales
across the S Group of EUR 972 million, which represents growth
of 22.2 per cent on the previous year. The figure includes sales by
unmanned stations at supermarket units. The S Group’s market
share within petrol sales rose by 10.8 per cent to stand at 17.5 per
cent, up 1.7 percentage points on the previous year. The growth
was attributable to the nationwide expansion of the ABC network
and the fact that members made more of their fuel purchases
through the S Group’s fuel-selling units. Bonus sales rose considerably as in previous years.
The fuel procurement company North European Oil Trade Oy
(NEOT) supplied fuels to the cooperative enterprises. The ABC
chain’s excellent trend in volume was strongly attributable to the
expanded network as well as to members concentrating their fuel
purchases at the chain’s units.
SOK sold its shares in Uudenmaan ABC Oy to Helsinki Cooperative Society Elanto in spring 2005. In the same connection, the
ABC service station stores and new ABC projects in the Greater
Helsinki area were transferred to HOK-Elanto.
The ABC chain gained a foothold in new geographical areas in
2005. Several unmanned stations were opened in Northern Fin-
land and new service station stores opened for business, especially
in Ostrobothnia, thus improving service for motoring members
throughout the entire country.
The popularity of fast casual dining has continued to rise and
this was also confirmed by the trend in restaurant sales by ABC
service station stores. Growth took place in all the ABC chain’s
sub-areas – fuels, restaurants, and supermarkets. About half the
sales by ABC service station stores accumulated from fuel sales
and the other half was divided between supermarket and café and
restaurant sales.
The visibility of the ABC chain can now be said to have risen
to new heights. During the year, 9 ABC service station stores and
24 ABC unmanned petrol stations were opened. The business
unit’s strategy is to push ahead with its vigorous expansion of the
network.
ABC Chain Management
ABC Chain Management is the development unit for the S Group’s
service station store business and fuel trade. Its central task is to
develop the strategy for the business and chain business ideas as
well as to assist the regional cooperative enterprises and provide
guidance in the development of the business area.
Chain Management operations centred on concept-driven planning, implementation and operations control for the ABC service
station stores and ABC unmanned stations and furthermore, it was
in charge of acquiring new business locations.
Department store and speciality store trade
S GROUP’S MARKET SHARE OF PETROL SALES
22
The S Group has 20 Sokos department stores and 11 Emotion
stores that are specialised in cosmetics and ladies’ lingerie. In
addition, seven Pukumies men’s apparel stores and eight other
speciality stores owned by Osuuskauppa Arina round out the S
Group’s speciality palette. Cooperative enterprise-owned Sokos
department stores serve members and other customers in the area
of 15 regional cooperative enterprises as do speciality stores in the
area of five regional cooperative enterprises.
Retail sales by the S Group’s department stores and speciality
stores in 2005 totalled EUR 365 million, representing growth of
5 per cent on the previous year. Whereas price levels fell for the
main product sectors, overall growth in sales was attributable to
increased volume. Members are by far the largest consumer group
of the Sokos department stores and the S Group’s speciality stores.
Purchases made by members accounted for more than 80 per cent
of Sokos department store sales.
The regional cooperative enterprises own all of the S Group’s
speciality stores and 17 of the Sokos department stores. The business operations of the Tampereen Sokos Oy were transferred to
the Pirkanmaa Cooperative Society at the beginning of the year.
SOK is responsible for operating the Tapiola Sokos and Helsinki
Cooperative Society Elanto is responsible for managing its business
operations. In Turku, SOK and Turku Cooperative Society engage
in Sokos business operations in the jointly owned Turun Sokos Oy.
SOK has a 90 per cent holding in the above-mentioned company.
The profitability of the speciality stores that operated for the full
year and the Sokos department store trade increased markedly on
the previous year and exceeded the levels targeted last year.
Customer satisfaction gained strength. Customers felt that price
levels in the department stores were better suited to their budgets.
They also felt that they received more knowledgeable customer
service.
The overall economic trend was favourable across the country.
Labour market solutions, with the exception of the wood processing industry, were reached without disrupting the stable trend in
disposable income. Consumer confidence remained largely positive
and healthy.
The re-openings and expansions of the large shopping centres in
the Greater Helsinki area paved the way for the arrival in Finland
of new international chains, such as in the sporting goods and toy
trade. The arrival of new players on the market is set to continue.
Similarly, re-openings and extensions to shopping centres will
continue, and this trend will spread beyond the Greater Helsinki
area in 2006.
The new technology featured prominently last year in new
products and novel approaches to shopping. The home technology trade grew in particular, when new technology came into
widespread use in televisions and stereos and players. The use of
information networks increased substantially, in both the pre-selection and purchase of goods. Advances in technology will forge
ahead in 2006.
Of the traditional product areas, the apparel and footwear trade
showed a particularly favourable trend. Average prices for products
in the sector have fallen but there has been a positive growth in the
number of items sold.
The changing trends that started in 2005 will continue in 2006.
Increasing numbers of players and diversifying ways of doing
things are competing for consumers’ interest, time and money.
2005 in the S Group’s department store
and speciality store trade
Sales of consumer goods by the Sokos department stores (20)
totalled EUR 312 million, representing growth of 4.7 per cent
compared with the previous year.
Like-for-like growth in the consumer goods trade in the Sokos
department stores was on a par with the rate of nationwide likefor-like growth in trade by department stores.
The best sales trends were recorded by the footwear and bag
trade as well as the cosmetics trade, and the healthy trend of the
Sokos home textiles trade reflected the widespread popularity of
home interior decorating.
The Pori Sokos was extensively refurbished, including improvements made to connections between floors, and the range of
refreshments offered by the café and restaurant at the department
store was substantially extended. Revamps to departments and
to product displays were carried out in all the Sokos department
stores to stimulate and attract customers and make shopping at
our locations more convenient. The Sokos chain posted an operating profit on sales of consumer goods, considerably improving on
the previous year’s result. The Sokos locations were similarly in the
black (consumer goods + grocery trade) and their result was clearly
up on the previous year.
Emotion chain
The units in the Emotion chain are speciality stores that are
located in large shopping centres and the larger town centres and
offer cosmetics and ladies’ lingerie. The stores round out the S
Group’s palette of consumer goods in their localities. There were
11 units at the end of 2005. Aggregate sales by the Emotion stores
amounted to EUR 12.1 million, representing an increase of 25.1
per cent (like-for-like growth was 10.1 per cent).
Trend in the operations of the Sokos
companies owned by SOK Corporation
The Sokos companies had three Sokos department stores in operation for the full financial year 2005: Sokos Wiklund in Turku,
Sokos Mylly in Raisio and Sokos Tapiola in Espoo.
Net turnover by the Sokos companies amounted to EUR 36.2
million, representing a decline of 62.6 per cent on the previous
year due to transfers of units. In 2004 net turnover by the Sokos
companies included the figures reported by the Tampere Sokos for
the full year and the Helsinki Sokos for four months in addition to
the three department stores mentioned above.
The Sokos companies reported an operating profit amounting
to EUR 0.8 million (4.2). In 2005 the companies had an average
payroll of 251 people (371).
Sokos Chain Management
The tasks of the Sokos Chain Management unit are to define the
category structure and sales assortment of the Sokos department
stores and the Emotion speciality stores as well as to develop and
maintain the chains’ business ideas, concepts and information systems. Chain Management provides the agreed marketing, logistics
and information system services and it prepares policy proposals
guiding the operations of the chains for presentation to their decision-making bodies.
In 2005 Chain Management pressed ahead with developing and
mobilising the business ideas and concepts for various product
areas as well as with developing the composition of the range of
products and its management systems. The Sokos competitive
strategy, which will constitute the basis for development in the
years immediately ahead, was updated and at the same time new
target levels were determined for the business.
23
Hotel and restaurant trade
The S Group’s hotel and restaurant business comprises a comprehensive network of 48 hotels and 554 restaurants located around
Finland.
Of the hotels, 39 belong to the Sokos Hotels chain and 6 to
the Radisson SAS chain. In addition to these, the S Group has 3
smaller hotels that do not operate according to a chain concept.
Of the restaurants, 313 operate as stand-alone restaurants, 129
in hotels and 70 in connection with ABC service station stores. Of
the restaurant units, 213 belong to restaurant chains.
Outside Finland, the S Group carries on hotel and restaurant
operations in Estonia, where hospitality customers are served by
Sokos Hotel Viru with its restaurants and a food court that operates at the Prisma hypermarket in the Sikupilli Shopping Centre.
More than half of the net turnover from the S Group’s restaurant business consists of sales by the chain restaurants. The
nationwide restaurant chains are Rosso, Fransmanni, Amarillo,
Sevilla, Torero, Memphis, the Night nightclubs, Public Corner and
in-house licensed restaurant chains. Regionally operating restaurant chains include Chico’s, Mr. Pickwick and Ale-Pub.
The café and fast food chains Coffee House, Presso, Rosso Express and Buffa round out the range of restaurants and in addition,
the Group engages in extensive co-operation with the Hesburger
chain in the hamburger restaurant business.
Ownership of the S Group’s hotel and restaurant business is
divided between SOK Corporation and the regional cooperative
enterprises. SOK Corporation’s Hotel and Restaurant Division
comprises SOK’s operating subsidiaries Sokotel Oy and the Estonian-based AS Sokotel as well as the S Group’s hotel and restaurant management, development and support unit that operates
within SOK. The regional cooperative enterprises own hotel and
restaurant operations in several different companies. The hotel and
restaurant units that are owned by the regional cooperative enterprises account for about 70 per cent of the S Group’s aggregate net
turnover in the sector.
Objectives of the hotel and restaurant trade
The objective of the business area is good profitability, which guarantees the resources for the development and controlled growth of
operations. Adequate financial resources provide the wherewithal
to secure the best business sites and they in turn will provide
extensive demand-oriented market coverage both in Finland as
well as, to an increasing extent, in neighbouring countries in the
years ahead.
Within hotel operations, the S Group’s objective is to ensure
that customers continue to receive the highest quality products
and services, to deliver offerings for the growing leisure segment
and to maintain clear market leadership in Finland. Outstanding
market leadership in accommodation operations in Finland will
call for expanding the network to St Petersburg and within the
Baltic regions over the next few years in line with the neighbouring
country strategy.
The objective for restaurant operations is to further enhance the
service spectrum through diverse product and chain concepts and
thereby boost market shares in each region.
Paying due attention to safety factors and responsibility in all ac-
24
tivities will continue to be a major part of the S Group’s hotel and
restaurant business. The value of competent staff is of prime importance so a good deal of effort goes into fostering staff well-being
and initiating training across the business. The S Group seeks to be
the most attractive and desired employer in the sector.
The business has several projects underway to secure new
business sites in urban areas, leisure centres and the neighbouring countries. Processes are being developed to enhance customer
convenience. New online services and information system projects
that underpin operations have been introduced alongside traditional channels. All the chains are elaborating the quality of service
and management in keeping with their business concepts through
training programmes that will span several years.
Operating environment
The hotel sector in Finland is characterised by internationalisation;
offerings are on the increase, customer companies are internationalising and international business travel and the demand for
the leisure sector are on the up. The expanding EU is bringing
to the sector competitors who must be taken seriously, but it is
also bringing new customers. People have higher expectations of
leisure, and short weekend breaks are becoming commonplace.
Customers are demanding greater individuality. Along with
advances in technology, online purchasing is burgeoning and
technology is also adding a new slant to business travel. The
changes in the operating environment pose considerable challenges
for the players in the sector: the growth in offerings, emergence
of chains and networking will further heighten price competition
and generate a more diversified spectrum of services. Professional
buyer activities are gaining prominence, as is a command of the
end-to-end process.
Demand in the hotel business rose favourably in 2005 and the
trend looks set to continue at a brisker rate than in previous years.
The S Group believes in the prospects for near-term success in
hotel operations and profitability is expected to improve on previous performance.
Within restaurant operations, changes are taking place in legislation, consumer behaviour and the competitive situation. Alcohol
consumption has continued to shift from the restaurant to the
home; alcohol consumed in restaurants accounts for one-fifth of
overall intake. Along with the decline in sales of alcoholic beverages, the high rate of value added tax on restaurant meals (22%)
puts pressure on prices. The impending act concerning smoking in
restaurants constitutes one of the looming threats that will affect
development in the sector, especially with regard to nightclubs and
dance restaurants. The sector fears the spread of the grey economy.
Competition is tightening and demand is becoming increasingly
fragmented, thus the players in the sector need to either select their
target groups or operate across an ever-broadening spectrum.
Restaurant operations represent about 70 per cent of the total
volume of the hotel and restaurant business. Consequently, and
also due to the size of the markets, the S Group will be focusing
increasingly on large, mid-price range units in all four categories
– beverages, socialising, restaurant meals and fast foods. The aim
is to achieve local market leadership by way of a sound regional
structure. The restaurant business and the hotel business are
expected to grow in volume in the near-term. Those players who
are in a position to develop their efficiency, work productivity and
capacity to respond to changes are poised to continue outperforming the rest.
line up business sites. Despite substantial investments, the financial performance by the S Group’s hotel and restaurant business
maintained an excellent level at 6.7 per cent of net turnover.
Two units, Sokos Hotel Presidentti in Helsinki and Sokos Hotel
Seurahuone in Kajaani, became part of the Sokos Hotels chain
during 2005. Furthermore, Sokotel Oy, which is owned by SOK,
carried out renovations on the Marina Palace real estate in Turku
for the Radisson SAS chain. It will open for business in early 2006.
Within the S Group’s network, considerable renovations and
extensions were carried out last year on some of the units, including the Sokos Hotels Ilves in Tampere, Torni in Helsinki, Vaakuna
and Kimmel in Joensuu, Lahden Seurahuone in Lahti, Vantaa and
more radical modifications and an extension on the Alexandra in
Jyväskylä. The refurbishment of the Radisson SAS Hotel Oulu
reached completion.
The S Group opened about 70 new restaurants of which 47
were chain restaurants. In addition, several dozen old restaurants
were refurbished. The way forward to generating an increase in
market share is through large units that combine several concepts.
Food courts were created in, for instance, Pori, Kouvola, Tampere
and Helsinki.
Fast food Food Court units featuring varied concept combinations were developed in the areas of several cooperative enterprises.
The Rosso Express and Amarillo restaurant chains chalked up the
fastest growth in the past year.
Capital expenditure amounting to approximately EUR 24
million was allocated for restaurants. The restaurant business in
2006 will be characterised by even stronger networking, closer-knit
market coverage, the search for synergy and new concepts.
2005 in the S Group’s hotel and
restaurant trade
Retail sales by the S Group’s hotel and restaurant trade totalled
EUR 635 million, an increase of 2 per cent on the figure a year
earlier. Accommodation sales came to EUR 182 million, representing growth of 1.1 per cent on the previous year. Restaurant sales
amounted to EUR 453 million, up by 2.3 per cent on the year
before. The S Group’s growth was on a par with the average for the
sector, which, according to statistics, is at around the 5 per cent
mark.
The S Group’s market share measured in terms of net turnover
by hotels was 24 per cent, making the S Group Finland’s largest
individual hotel operator.
Along with the leisure units that became part of the Sokos Hotels chain as well as increased demand, the proportion of the sales
of leisure services to members showed an increase. The occupancy
rate of the S Group’s hotels was up on the previous year at 64.5 per
cent (62.9%), whereas occupancy rates reported by other players
throughout Finland remained at around 49 per cent.
The 20 per cent market share of the S Group’s restaurant
business was also the largest in Finland. Within its restaurant
operations, the S Group increased its market share in the beverage, socialising and restaurant meal sectors. Growth of locations
specialised in fast foods came in at 10 per cent whereas nationwide
growth reached only 5 per cent. There are large differences between
cooperative enterprises in the control of regional and city-specific
market shares. The capacity utilisation of the S Group’s restaurants
(sales/customer place) is continuing at a considerably higher rate
than the levels reported by competitors. The development in the
market share and the building of closer-knit network coverage has
kept cooperative enterprises busy in the fiercening competition to
Restaurant and Hotel Chain Management
In autumn 2005 Sokos Hotels Chain Management unit and
Ässäravintolat, which is responsible for the management of the
chain restaurants, were combined into the S Group’s Restaurant
and Hotel Chain Management. Chain Management attends to
THE HOTEL BUSINESS
THE RESTAURANT BUSINESS
25
and is responsible for the development of the competitive strategy,
business ideas, concepts and chain brands for the Group’s hotel
and restaurant business. Furthermore, it manages logistics and
monitors the profitability and competitiveness of the chains.
Chain management of the Radisson SAS hotels is handled from
the chain’s headquarters in Brussels.
In 2005 Chain Management activities put emphasis on expanding the network and critical mass, increasing market shares and on
developing profitability and quality. All of the chains launched or
continued service training courses specific to their business concepts and development programmes for the day-to-day management of concepts.
In November 2005 Chain Management developed and opened,
together with Pirkanmaa Cooperative Society, a pilot for a new
nationwide Budget Meal restaurant concept, Buffa, in Tampere.
Buffa comes under the mid-price range category of fast foods. In
addition, several new restaurant and product concept projects got
underway ready to launch in 2006. An internal chain operating
model was refined and implemented in the restaurant meal, beverage and nightclub concepts.
Within support service processes and systems development, the
most challenging step has been the adoption of the Tuhti DW
programme and its firm establishment in the field. Other product
innovations launched in 2005 included a wireless information system to improve the efficiency of restaurant and service processes.
Sokotel Oy
Within SOK Corporation, Sokotel Oy in Finland and AS Sokotel
in Estonia operate hotels and restaurants under the Sokos Hotels
and Radisson SAS brands. At the end of 2005, the company comprised 13 Sokos Hotels and 6 Radisson SAS hotels.
The hotel network changed at the beginning of 2005 when the
Sokos Hotel Presidentti became part of the chain and Sokos Hotel
Porin Vaakuna was sold to Satakunta Cooperative Society in April
2005. When Presidentti became a part of the Sokos Hotels chain,
the Memphis and Coffee House restaurants in the Hotel Vaakuna
in Helsinki were transferred to Helsinki Cooperative Society
Elanto (HOK-Elanto). The Klaus Kurki hotel closed at the beginning of 2005.
Sokotel Oy’s net turnover was up 4.0 per cent on the figure a
year ago. Like-for-like net turnover grew by 4.2 per cent. The company’s sales remained good in spite of large investments, which disrupted operations in some of the Sokos hotels and Radisson SAS
hotels. The occupancy ratio and average room rate rose compared
with a year ago. This meant that the room yield also increased and
was clearly better than the average for the country as a whole.
The operating profit posted by Sokotel Oy, which carries on
the hotel and restaurant business in Finland, was at the budgeted
level, but fell slightly short of the previous year’s earnings owing to
the changes in the Sokos Hotels network. On a like-for-like basis,
profits improved markedly on the previous year.
Within the S Group, SOK Corporation and 12 regional cooperative enterprises engaged in vehicle sales. The services provided by
the regional cooperative enterprises are supplemented by SOK
Corporation’s Maan Auto Group in Finland and by AS Kommest
Auto Group in the Baltic countries. At the end of the year, the
S Group had a total of 46 (45) car dealerships in Finland. S Group
dealerships represented 13 (13) different makes of cars, of which
Peugeot is the S Group’s own imported marque.
The positive trend in the motor trade continued in 2005 with
the registration of 148,161 new passenger cars, which represents
an increase of 3.9 per cent compared with the previous year. The
number of new vans registered in 2005 was 14,090, which represents a drop of 10.6 per cent compared with the previous year. The
decline in van registrations was partially attributable to the fact
that many vans were registered in 2004 as so-called dual-use vehicles whose tax advantages ceased at the end of that year. A total of
29,728 used cars were imported into Finland during 2005, or 5.3
per cent less than the year before.
Activities in the motor trade in recent years have been affected
by the EU Block Exemption that came into force on 1 October
2002. Its objective is to increase competition in sales, servicing
and repair services of vehicles as well as to strengthen the position
of car dealerships in relation to manufacturers and importers. The
final transition period of the Block Exemption ended on 1 October 2005 with the abolition of the location clause, following which
an authorised dealer of a marque can establish dealerships that
comply with the manufacturer’s standards in any country within
the EU. Tougher competition will be translated into the strengthened position of so-called independent vehicle servicing and repair
service chains within vehicle service and repair operations. The
abolition of the location clause will lead to heightened competition
within retail sales of vehicles, at least in larger population centres,
as car dealerships endeavour to expand their networks. Fiercer
competition will underline the importance of customer service in
the success of car dealerships as well as in the service and repairs
business areas.
Car manufacturers have initiated price harmonisation within
the EU, as a result of which the ex-factory prices of vehicles would
be the same in all EU States. So far, price harmonisation has made
little headway but as it becomes more widely implemented, it will
mean higher prices for cars in Finland and this will lead to changes
in market shares of marques and models when compared with the
current situation.
2005 in the S Group’s motor trade
The S Group’s retail sales in the motor trade and accessories in Finland amounted to EUR 688 million, which is 3.9 per cent down
on the previous year.
SOK Corporation’s net turnover from vehicle sales was EUR
345 million (356), down 3.1 per cent on the figure the year before.
Operating profit was EUR 4.8 million (9.1). The average number
of employees in the motor trade was 645 (614).
The Maan Auto Group
The Maan Auto Group is a wholly-owned subsidiary of SOK,
which comprises five companies. Maan Auto Oy imports into
Finland and markets Peugeot vehicles, spare parts and accessories through its own network of subsidiaries, Automaa Oy and
26
27
Hämeen Leijona Auto Oy, and the rest of its nationwide dealer
network. In 2005 Maan Auto’s distributor network comprised 36
full-service car dealerships, 7 of which were owned and operated
by the Maan Auto Group itself, 15 by the regional cooperative
enterprises and 14 were owned by private entrepreneurs.
Automaa Oy is a full-service car dealership chain with three
dealerships in the greater Helsinki area: in Olari (Espoo), Herttoniemi (Helsinki) and the Airport outlet in Vantaa. It has additional
dealerships in Tampere and Raisio. Under a business transaction
finalised on 30 December 2005, Automaa acquired additional
capacity in Konala, a district of Helsinki, where a full-service car
dealership will open for business in the first part of 2006. Hämeen
Leijona Auto Oy has dealerships in Hämeenlinna and Lahti.
Oy Motortrans Ab is also a subsidiary of Maan Auto Oy. The
company is responsible for the warehousing and inspections of
Peugeot passenger cars at the Hanko Free Port as well as for import
vehicle servicing and vehicle accessory installations, vehicle storage
and deliveries to Peugeot car dealerships. Last year the company
performed import vehicle servicing on 9,806 Peugeot vehicles;
Peugeot vehicles accounted for 96 per cent of all the import vehicle servicing performed by the company.
In a transaction signed on 9 December 2005, Maan Auto
acquired the entire shares of Auto-Kivitila Oy, which operates a
Ford dealership in Tampere. Under the same agreement, the entire
shares of Auto-Kivitila Metro Oy were also acquired; Auto-Kivitila
Metro operates a Ford service outlet in Turku. The Finnish Competition Authority approved the transaction on 3 January 2006.
A total of 8,773 Peugeot passenger cars were registered, representing a decrease of 12.2 per cent on the previous year. The
market share of Peugeot passenger cars fell from 7.0 per cent to 5.9
per cent; Peugeot suffered the largest loss of market share of the
leading makes in Finland. Registration of Peugeot vans rose by 0.2
per cent and came to 966 vehicles. The market share of vans rose
from 4.5 per cent to 4.9 per cent.
The market in Automaa’s business area increased by 3.2 per
cent and in Hämeen Leijona Auto’s business area, it increased by
5.5 per cent. The companies handed over a total of 4,200 Peugeot
passenger cars and 347 vans. Registrations of Peugeot passenger
cars sold by Automaa and Hämeen Leijona Auto declined by 10.5
per cent, whereas van registrations rose by 25.7 per cent on the
previous year. The market share of Peugeot passenger cars within
Automaa’s business area accounted for 6.2 per cent (7.3%) and
within Hämeen Leijona Auto’s business area, the market share
accounted for 5.2 per cent (5.6%). The market share for Peugeot
vans within Automaa’s area rose by 0.7 percentage points on the
previous year, amounting to 4.3 per cent, and in Hämeen Leijona
Auto’s area, the market share of vans rose by 1.1 percentage points
to stand at 3.8 per cent. The companies sold a total of 5,531 tradein vehicles, down 2.5 per cent on the previous year.
The financial performance of the Maan Auto Group did not
come up to expectations. This was attributable to tighter competition and to a drop in price levels for trade-in vehicles, which was
largely brought about by increased imports of used vehicles. Members get a Bonus from vehicle sales, service and spare parts operations. The Maan Auto Group paid members Bonuses amounting
to more than EUR 0.5 million.
Maan Auto Group’s net turnover in 2005 amounted to more
than EUR 280 million.
Maan Auto Group employed more than 400 people in 2005.
28
Agricultural trade
The S Group’s agricultural trade business area comprises agricultural trade, machinery sales, hardware sales and the gardening/horticultural trade.
The sales of agricultural products comprise plant nutrients, pesticides, preservatives, feeds, farm implements, fuels and lubricants
as well as seeds and grain. Machinery sales include tractors, combine harvesters, landscaping and grounds maintenance machinery,
golf course maintenance machines, spare parts, machine and
equestrian accessories, and contract maintenance. Besides services
for farm building, hardware sales outlets provide hardware store
services for S Group members. The units specialising in gardening
and horticultural supplies provide products for people who want
to do up their yards and for gardening enthusiasts.
The S Group’s agricultural trade is conducted by 131 Agrimarkets, 7 Agrimarket Machine Centres and 1 John Deere Centre.
The Agrimarket chain is made up of Hankkija-Maatalous Oy
together with Southern Ostrobothnia Cooperative Society, SuurSeutu Cooperative Society SSO and Kymenlaakson Agrimarket
Oy. The Agrimarket chain has 32,000 Agribonus customers.
The overall agricultural market in Finland remained at the previous year’s level of about EUR 1,900 million. Total demand in
the retail hardware trade grew by about 6 per cent, and growth
in gardening/horticultural supplies was at the 5 per cent level.
Demand for the production inputs used on farms remained more
or less unchanged. The overall market for tractors fell 10 per cent.
Sales of farm implements remained at the level of previous years,
and customers showed particular interest in direct seedling machines and different disc cultivators. The grain harvest in Finland
amounted to 4.0 billion kilos, which was about 12 per cent higher
than in the previous year. The quality of the grain was predominantly good.
2005 in the S Group’s agricultural trade
In 2005 the S Group retained its market leader position within the
agricultural trade, with a share of 42 per cent of the market. Agricultural tax-inclusive retail sales, including the grain trade, totalled
EUR 1,043 million, representing an increase of 4.4 per cent on the
previous year.
In 2005 sales by the Agrimarket chain came to EUR 751 million, an increase of 6.4 per cent on the previous year. The Machine
Centres reported sales of EUR 130 million, the grain trade
amounted to EUR 100 million and other agricultural sales came
to around EUR 61 million. The Agrimarket chain’s hardware and
interior decoration sales grew by about 16 per cent and gardening/
horticultural sales were up by around 15 per cent when compared
with the year before.
The hardware and gardening/horticultural range and ways of
working were developed to become more customer-focused and in
particular to respond to the needs of the S Group’s members.
Hankkija-Maatalous Oy
SOK’s wholly-owned subsidiary Hankkija-Maatalous Oy provides
agricultural, machine, hardware and gardening/horticultural
services and benefits for loyal customers in the agricultural sector
as well as for the S Group’s members. Hankkija-Maatalous Oy
Procurements and
Logistics
had net turnover in 2005 of EUR 746 million, which represents
growth of 4 per cent on the previous year. Hankkija-Maatalous
Oy accounted for about 81 per cent of the Agrimarket chain’s net
turnover.
The overall market for tractors dropped 10 per cent from the
previous year to 4,507 tractors sold. At the end of the year, the
market share of Hankkija-Maatalous Oy’s John Deere tractors was
17.6 per cent.
Around 420 combine harvesters were sold in Finland during
2005, of these two thirds were Finnish Sampo Rosenlew combine
harvesters supplied by the Agrimarket chain. The sales targets set
for the landscaping, grounds maintenance tractor and golf course
machine business achieved their objectives.
Several retail outlets were refurbished during 2005. The
Haapavesi, Ilmajoki, Kiuruvesi, Pielavesi, Padasjoki and Muhos
Agrimarkets were all relocated in new premises. The first outlets in
the S Rautamarket chain, which supplies a wide range of hardware
and gardening/horticultural products, were opened in the spring;
they operate in conjunction with the Forssa, Hämeenlinna, Iisalmi
and Somero Agrimarkets. New Multasormi gardening stores were
opened in Vammala, Kokemäki and Laitila and extensions and
renovations were carried out at the Orivesi, Kokkola, Juva, Pori
and Huittinen Multasormi stores.
The Tenhola, Karjalohja and Virojoki Agrimarkets were closed
during the year.
The hardware and garden operations as well as the business
premises of Veijo Niku Oy in Haapavesi were acquired for Hankkija-Maatalous at the beginning of 2005.
Hankkija-Maatalous Oy’s profit before extraordinary items was
EUR 9.3 million.
In 2005 the company employed an average of 923 people (874).
Rainex Yrityspalvelu Oy
Rainex Yrityspalvelu Oy is a wholly-owned subsidiary of SOK.
Rainex Yrityspalvelu is a hardware and building wholesaler that
also deals in civil defence, security, work clothes, catering products
and textiles.
The company has six sales outlets in Helsinki, Jyväskylä,
Kuopio, Oulu, Tampere and Turku. Its head office and administration are in Pukinmäki, Helsinki, and its warehouses are located in
Vantaa (Hakkila and Maantiekylä), Jyväskylä, Oulu and Turku.
Company development continued in 2005. A new warehouse
that is due to reach completion in early 2006 is being built in
Kuopio. Large outlays were made into electronic trade invoicing
and ordering systems.
The company had net turnover of EUR 80.9 million (91.4),
down by 11.5 per cent on the previous year. Operating profit was
EUR 0.2 million (1.6).
At the end of 2005 the company employed an average of 46
people (45).
Intrade Partners Oy
Intrade Partners Oy is the S Group chains’ procurement and
logistics company whose primary responsibility is the apparel, cosmetics, leisure and household product areas. It is a wholly-owned
subsidiary of SOK.
The company’s largest customers are the Prisma, Sokos, S
Market and Agrimarket chains. Other customers include the Sale,
Alepa, Emotion and ABC chains. In addition to consumer goods,
Intrade Partners Oy supplies store furnishings and fittings to the S
Group’s sites.
The task of Intrade Partners is to bring added value to its
customer chains through an appropriate product range in line
with their business ideas by means of operational processes that are
integrated into the customer chains and backed up by information systems as well by achieving high-volume advantages through
centralised purchases. In 2005 cost-efficiency continued to develop
favourably in tune with more efficient operations and increased
volume.
Several projects aimed at optimising operational processes were
implemented in 2005 in order to upgrade procurement sources,
assortment and delivery network management, and new methods
were developed to enhance supplier integration. Intrade Partners
Oy’s SAP Retail operational management system was developed by
introducing new functionalities, particularly in the areas of data
transfer, reporting and portal technology. The degree of automation in handling invoices increased substantially during the past
year.
Co-operation between suppliers placed emphasis on availability
and improving other operational quality as well as on assessing
suppliers from the perspective of operational quality. Intrade
Partners Oy energetically implemented a European responsible
importer model, BSCI (Business Social Compliance Initiative).
The BSCI sets out common social requirements and provides a
monitoring system in order to verify and improve the social conditions of goods suppliers.
The outlook for 2006 is positive and Intrade Partners Oy’s
procurement volume is expected to show further growth in the
coming financial period.
In 2005 Intrade Partners Oy had net turnover of EUR 533.7
million, representing growth of 8.6 per cent on the previous year.
Operating profit was EUR 0.0 million (2.5). The company employed an average of 237 people (241).
North European Oil Trade Oy
North European Oil Trade Oy (NEOT) is a fuel procurement
company that is jointly owned by SOK and Greeni Oy. Net
turnover in its first full year of operations amounted to EUR 740
million, of which the company recorded a profit of EUR 1.8
million. The growth in net turnover compared with the previous
year was attributable to a full year of operations, the rise in market
prices and to increased sales by customer chains.
The aim of the company is to create a relative competitive edge
for its customer chains (the S Group’s ABC chain and Greeni Oy’s
St1 chain). In 2005 joint procurements raised the market share of
the fuels NEOT Oy delivers to service stations to approximately
25 per cent of the entire Finnish retail fuel market. This gives the
29
company a strong position when negotiating procurement prices
for fuels. Centralising procurements results in significant logistics
advantages for customer chains and keeps the percentage of fixed
costs for procurement and deliveries at highly competitive levels.
Building up NEOT Oy’s organisational structure proceeded
according to plan. The company’s management of its international
oil trade is at a good level but the broadening of its knowledge
base is nevertheless one of the company’s main objectives. This objective will be achieved through constant training, recruitment and
close co-operation with SOK Finance. At the end of the financial
year, the company employed six people.
Inex Group
At the close of 2005 the Inex Group comprised the parent company Inex Partners Oy and its wholly-owned subsidiary Meira
Nova Oy. Inex Partners Oy was owned on a 50-50 basis by SOK
and Tradeka (Cooperative Tradeka Corporation). Frozen foods
logistics was handled in co-operation with the associated company
Finnfrost Oy.
The Inex Group’s operations developed well last year. This was
attributable to the good performance of the customer chains and
to Inex’s own profitable operations. Overall, 2005 was a good year.
The added value generated by its operations has had a direct impact on strengthening the competitiveness of the customer chains.
Sales by the Inex Group grew by 8 per cent on the previous year,
amounting to EUR 2,075 million. The prevailing trend in sales by
Inex Partners Oy, Meira Nova Oy and Finnfrost Oy are still higher
than the general trend in the sector. Consequently, Inex’s sourcing
and logistics position has gained strength.
In 2005 Inex adopted an operational model based on functions
and processes, and development projects were implemented to
support its firm establishment. Key development projects included
product group planning, delivery channel selection, voicecontrolled order picking at the Kilo logistics centre, preparations
to revamp financial control systems and measures to intensify
operations at the logistics centre for specialty products. Procurement co-operation was developed in unison with the Nordic retail
trading company Coop Norden.
Last year saw continued good performance by Inex Partners Oy,
which produces assortment, purchasing and logistics services for
the grocery and speciality trade. The company’s sales came to EUR
1,858 million, up 7 per cent on the previous year. Development
projects went ahead better than had been planned. This enabled
the company to improve efficiency, operational reliability, quality
and earnings. The company’s competitive benefits for customers
and its position in the markets strengthened.
A continued strong performance was also reported by Meira
Nova Oy, which produces assortment, purchasing and logistics
services for the HoReCa sector. Sales totalled EUR 223 million, an
increase of 12 per cent on the previous year. Warehouse deliveries
grew by 14 per cent. Meira Nova’s share of the delivery wholesale
trade in the HoReCa sector comes to about 30 per cent. Planning
got underway for the building project for a new logistics centre
that is due to be ready in 2007.
Finnfrost Oy, the associated company that provides purchasing and logistics services for frozen foods, reported excellent sales
30
figures of EUR 205 million, up 13 per cent. Activities during the
year focused on improving the efficiency of basic operations.
The year 2006 will be a challenging period for Inex as it adapts
volumes in response to the corporate acquisitions made by SOK.
While Tradeka Oy’s volumes will gradually be discontinued from
Inex’s purchasing and logistics, volumes from Spar stores will
come under the scope of Inex’s sourcing and logistics operations
throughout the year. Furthermore, Inex’s new role as a subsidiary
of SOK will bring about change.
Increasingly international trading and the structural changes
taking place within Finland are putting pressure on the competitive situation. This is reflected in particular by tougher price competition. Intensifying basic operations and tightening up co-operation with the S Group are the way to tackle these challenges.
The good trend of the Inex Group and its client chains will
continue for the most part in 2006. The competitive factors of
primary importance are price-competitiveness, cost-effectiveness
and delivery reliability as well as the efficiency of the value chain
extending from the consumer to the production operation.
Inex Group had a payroll of 2,411 employees at the end of the
year, an increase of 35 people over the previous year.
Risto Pyykönen M.Sc. (Econ.) serves as Chairman and CEO of
the parent company and the Group.
Neighbouring Countries
The S Group operates in the Baltic countries within the supermarket trade, the hotel and restaurant business and the motor trade.
The Baltic region saw the continuance of the investment plan
in the supermarket, hotel and restaurant and motor trades. An
updated neighbouring country strategy was approved in December
2005. An agreement was made in 2005 concerning the opening
of the first Prisma hypermarket in the Latvian capital of Riga in
autumn 2006.
Business operations in the Baltic countries achieved the objectives set for them in the financial year and showed a profitable
result.
The overall market for vehicles in Estonia in 2005 was 22,025
new cars and vans, representing growth of 18.6 per cent on the
previous year. Latvia’s total market was 18,426 cars and vans, an
increase of 46.0 per cent compared with the previous year.
Kommest Auto sold a total of 1,707 Peugeot vehicles in Estonia
and 721 in Latvia. The market share of Peugeot passenger cars in
Estonia was 6.6 per cent and in Latvia, 4.1 per cent.
The Kommest Auto Group had net turnover in 2005 of EUR
61.8 million (59.7) and posted operating profit of EUR 0.8 million (1.0).
At the end of 2005 the company had a payroll of 236 people
(210).
AS Prisma Peremarket
AS Prisma Peremarket, a wholly-owned subsidiary of SOK, is
engaged in the retail trade in Tallinn at Prisma hypermarkets in
the Sikupilli, Kristiine, Mustamäe and Haabersti town districts.
The year 2005 saw the acquisition of ETK’s (Eesti Tarbijateühistute Keskühistu) subsidiary AS Ramare, the previous owner of
the Prisma in the Rocca al Mare Shopping Centre. The opening
of the fifth Prisma in Tallinn, in the Lasnamäe town district, was
postponed until autumn 2006. In 2005 developments within such
spheres as logistics, electronic ordering and data systems took the
company’s preparedness for the future a major step forward.
The company also carries on restaurant operations in line with
the Rosso, Rosso Express, Coffee House and Hesburger concepts
in a food court that operates within the Prisma in Sikupilli.
In 2005 the net turnover for AS Prisma Peremarket came to
EUR 81.0 million (58.6) and it reported operating profit of EUR
2.5 million (0.6).
At the end of 2005 the company had a payroll of 610 employees.
AS Sokotel
AS Sokotel is SOK’s wholly-owned subsidiary that operates the
Sokos Hotel Viru in Tallinn. As the largest hotel in Estonia, Sokos
Hotel Viru and its restaurants serve the S Group’s members, business travellers and other customers. Following the completion of
an extension in spring 2004, the hotel has 516 rooms, five restaurants and completely refurbished conference facilities. In 2005 a
Letter of Intent was signed concerning the building of a new hotel
in the heart of Tallinn, next to the present Sokos Hotel Viru; the
new hotel is intended to open for business in 2007, depending on
when the building permit is granted.
AS Sokotel’s net turnover in 2005 amounted to EUR 18.4 million (16.9) and its operating result was EUR 3.1 million (1.7).
At the end of 2005 the company had a payroll of 236 employees.
AS Kommest Auto Group
AS Kommest Auto is SOK’s subsidiary that has dealership rights
for Peugeot vehicles in Estonia and Latvia. SOK has a 90 per cent
holding in the company. AS Kommest Auto’s subsidiary Oü Kommest Autokeskused operates as a sales company in Estonia. AS
Lauva Auto is the importer in Latvia and SIA Lauva Autocentrs is
the sales company.
31
Corporate Governance within SOK Corporation
Applicable regulations
SOK is a Finnish cooperative whose decision-making and administration complies with the Cooperatives Act, other relevant regulations and SOK’s Statutes. The activities of its subsidiary companies
are regulated by the Finnish Companies Act and Corporation-wide
principles which are based on various regulations and guidelines.
The Corporation’s administration seeks to comply with the
recommendation on the corporate governance of publicly traded
companies issued by the Helsinki Stock Exchange, the Central Chamber of Commerce and the Confederation of Finnish
Industry and Employers. Owing to the cooperative form and the
structure of the Group, not all the recommendations have been
considered applicable.
General Meetings
The Cooperative Meeting is SOK’s highest decision-making body.
Each cooperative enterprise is entitled to send to a Cooperative
Meeting a number of representatives equal to its votes. The representatives have the right to speak but only one of them has the
right to vote on behalf of the cooperative enterprise. The exercise
of owners’ rights is based on the cooperative’s Statutes.
The task of the Annual Cooperative Meeting is to deal with
matters that are defined in the Statutes, such as adopting the financial statements, considering the profit/loss, discharge of officers
from liability, the election of the Supervisory Board and the auditors and their remuneration. Extraordinary cooperative meetings
may be convened as necessary.
Supervisory Board
The Cooperatives Act does not require the appointment of a Supervisory Board, but SOK’s Statutes define the Supervisory Board
as part of the Corporation’s corporate governance model. The role
of the Supervisory Board is to represent the owners at large and to
serve as a forum for taking a common stand on central strategic
questions. Its task is to decide on major policies and to oversee
the best interests of members. Upon a proposal by the Executive
Board, the Supervisory Board confirms all the central strategic
policies of the S Group and SOK Corporation. The matters within
the scope of line management fall within the competence of the
cooperative enterprise’s Executive Board and line management.
The Supervisory Board oversees that the administration of the
cooperative enterprise and SOK Corporation is attended to in
accordance with the law, the Statutes, decisions of the Cooperative
Meeting and the Supervisory Board as well as the cooperative enterprise’s best interests. The Supervisory Board accepts and expels
members of the cooperative enterprise and appoints and dismisses
the chief executive and other members of the Executive Board as
well as decides on the remuneration of Executive Board members
other than those who are employed by the cooperative enterprise.
In addition, the Supervisory Board decides on the principles of
co-operation for the S Group’s operations and on long-term plans.
The Supervisory Board has duly confirmed rules of procedure.
The chairman and two vice chairmen of the Supervisory Board
form a Committee of Presiding Officers which assists the Supervisory Board with its tasks. The chief executive participates in the
32
meetings of the Committee of Presiding Officers. In addition,
the Committee of Presiding Officers decides on such matters as
the chief executive’s compensation. The Supervisory Board has
appointed a permanent Compensation Committee and a Nomination Committee.
The Cooperative Meeting elects the members of the Supervisory
Board on the basis of proposals made by the cooperative enterprises. The Supervisory Board has 12-25 members. A person elected
to the Supervisory Board must be a Finnish citizen, a member of a
cooperative enterprise and less than 65 years of age. The Cooperative Meeting decides the emoluments of the chairman, vice chairmen and members as well as the auditors’ fees.
The Supervisory Board had 22 members in 2005 as well as two
personnel representatives. The Supervisory Board met 6 times.
The special remuneration for the chairman of the Supervisory
Board in 2005 came to EUR 1,350 per month and the monthly
remuneration for the vice chairmen amounted to EUR 420.
In 2005 the fee paid to the chairmen and members of the
Supervisory Board per meeting and per day taken up with carrying
out their duties amounted to EUR 320.
Executive Board
Election and composition
In accordance with SOK’s Statutes, the Supervisory Board elects
the members of the Executive Board for a term of one year based
on a proposal by the Committee of Presiding Officers. Under the
Statutes, the Executive Board is comprised of the cooperative enterprise’s chief executive, who serves as chairman, and a minimum
of three and a maximum of eight other members. The Executive Board of SOK in 2006 has eight members, six of whom are
managing directors of cooperative enterprises and two of whom
are employed by SOK.
In accordance with the Statutes, a person elected must be a
Finnish citizen and less than 65 years of age. The aim is to ensure
sufficient rotation while preserving sufficient continuity.
Tasks of the Executive Board
The activities of the Executive Board are guided by the cooperative enterprise’s Statutes, the Corporation-wide principles and the
Board’s rules of procedure. The Executive Board confirms matters
such as the objectives of the subsidiaries, the operational plans
and the allocation of resources and oversees the implementation
of related decisions. The Executive Board oversees the operations
of the associated companies to ensure the best interests of SOK
Corporation and the S Group. The Executive Board also monitors
the savings fund activities of the cooperative enterprises.
Upon a proposal by the chief executive, the Executive Board
decides on setting up a Management Team, on the appointments
and compensation of members of the Management Team who do
not belong to the Executive Board as well as on other management
appointments.
A member of the Executive Board who is an employee of a cooperative enterprise or exercises a position of trust within one does
not participate in the preparation of decisions concerning the audit
and auditors of cooperative enterprises or in decision-making or in
monitoring the cooperative enterprises’ savings fund activities.
Meetings of the Executive Board
The Executive Board met 18 times during 2005 and the rate
of attendance by its members was 98.4 per cent. The Executive
Board of SOK annually appraises its activities using a system of
self-evaluation. The members of the Executive Board were paid
emoluments totalling EUR 60,000 in 2005. Those members of the
Executive Board who are employed by SOK received no compensation for working on the Executive Board.
Chief Executive Officer
The duty of the chief executive officer is to direct the activities of
the Executive Board and the cooperative enterprise in accordance
with the relevant acts, SOK’s Statutes and the decisions of the
governing bodies. The chief executive officer of SOK is Professor
Kari Neilimo, D.Sc. (Econ.).
Management Team
The task of the Management Team is to assist the chief executive
officer and the Executive Board in accordance with the framework
determined by the Executive Board. The Management Team
prepares matters for presentation to the Executive Board which require co-ordination, such as the S Group’s and SOK Corporation’s
business strategies, target levels, operational plans and budgets.
The Management Team met eleven times in 2005. In 2005 the
members of the SOK Management Team were paid salaries and
profit-related bonuses amounting to EUR 1,920,274. The sum
includes remuneration in kind.
Executive Boards of the subsidiaries
The chairman of the Executive Board of a subsidiary is, as a rule,
a member of the Executive Board or Management Team who is
responsible for the subsidiary’s operations and is employed by
SOK. The subsidiary’s Executive Board decides on the company’s strategy, operational plans and budget as well as the hiring,
terms of employment and dismissal of the managing director. The
decisions of the Executive Board take into account the Corporation-wide principles and the decisions of SOK’s Executive Board
concerning the company’s objectives, operational plans and allocation of resources.
Chain Management
The business area-specific Chain Management organisation manages and co-ordinates chain operations under the supervision of
SOK’s Executive Board. The Chain Management organisation
comprises the Chain Board, the Chain Management unit and the
Steering Group that assists it. The Chain Management organisation is the central commercial joint organisation of the cooperative
enterprises and SOK Corporation.
The Chain Management organisation is independently responsible for managing, developing and monitoring strategic and tactical
chain operations within its own business area. It functions in cooperation with the cooperative enterprises and various professional
organisations. The Chain Board makes the central decisions concerning its own business area and chains within the framework of
its authority. Its decisions are binding under the Chain Agreement.
The Chain Boards are made up of the managing directors and
business area directors of the cooperative enterprises as well as
members of the Executive Board or Management Team who are
employed by SOK. SOK’s Executive Board decides on the composition of the Chain Boards.
Profit-related bonus scheme
for management
All staff within SOK Corporation come under a profit-related
bonus scheme. The principles of the profit-related bonus scheme
for management are approved annually by the Supervisory Board
based upon a proposal by the Compensation Committee. The
criteria for the bonus scheme include profit, process efficiency, and
customer and personnel satisfaction. Profit-related bonus gauges
are defined from the perspective of one’s own unit as well as from
the wider perspective of SOK and the S Group as a whole.
The Supervisory Board has set up a Compensation Committee
to determine the principles of the bonus scheme in the future.
General and administrative audit
General audit
The Annual Cooperative Meeting elects a minimum of one and
a maximum of three auditors and two deputy auditors to audit
the financial statements of the cooperative enterprise and the
Corporation as well as the accounting records and administration.
The auditors and deputy auditors must have the legally required
qualification.
Administrative audit, Audit Committee
The aim of establishing an Audit Committee and electing Management Auditors is to facilitate the participation in the audit
of persons within the cooperative enterprises owned by SOK
Corporation who exercise a position of trust. The Audit Committee is part of corporate owner-oversight. The Committee comprises
two Management Auditors and the SOK auditors elected by the
Cooperative Meeting.
The Audit Committee is an oversight body and a link between
the auditors and the owners. A special task of the Committee and
of the Management Auditors is to bring the point of view of the
owner administration and basic membership into the audit. The
Audit Committee compiles a report for the Annual Cooperative
Meeting. The report is submitted to the Supervisory Board chairman and the Executive Board and is entered as received and attached as an appendix to the minutes of the Cooperative Meeting.
The Audit Committee’s report is distributed to the Supervisory
Board, the Executive Board and to other units as necessary.
The Management Auditors are paid an emolument according
to the same principles as apply to the members of the Supervisory
Board. The emolument paid to the chairman is raised by 50 per
cent.
2005
The Cooperative Meeting held on 20 April 2005 elected as SOK’s
regular auditors for 2006 Tomi Englund M.Sc. (Econ.), LL.M.,
Authorised Public Accountant (APA), of Helsinki, Tapani Ro-
33
tola-Pukkila, Managing Director, APA, of Kauhajoki and Juhani
Heiskanen D.Sc. (Econ.), APA, of Huittinen. The deputy auditors
elected were Ernst & Young Oy and Eero Huusko M.Sc. (Econ.),
APA, of Kajaani. The Management Auditors elected to the Audit
Committee for 2006 were Matti Suokas, M.Sc. (Econ.), Approved
Auditor, of Kotka, Marja Pappila, lawyer, of Laitila and their deputies, Risto Tuori, lawyer, of Vammala and Seppo Ehanti, Senior
Consultant, of Porvoo.
Auditing fees for SOK Corporation companies amounting to
EUR 666,000 and fees for consultancy services amounting to
EUR 134,500 were paid in Finland and the Baltic countries in
2005. The Management Auditors received payment totalling EUR
20,330 for their work.
Internal control, internal audit and
risk management
SOK’s Executive Board is responsible for organising operations in
an appropriate manner, corporate governance and for the legality
and reliability of the accounting records, finance and routine
management. In addition, the chief executive officer, SOK’s unit
directors and the Executive Boards of the subsidiaries and their
managing directors carry out the management and control of business activities in day-to-day operations within their own areas of
responsibility.
SOK Corporation’s Controller functions constitute the strategic
body which is responsible for implementing the internal audit
of the Corporation and for assessing strategic profitability. Their
activities cover all business operations and support services within
the Corporation. SOK’s Executive Board annually deliberates on
the focal points of internal control and the Controller functions
perform an assessment of the functionality and adequacy of internal auditing as well as internal control within a set framework.
The Controller functions report regularly to the CEO, the
Executive Board and to the Committee of Presiding Officers of
the Supervisory Board on matters concerning risk management.
The Corporation has adopted a comprehensive risk management
model. Based on the results, the most significant risks with respect
to the Corporation’s operations and the achievement of its strategic
objectives have been identified. In addition to the comprehensive
risk management model, selected functions employ more detailed
risk management models (including finance and the accountancy
function). Insurance policies have been taken out in order to
address the risks concerning assets, disruption of operations and
business liability.
Financial reporting
SOK Corporation and the S Group use a wide-ranging method of
reporting on financial key figures, trends and forecasts to monitor
financial objectives. In addition to comprehensive internal reporting, the Corporation regularly publishes information on financial
performance and the trend in net turnover.
Information
SOK Communications and Publications ensures that customers and stakeholders have sufficient correct information at their
disposal concerning the company and its operations. Information
in written form is available upon request as well as through SOK’s
website.
34
SOK Supervisory Board 2005
Otto Mikkonen (born 1949)
Joensuu
Titular Industrial Counsellor
M.Sc. (Tech.)
Chairman 2002–
Managing Director,
KM-Yhtymä Oy
Chairman, Supervisory Board,
North Karelia Cooperative Society
Member of the Supervisory Board
2001–
Retiring in 2007
Jouko Vehmas (born 1956)
Kouvola
M.Sc. (Econ.)
First Vice Chairman 2004–
Managing Director,
Cooperative Society Ympäristö
Member of the SOK Executive Board
2001–2003
1994–2000, 2004–
Retiring in 2007
Max van der Pals (born 1945)
Lohja
Farmer
Second Vice Chairman 2003Chairman, Supervisory Board,
Suur-Seutu Cooperative Society SSO
2001–
Retiring in 2007
Jorma Bergholm (born 1954)
Helsinki
Managing Director
Helsingin Työväenyhdistys ry
Helsinki Cooperative Society Elanto
Member of the Supervisory Board 20
April 2005–
Retiring in 2008
Marcus H. Borgström (born 1946)
Sipoo
Titular Agricultural Counsellor
M.Sc. (Agr. and For.)
Cooperative Society Varuboden
2004–
Retiring in 2007
Jouko Härkönen (born 1939)
Kajaani
Farmer
Cooperative Society Maakunta
2003–
Retiring in 2006
Heikki Ikonen (born 1943)
Nurmes
Honorary Counsellor
Farmer
Cooperative Society Jukola
1985–
Retiring in 2008
Aarto Jalava (born 1947)
Rauma
M.Soc.Sc.
Financial Manager
City of Rauma
20 April 2005–
Retiring in 2008
Pekka Kangasmäki (born 1945)
Porvoo
B.Sc. (Econ.)
Managing Director,
Cooperative Society Osla
1994–20 April 2005
Simo Kutinlahti (born 1957)
Keuruu
Farmer
Cooperative Society Keskimaa
1998–
Retiring in 2007
Leo Laukkanen (born 1947)
Mikkeli
Titular Commercial Counsellor
Managing Director,
Cooperative Society Suur-Savo
Member of the SOK Executive Board
1998-2002
1987–1997, 2003–
Retiring in 2006
Jouko K. Leskinen (born 1943)
Helsinki
LL. M.
Helsinki Cooperative Society Elanto
Member of the Supervisory Board 2002–20
April 2005
Maija-Liisa Lindqvist (born 1951)
Lahti
Member of Parliament
Cooperative Society Hämeenmaa
Member of the Supervisory Board 1997–
Retiring in 2008
Seppo Linjakumpu (born 1958)
Kuusamo
Agronomist
Cooperative Society Koillismaa
Retiring in 2006
Ahti Manninen (born 1950)
Lappeenranta
Managing Director,
South Karelia Cooperative Society
Member of the Supervisory Board 1989–1991,
2000–
Retiring in 2006
Jorma Niiniaho (born 1945)
Hamina
M.Sc. (Econ.)
Managing Director,
Cooperative Society Ympyrä
Member of the Supervisory Board 1991–1997,
2002–
Retiring in 2006
Klaus Pentti (born 1943)
Hämeenkyrö
Titular Agricultural Counsellor
Member of Parliament
Pirkanmaa Cooperative Society
Member of the Supervisory Board 20 April
2005–
Retiring in 2008
Arto Piela (born 1960)
Porvoo
LL. M
Managing Director,
Cooperative Society Osla
Member of the Supervisory Board 20
April 2005–
Retiring in 2006
Matti Vanto (born 1945)
Raisio
LL. M.
Lawyer, City of Naantali
Turku Cooperative Society
Retiring in 2007
Matti Pikkarainen (born 1953)
Oulu
Dean
Director of Christian Education
Oulu Evangelical Lutheran Parishes
Cooperative Society Arina
Retiring in 2007
Juha Vuorenhela (born 1944)
Pori
LL. M.
Juha Vuorenhela Ky, Law Office
Satakunta Cooperative Society
Retiring in 2006
Jorma Sieviläinen (born 1954)
Rauma
M.Sc. (Econ. and Bus. Admin.)
Managing Director,
Cooperative Society Keula
1991–20 April 2005
Personnel Representatives
Kimmo Simberg (born 1959)
Seinäjoki
Bachelor of Hospitality Management
Managing Director,
South Ostrobothnia Cooperative Society
Member of the Supervisory Board from
2004–31 December 2005
Tapani Tikkala (born 1947)
Helsinki
Project Manager,
SOK Member Services
Retiring in 2007
Annikki Heikkinen (born 1942)
Helsinki
Assistant,
SOK Real Estate Maintenance
Retiring in 2007
Timo Sonninen (born 1948)
Iisalmi
Entrepreneur
Cooperative Society PeeÄssä
Retiring in 2008
Antero Taanila (born 1941)
Kokkola
Provincial Counsellor
Former Administrative Director,
Boliden Kokkola Oy
Cooperative Society KPO
Retiring in 2008
35
SOK Executive Board 2005–2006
Kari Neilimo (born 1944)
Chief Executive Officer 2002–
D.Sc. (Econ.)
Professor of Business
Administration, University of
Tampere,
University of Lapland and
Lappeenranta University of
Technology, 1983–2002
Managing Director of
Neiconsulting Oy, 1991–2002
Member of the Executive Board
of Pirkanmaa Cooperative Society,
1988–1991 and
Chairman of the Supervisory
Board, 1992–2002
Chairman of the SOK’s
Supervisory Board, 1991–2002
With the S Group since 1988
Esko Hakala (born 1952)
Managing Director,
Cooperative Society Maakunta
2003–
Arto Hiltunen (born 1958)
M.Sc. (Econ.)
Managing Director, Helsinki
Cooperative Society Elanto
2000–2001, 2003–
Kuisma Niemelä (born 1958)
M.A.
Managing Director, Cooperative
Society Keskimaa Osk
2002–
Veli-Matti Puutio (born 1961)
MBA
Managing Director, Cooperative
Society Arina
2004–
Jukka Salminen (born 1947)
M.Sc. (Econ.)
Executive Vice President, SOK
Administrative Division 1993–
Director of SOK’s Field Division
1993–
1988–
Kimmo Simberg (born 1959)
Bachelor of Hospitality
Management
Managing Director, Southern
Ostrobothnia Cooperative
Society
2006–
Ulla-Maija Tolonen (born 1951)
M.Sc. (Econ.),
Managing Director, Pirkanmaa
Cooperative Society
2005–
36
SOK Management Team
Kari Neilimo (born 1944)
Chairman and CEO
D.Sc. (Econ.)
M.Sc. (Econ.), University of
Tampere
Member of SOK’s Executive
Board 2002–
Member of the Management Team
2002–
main positions of trust:
Confederation of Finnish
Industries, EK member of
the Member Associations’
representative council 2004–
Federation of Finnish Commerce
and Trade, member of the Board
2003–
Tapiola Mutual Pension Insurance
Company, member of the
Supervisory Board 2003–
Central Chamber of Commerce
2003–
Luottokunta, Vice Chairman of
the Executive Board 2003–
Federation of Finnish Commerce
and Trade, member of the Board
2004–, Managing Director 2005–
University of Tampere, member of
the University Governing Board
2004–
Ensio Hytönen (born 1952)
Managing Director,
Hankkija-Maatalous Oy
Licentiate in Agriculture and
Forestry
Member of the Management
Team 2003–
Reijo Kaltea (born 1946)
Senior Vice President,
SOK Customer-ownership and
Specialty Store Division
B.Sc. (Econ.)
Team 2002–
Suso Kolesnik (born 1961)
SOK Communications and
Publications
M.Soc.Sc
Team 2003–
Harri Miettinen (born 1962)
SOK Strategic Development
and Human Resources
M.Sc. (Econ.)
Team 2004–
Matti Pulkki (born 1947
SOK Hotel and Restaurant
Division
B.Sc. (Econ.), MBA
Titular Turism Councellor
Team 2002–
Jukka Salminen (born 1947)
Executive Vice President,
SOK Administrative Division
M.Sc. (Econ.)
Member of SOK’s Executive
Board 1988–
Team 1998–
Deputy CEO
Antti Sippola (born 1955)
SOK Supermarket Trade
M.Sc. (Econ.)
Team 2003–
Heikki Strandén (born 1954)
Senior Vice President
SOK Service Station Store and Fuel
Sales
Member of the Management Team
2003–
37
Accountability
Accountability is one of the fundamental values of the S Group.
The scope of accountability within the S Group is wide-ranging due to the Group’s broadly based business. For the S Group
accountability means that members can rely on the quality of the
products they purchase and that they can be equally confident
that employees are content in their jobs and that fuel sales cause
no harm to the local environment. The accountability of corporate
activities is viewed as a natural part of the S Group’s operations
and of a people-first market economy. The aim is to provide added
value for the S Group’s business operations and in turn for its
members by developing economic, social and environmental data
management.
In November 2002 SOK’s Executive Board endorsed the principles of social accountability for the S Group that had been drafted
on the basis of the S Group’s environmental policy which was
approved in 1999. The principles encompass the economic, social
and environmental dimensions of accountability.
Principles of the S Group’s
social responsibility
The S Group provides services and benefits for its members
responsibly and in accordance with the principles of sustainable
development. Responsibility means regionally, economically,
ecologically and socially responsible business operations over the
long term.
Operations are developed in co-operation with members,
personnel, suppliers of goods and services, local communities, the
authorities, partners in co-operation and other stakeholders.
The observance of international agreements, legislation as
well as regulations and guidelines sets the standard within the S
Group and this is supplemented with inter-company agreements
and good business practices. Responsible business is furthered by
taking the initiative and being at the forefront in line with the
principle of continuous improvement.
Result-oriented operations ensure long-term profitability and
SOK CORPORATION’S PERSONNEL PER BUSINESS UNIT
38
sufficient resources to develop responsible business practices.
The S Group makes innovative use of the best available technology and expertise on the market. This enables the Group to
minimise hazardous and adverse situations and the risks they cause
to people and the environment. Matters related to customers’
health and safety as well as to ethical product procurement play a
prominent role in planning product and service assortments.
The S Group communicates openly about the effect of its
operations on the economy, the environment and people as well as
regional vitality. To this end, the S Group draws up indicators for
measuring, describing and comparing the results of the development work carried out in the various sub-areas.
The Group strives for interactive corporate communications
with different stakeholders.
It is the task of the management of the S Group’s business units
to ensure that employees are familiar with these principles and
committed to observing them in their daily work.
Social responsibility is viewed as a natural part of the S Group’s
set of core values, and the principles are applied in practice by
means of action plans carried out by the operating units. The aim
is to provide added value for the S Group’s business operations
and in turn for its members by developing economic, social and
environmental data management.
The S Group’s Social Accountability Report is available at
www.s-kanava.fi
DISTRIBUTION OF MALE AND FEMALE EMPLOYEES
Accountability
SOK Corporation’s personnel
In all, 5,141 people (including absentees) were in the employ
of SOK Corporation at the end of 2005. Of the staff working
in Finland, 143 were on family leave and 7 were on study leave.
Permanently employed personnel remained at more or less the
same level as the previous year (92%). Full-time staff represented
the majority of all employment contracts (75%). Women in SOK
Corporation accounted for over half the personnel (58%). The
average age was 38 years. Employees in the hotel and restaurant
business comprised the largest personnel group.
nates the implementation, monitoring and the setting of objectives
for the equality plan together with personnel representatives. The
achievement of the equality principles is monitored by means of an
annually conducted workplace survey. Management and personnel
representatives are always informed of the results.
The survey for 2005 revealed that equality is achieved successfully within SOK. Around 80 per cent of staff took part in the
survey. The equal treatment of different-aged employees received
an excellent score in the survey. Equality between the sexes, the
fairness of supervisor work as well as the overall way in which
equality is achieved were given good scores.
When evaluating the implementation of earlier measures, it
is worth drawing attention to the fact that, for instance, flexible
working hours have made it easier for employees to maintain the
balance between work and family. The workplace surveys have also
contributed towards implementing various development measures.
Measures included in the equality survey were improving the
quality of appraisal discussions, adding equality materials to the
intranet and preventing salary discrepancies by continuing to pay
particular attention to starting salaries for women.
Equality
Responsibility is one of the S Group’s fundamental values. It refers
to shouldering responsibility in matters such as equality and to
taking different people and points of view into consideration. A
working community that promotes equality motivates people to
give their best effort, to be committed to their work and to step up
the quality and profitability of work throughout the community,
which in turn leads to better competitiveness.
Within SOK, equality is defined as comprising the equal and
fair treatment of a person irrespective of sex, age, ethnic background or other personal characteristic.
SOK’s equality plan revolves around the Corporation’s human
resources policy and core values. A random sample questionnaire
concerning equality was devised for personnel as the basis for the
plan. SOK’s HR Administration and Development unit co-ordi-
Compensation and reward
Within the S Group, reward is a part of good, goal-oriented management as well as of competent supervisor work. It is a means for
supporting the achievement of the S Group’s business objectives.
The primary aim of reward is to positively affect competitiveness
and profitability across the S Group and within each unit.
The S Group has a strong tradition of diverse and motivational
reward of personnel. Effective and appropriate reward calls for a
sound grasp of different forms of reward and actively using them.
A working group was established in 2005 to survey and define the
S Group’s reward practices. The group will continue its work in
2006.
The aim of the principles defined by the working group is to
encourage the feeling that a job and working within the S Group
are rewarding and valued. The idea behind comprehensive reward
LENGTH OF EMPLOYMENT
(permanent employees in Finland)
PERMANENT EMPLOYEES / TEMPORARY EMPLOYEES
Personnel
Within the S Group, the staff are managed in accordance with the
Group’s core values. Personnel activities are steered by the human
resources strategy, which is rooted in the S Group’s mission, vision
and values. The objective of the HR strategy is to turn our personnel into a unique competitive advantage for the S Group, whilst
supporting and ensuring the implementation of competitive strategies via human resources and the S Group’s ways of working.
39
Vastuullisuus
40
Accountability
is that within an organisation, the focus is on work and its co-ordination and development while ensuring that financial reward is in
the right ratio to the work accomplished and profit achieved.
Bonus schemes within SOK Corporation have applied to all
staff since the beginning of 2004. SOK Corporation paid profit-related and incentive bonuses based on operations in 2005 amounting to EUR 4,413,704.93.
Within SOK Corporation, an employee’s salary is determined
by task qualification, the person’s experience and competence as
well as performance of the task. The criteria for evaluating job
qualification apply equally to all employees.
healthcare. Over the years, the emphasis of occupational healthcare
has shifted from treating accidents and illnesses and preventative
care to promoting and sustaining health and well-being.
The fundamental element within SOK Corporation is that
meaningful work and an open and fair atmosphere in the workplace generate job well-being. Diverse club activities and Job Verve
days are also the approaches used to maintain job well-being.
Forthcoming supervisor courses will concentrate on job well-being
and on the means for its improvement.
Well-being
One of the S Group’s overriding objectives concerning personnel is
to foster and sustain well-being at work. Occupational healthcare
across SOK Corporation is arranged through its own occupational
health unit. In addition to Job Verve activities that serve a preventative purpose and promote job well-being, activities comprise general practitioner-level treatment with the emphasis on occupational
Training and development
The continual development of personnel ensures that SOK Corporation’s staff are equipped with adequate tools to give them the
competence to do their work both now and in the future.
Last year the Jollas Institute racked up around 1,300 training
days, which were attended by about 17,500 students. There was
continued strong demand for the basic courses offered at Jollas,
such as long-term training programmes for supervisors and product group and store opening courses.
The For You, Our Customer in 2004 training programme,
which was aimed widely at S Group personnel, reached conclusion
last year. Its aim was to support supervisors in running efficient
operations and in service quality management. It was attended
by around 10,000 S Group employees during 2004 and 2005.
The programme culminated in spring with the final round of a
competition arranged at Jollas, in which more than 200 contestants took part.
Last year saw the start-up and implementation of several new
programmes, such as the Saha course which aims at improving
availability, reducing wastage and enhancing the efficiency of
operations by utilising ordering systems. Other courses that started
out during the year included in-depth management training for
S Group supervisors and customer-knowledge training. The most
significant Chain Management courses were launched for the
ABC and Sokos chains. The Management in the Future course was
DISTRIBUTION OF EMPLOYEES PER BUSINESS UNIT
FULL-TIME EMPLOYEES / PART-TIME EMPLOYEES
Management and leadership
Good leadership and management are used to ensure that social
relations work from the top down, the bottom up and horizontally. Reliability, openness and persistence are the hallmarks of
a well-managed unit. Management and leadership are rooted in
profitable activities, by people and with people.
Within SOK Corporation, particular attention has been given
to the work of supervisors. For instance, SOK has arranged halfday coaching sessions covering a range of themes for supervisors
eight times a year. The themes in 2005 included appraisal discussions, the development of capabilities, interactive skills, reward and
the supervisor’s role in dealing with problematic situations within
the work community. Supervisor training is continuing at the
Jollas Institute, the S Group’s training centre, with a course named
Inspired Leadership and a Thriving Working Community.
41
Accountability
arranged in collaboration with the Continuing Education Centre
at the University of Tampere. A course for the S Group’s senior
management also commenced at the Jollas Institute towards the
end of the year.
Some of the Jollas Institute’s courses are arranged online. The
popularity and importance of this form of training are continually rising. The most important online course is online induction,
which is already used in several of the S Group’s units. New, advanced online training programmes were also devised for the ABC
chain, to name but one example.
Arranging apprenticeship training and courses leading to professional and vocational qualifications is an important part of activities at the Jollas Institute. These types of courses were organised
to prepare students for vocational qualifications in sales, car sales,
secretarial duties and financial administration and for professional
qualifications specialising in store supervision, food supervision as
well as hotel, restaurant and institutional kitchen supervision and
management. Last year these courses were attended by more than
450 students.
Appraisal discussions play an important part in planning the development of a person’s competence. They take place at least once
a year. An S Group level recommendation concerning the appraisal
discussion process was issued in 2005. Training programmes for
supervisors arranged at the Jollas Institute have focused particular
attention on the quality of the discussions. SOK’s HR Administration and Development unit, in collaboration with the Jollas
Institute, is continuing to develop the tools for successful and high
quality appraisal discussions. The monitoring of appraisal discussions has also been included as part of the workplace survey.
Electronic tools that support HR functions were also taken a
step forward. The emphasis was on enhancing the readiness for
appraisal discussions as well as on steering job-related issues. Last
year HR courses were organised twice for HR professionals. SOK’s
HR Information days, which deal with personnel matters of current interest, were arranged twice during the year.
TURNOVER (permanent employees in Finland)
42
Commercial field training
Commercial field training is a recruitment programme aimed
at recent graduates from universities and polytechnics. It is the
approach taken by the S Group to recruit and train people for
challenging managerial and specialist tasks in the different sectors
within the Group. Field training groups are the way to ensure
sufficient key resources for the future in the S Group’s units and
sectors.
Eighteen trainees were recruited for the university-level commercial field training group that started out in February and thirteen trainees started in the polytechnic group launched in June.
Corporate security
The goal of corporate security and risk management within the S
Group is to support the unhindered continuity of the S Group’s
central operations and processes by using risk management
measures and procedures in order to achieve its business strategy
objectives. The aim is to safeguard personnel, customers, assets,
information and the environment against accidents, damage and
misfeasance through preventative and cost-effective risk management as well as to reinforce customer confidence in the S Group.
In 2005 the development of comprehensive risk management
pressed ahead in line with the risk management policy determined
by SOK’s Executive Board last spring, and in accordance with the
organisation and responsibilities of risk management. Furthermore, the work of drawing up the S Group’s risk management
strategy got underway. During the year a risk management and
security management information system (RITU) was developed
and adopted. The system is used to promote the management
of the S Group’s business risks, the internal control of security,
reporting on extraordinary situations as well as online learning as
part of comprehensive risk management.
Improvements were made to ensure the unhindered continuity of business functions by drawing up a continuity plan for
the S Group’s steering and management functions. In addition,
data security reviews and internal audits on the principal service
and goods suppliers were carried out as part of a comprehensive
security audit. Data security audits were conducted in the Sokos
department stores. In 2005 particular attention was given to stepping up workstation anti-virus software and control.
Safety Passport courses were arranged in collaboration with
the Red Cross, the Jollas Institute, SOK’s Corporate Security and
Risk Management unit and the fire and police authorities. These
courses aim at enhancing the safety of customers and personnel in
the S Group’s locations. By the end of the year, altogether 1,861 S
Group employees had completed their Safety Passport training.
Other security training was arranged as part of the Jollas Institute’s basic and store opening courses as well as on security courses
arranged at the initiative of staff within the organisation. A total
of 1,086 students completed the E-jollas online induction security
module. Last year the Corporate Security and Risk Management
unit arranged security training totalling 311 hours for S Group
staff.
Management readiness in crisis situations was further improved
in co-operation with SOK’s Communications and Publications
division. A crisis situation management model was defined for
the regional cooperative enterprises and the Crisis Communications manual was compiled for supervisors and crisis management
organisations. Crisis management organisations and responsibili-
Accountability
ties were laid out for the regional cooperative enterprises as part
of training and a field exercise was carried out with the purpose of
developing practical management capabilities.
Last year analyses were carried out on the principal security
threats related to the S Group’s business operations; risk management measures were prescribed accordingly. Furthermore, the
analysis of business risks using the RITU system was launched
within organisations determined by SOK Corporation.
Co-operation in safety continued within the framework of the
security partnership agreement with the City of Helsinki Rescue
Department, SOK and Helsinki Cooperative Society Elanto by
developing an internal control tool for fire safety. The comparison
of the level of security activities continued between Rezidor SAS
and Sokotel Oy. SOK’s Corporate Security and Risk Management
unit and the Tapiola Group of insurance companies commissioned
an inspection of the safety levels in 106 of the S Group’s locations.
The S Group entered into a Bonus co-operation agreement with
Falck Security (A Group 4 Securicor Company) concerning the offering of home protection and security systems to customer-owners. The Bonus co-operation agreement was piloted in Cooperative
Society Keskimaa in 2005.
Inspections of safety levels at locations were carried out with
the aim of stepping up anti-crime security as part of the SafetyProtected campaign being run by the Federation of Finnish Commerce and Trade. By the end of the year, 298 locations had been
approved.
Outlook for the future
Updating the HR strategy across the S Group will be one of
the priority areas in 2006. The work of renewing, defining and
putting SOK Corporation’s personnel policy into tangible shape
got started at the end of 2005. The work will continue in 2006
together with personnel representatives.
The year will see the launch at the Jollas Institute of the For You,
Our Customer programme aimed at all the S Group’s personnel, the theme of which is the Your Own Store vision. Personnel
capabilities will be taken a step further by such means as strengthening competence in business operation systems. The competence
profiling that got underway last year will make it possible to focus
and plan future courses even more precisely to match the needs of
different organisations and task groups.
Within corporate security, the development of comprehensive
risk management will forge ahead by drawing up the S Group’s
risk management strategy as well as by developing risk management processes and procedures. Personnel and customer safety will
be further improved by continuing the Safety Passport courses.
Continuity plans will be drawn up for information systems critical
to business operations in order to ensure the unhindered continuity of business functions.
Environment
Fundamentals
This report focuses on SOK Corporation’s environmental management, the environmental competence of employees, real estate,
energy and water consumption, sourcing and logistics, environmental labelling and Fair Trade products, packaging, waste
management, recycling services for customers, environmental
communications and co-operation with interest groups. More detailed information about the environment will be presented in the
S Group’s Accountability Report that is to be published in spring
2006 on the S Group’s website at www.s-kanava.net/accountability.
Environmental management
The most important aspect of environmental management is to
apply in practice the S Group’s environmental policy, which was
updated in 2005. The new environmental policy implements the
S Group’s values and the Group strategy, delineates responsibilities
and the division of labour, fosters the monitoring of the Group’s
performance and the dissemination of best practices as well as supports knowledge-based management, good administrative practices
and open communications.
Indicators and comparative data are indispensable as the basis
for decision-making. Consequently, the S Group employs environmental indicators to monitor environmental performance in the
field. Development work on environmental auditing at S Group
level concentrated on the introduction of indicators of environmental responsibility and integrated auditing rules as well as on
automating access to data from numerous source systems.
Environmental competence of employees
Increasing and maintaining the environmental skills of personnel
is an important part of day-to-day environmental work. Information was supplied to employees through training, communications,
and reporting and pilot projects. Training in environmental compliance is carried out in co-operation between the Jollas Institute
and the S Group’s units. At the Jollas Institute, environmental
compliance is included in store opening training, management
training days, commercial field training and in vocational degrees
in sales and service station store sales.
In addition, the units have carried out their own internal
training by means such as co-operating with goods suppliers and
other interest groups. The environmental message is put across to
employees in the Ässä magazine, the company’s website and the S
Group’s Accountability Report. Trade magazines, guidebooks, brochures, concepts, fairs and working groups also serve as important
sources of information.
Real estate
The prominence given to environmental compliance in the work
going on at new building and renovation sites set up by the S
Group’s real-estate arm as well as in the development of maintenance and servicing functions has taken on new dimensions
with each passing year. SOK’s Real-Estate Management is actively
involved in pioneering programmes in the property and construction field. The PromisE system, which is used for classifying and
comparing the environmental characteristics of properties, has
been in pilot use since 2002. The year 2005 saw the launch of
the PromisE Prisma Project, which is examining for the first time
43
Accountability
the environmental characteristics and energy efficiency at all the
Prisma hypermarkets; the work will reach conclusion in 2006.
Developer construction across the S Group has adopted technical environmental targets that serve as a design tool in building.
Targets are defined for a construction site, the building itself and
for the operations planned for that building. The objectives have
played a central role in constructing Prismas, S Markets, ABC
service station stores and hotels.
Energy and water consumption
Extending joint electricity procurement, or bulk electricity, for
use by the entire retail group calls for monitoring consumption
readings at individual sites. Providing information on electricity
consumption on a centralised basis directly from the S Group’s
locations serves not only joint procurement objectives but also the
use and maintenance of real estate, accountability reporting and
the requirements of the energy efficiency directive. Bulk electricity
accounts for approximately half the S Group’s annual electricity
consumption.
In 2005 SOK’s Real-Estate Management took part in the RET
project on auditing eco-efficiency in buildings, which defined the
criterion for country-specific application of the energy efficiency
directive in projects for constructing extensions and new buildings.
Real-Estate Management participated in the capacity of a
corporate representative in the LED-PLC product development
project, the aim of which was to develop commercial applications
using lighting solutions based on energy saving and long-life LED
technology.
Sourcing and logistics
Finland is a sparsely populated country with long distances
between towns and cities; it is both economically and environmentally sound to deliver goods to consumers in as rational a
manner as possible, avoiding unnecessary transport, packaging and
unloading. Co-operation between trade and industry enhances
information management and provides improved opportunities for
planning logistics functions.
Over half of the grocery products sold by the S Group’s chains
are transported to stores by means of the sourcing, warehousing
and distribution services provided by Inex Partners Oy. Environmental co-operation between the S Group and Inex Partners is an
important aspect of the entire logistics chain.
Intrade Partners Oy acts as the S Group chains’ procurement
and logistics company for consumer goods. Its main task is to
provide its customer chains with high-quality operational services
and products that have competitive cost/quality ratios.
Packaging requirements stress the need to avoid excess packaging and the importance of using packaging materials that can be
recycled or utilised in other ways. Packaging materials and their
recyclability must be marked in accordance with EU practices.
Products that place a lower burden on the environment must feature a nationally or internationally approved environmental label.
The company’s instructions specify environmental and ethical
requirements for goods suppliers. These guidelines are taken into
consideration when evaluating a new supplier.
Both S Group procurement companies are responsible for ensuring that purchased goods and the information provided about
them comply with environmental legislation and requirements.
Intrade Partners Oy is involved in the Business Social Compliance
44
Initiative (BSCI) co-operation model that seeks to streamline and
standardise monitoring the working conditions of goods suppliers. In addition, Inex Partners and Intrade Partners are both active
members of the Responsible Importer network, which is co-ordinated by the Central Chamber of Commerce.
Environmental labelling and
Fair Trade products
The number of environmentally labelled products within the
assortments is constantly on the increase. Organic foods have
consolidated their position within the grocery sector. At the end
of 2005, market stores stocked more than 500 organic products.
SOK and HOK-Elanto from the S Group participated in the
Organic Products research project funded by the Ministry of Agriculture and Forestry, which reached completion in 2005.
Environmentally labelled non-food consumer goods comprise
products marked with the Nordic Swan (89), the EU Flower (16)
and the FSC Forest Certificate (14). In 2005 around 300 products
in the textile assortments bore the “Confidence in Textiles: tested
for harmful substances” product safety label in accordance with the
Oeko-Tex Standard 100. It has been common practice for building
materials to display the relevant environmental specifications.
Fair Trade products have featured in market store assortments
since 1999. At the end of 2005, market stores stocked a total of 18
Fair Trade products including coffee, tea, cocoa, honey, chocolate,
sugar, pineapples, oranges and bananas. Fair Trade products have
been brought to public attention during Fair Trade promotion
weeks. The S Group is a leading trader of Fair Trade products in
Finland.
Waste management
Changes in waste legislation mean stricter local regulations and
therefore new challenges for the S Group. Producer responsibility
legislation concerning the recovery of waste from electrical and
electronic equipment, which came into force in August 2005, gives
sellers of such products the role of communicators of information.
During last year the S Group’s grocery sector prepared to assess the
impacts from the obligations arising from the Animal By-products
regulation.
The “New Services – Increased Material Efficiency” project led
by the Helsinki Metropolitan Area Council (YTV) found solutions
to reduce the amount of waste produced by the service sector.
HOK-Elanto’s S Markets and Prisma hypermarkets are seeking
means for preventing waste from arising in grocery stores. The
product range in the grocery trade is expected to expand in the
next few years, which generally leads to greater volumes of wastage.
However, HOK-Elanto’s objective is to halt the increase in waste
volumes, and sound basic procedures have been set up within the
Group for the management of waste flows. Monitoring waste volumes has become more stringent so that waste volumes and costs
are reported on a monthly basis. New means for preventing waste
from arising are being actively sought, and working practices in the
chains can accordingly be adapted in quick response.
Recycling services for customers
The bottle and can recycling system is the best-known recycling service for customers. Collection is mainly handled using
automated bottle and can collection machines. Over 95 per cent
of glass and plastic deposit bottles and more than 90 per cent of
Vastuullisuus
45
Accountability
aluminium cans are returned. Other recycling services are related
to recyclable waste collection points, end-of-life vehicle and tyre
recycling.
Communications
Environmental information targeted at interest groups has been
disseminated through the environmental pages of SOK Corporation’s Annual Report and on the Internet through the S Group’s
Accountability Report.
The environmental message has been conveyed to households
through the Yhteishyvä magazine. The regional cooperatives have
disseminated information by means of accountability reports,
brochures, ecological experts, bulletin boards and various events.
The Ässä magazine and the S Intranet are the S Group’s internal
communications tools.
Interest groups
SOK has continued actively to contribute to the dialogue relating
to international environmental co-operation within Euro Coop’s
Environmental Working Group. Central themes have been the
EU chemicals legislation, the recycling of waste from electrical and
electronic equipment, the utilisation of packaging, issues relating
to environmental labelling, Fair Trade and organic production.
SOK has actively headed the Environmental Committee of the
Federation of Finnish Commerce and Trade and it has participated
in the work of both the Logistics and Purchasing Division of the
Finnish Food Marketing Association as well as the environmental
committee of the Confederation of Finnish Industries EK. SOK
has also been represented in the following working groups: the
Ministry of the Environment’s Co-operation Group of the Waste
Branch, the Ministry of the Environment’s Waste Management
Practices Working Group, the Ministry of Trade and Industry’s
environmental labelling steering group, the project management
group of the Recycling Technologies and Waste Management
Project (Streams) initiated by the Finnish Funding Agency for
Technology and Innovation TEKES, and the steering group for
the Finnish Oil and Gas Federation’s SOILI soil-remediation
programme.
Sponsorship and international contacts
Sponsorship
Sponsorship and other co-operation with interest groups are conducted in line with a sponsorship strategy throughout SOK Corporation and the S Group. The strategy ensures that investments
are allocated to appropriate targets in a co-ordinated manner. It
is important that sponsorship investments are made in line with
objectives. Sponsorship is one of the ways in which the S Group
seeks to build and maintain its image as a responsible actor. The
aim is to allocate investments to targets that support the S Group’s
values and that in one way or another touch on the life of each and
every member.
The priorities of SOK’s sponsorship and financial support have
shifted in recent years. The traditionally considerable investments
in top sports have been reduced to make way for endorsing children’s and young people’s sports activities. The scope of cultural
sponsorship has also widened to embrace different target groups.
Overall, there has been a considerable shift within the S Group at
large to giving prominence to activities that support children and
young people.
46
SOK Corporation’s sponsorship co-operation work in 2005 placed
strong emphasis on social responsibility and targets suited to
families with children, as directed by the sponsorship strategy. The
major agreements concluded with the Finnish Red Cross and the
Mannerheim League for Child Welfare serve as good illustrations
of our sponsorship policies. Co-operation also continued with
the Finnish Freestyle national team, Raumanmeri Midsummer
Festival, Svenska Teatern, the Helsinki Festival, Circus Finlandia,
Art Centre Salmela and Pori Jazz. Moominworld and the Kuhmo
Chamber Music Festival came on board as new partners.
Members discovered Moominworld right away in the first year
of co-operation, and the number of visitors in summer 2005
reached record levels; more than 220,000 Moomin enthusiasts
visited the island, over 52,000 of them S Group members.
The FIS Freestyle World Ski Championships 2005 took place at
Ruka in March, and promising youngsters who had risen through
the ranks of the freestyle schools for children and youth, which are
supported by the S Group, made it to competitions.
In addition to focused group-wide activities, regional cooperative enterprises have actively engaged in co-operation with local
organisations, associations and events.
The Finnish Red Cross and the Mannerheim
League for Child Welfare – true partnership
The S Group has entered into a national agreement of co-operation with two distinguished organisations: the Finnish Red Cross
and the Mannerheim League for Child Welfare. The national
agreements cover nationwide co-operation and the regional cooperative enterprises engage in co-operation with local organisations.
The co-operation agreement with the Red Cross was concluded
in December 2002. The S Group brought to the table its network
of regional cooperative enterprises, grocery markets and department stores, hotels and restaurants, service station stores, car
dealerships and hardware and agricultural outlets. Through its
co-operation, the S Group aims to bring the Red Cross into closer
touch with its member families and its personnel. This provides
the opportunity for the Finnish Red Cross to reach out to over 2
million Finns and thus gain additional resources for helping at the
local level. The patron project of the co-operation between the S
Group and the Finnish Red Cross is drumming up membership.
The project, which has been ongoing for three years, has helped to
swell the number of Finnish Red Cross members considerably; it
has welcomed 20,000 new members during this period.
The first three-year co-operation agreement between the Finnish Red Cross and the S Group ended at the end of 2005 and a
new three-year agreement was signed at the turn of the year. The
S Group supports the Red Cross in its drive to gain new members and provides prominence for Red Cross activities in its own
publications. Sales of Finnish Red Cross products in the S Group’s
chains have also been promoted. The agreement includes extensive
local co-operation between Red Cross districts and local branches
and the S Group’s regional cooperative enterprises.
The S Group’s nationwide co-operation with the Mannerheim
League for Child Welfare got underway in 2000. Prior to this,
the regional cooperative enterprises had already co-operated with
local associations within the framework of such projects as the “A
Good Start to Schooldays” campaign. In honour of SOK’s centennial, the S Group presented the Mannerheim League for Child
Welfare with EUR 200,000 in January 2004. This sum covers the
years 2004–2006 and it is being allocated for the development of
Accountability
an Internet service to support parents and for arranging regional
“Parents Together” events.
These events, which have achieved tremendous popularity, have
been arranged in the regional cooperative enterprises’ areas up
and down the country and they have covered a number of themes
relating to parenthood.
The Finnish Cooperative Union, SOKL r.y.
The Executive Board of the Finnish Cooperative Union, SOKL
r.y, focuses its activities on developing and examining the mission,
values and vision of the S Group, and it analyses, puts forward
and presents policies and views related to the implementation of
cooperative principles and values to the various decision-making
bodies of the S Group and oversees their practical implementation.
The Union does not participate in the management and decisionmaking of business operations.
At the end of the year SOKL’s Executive Board launched a
project that seeks to shed light on SOKL’s position, role and tasks,
particularly with regard to decision-making across the S Group.
SOKL is the S Group’s representative in international cooperative activities, especially in the International Cooperative Alliance
(ICA) and Euro Coop.
SOK’s Field Management unit is responsible for the practical
activities of SOKL. The Union has no clerical staff of its own.
The members of the Union are all of the S Group’s cooperative
enterprises and SOK.
SOKL’s Executive Board comprised representatives of regional
cooperatives with Jukka Huiskonen, LL.M., Senior Judge, as
chairman and Raili Palmi, office manager, vice chairman as well as
members Pekka Kangasmäki, Managing Director (until 20 April),
Ulla Karvo, LL.M., Simo Kutinlahti, farmer, Professor Kauko
Mikkonen, Jorma Niiniaho, Titular Commercial Counsellor (as
from 20 April), Leena Pelkonen, Chief Financial Officer, Jorma
Sieviläinen, Managing Director, Hanna Valtari, Training Director,
and Juha Vuorenhela, LL.M., as well as SOK representatives Jorma
Koistinen, Director of Field Management and Cooperative Relations, and Kari Neilimo, Chairman and CEO.
The tenth S Group’s Management summer days took place in
Kokkola on 11–12 June. Altogether around one thousand people
from cooperative enterprises and SOK Corporation attended the
various events arranged during the days.
National-level training for management personnel took place in
co-operation with the Jollas Institute. A good 50 participants from
cooperative enterprises who are members of the Supervisory Board
or Executive Board attended the updated management training
programmes.
Induction courses and training events related to the adoption of
the “Good Administrative Practices within Co-ops” manual, a tool
for administrative staff that was completed in the previous year,
were arranged in the cooperative enterprises.
A study, which examined the opinions and thoughts of management concerning the activities of cooperative entrepreneurship,
reached completion in the previous year. A summary of the study
was delivered to the cooperative enterprises in February 2005.
Elections of representatives were arranged in six cooperative enterprises. Voter turnout averaged about 30 per cent; the
customer-owners of Satakunta Cooperative Society were the most
active (42.3%). The cooperative enterprises received assistance in
conducting the elections. All the cooperative enterprises arranged a
training and induction event for the new representatives.
In response to the plans to expand the S Group’s finance services,
19 regional cooperative enterprises modified the regulations to
their savings fund activities at their representatives’/cooperative
meetings held in the autumn. As in previous years, the cooperative enterprises received assistance in matters connected with the
amendments to Statutes and Trade Register filings. Furthermore,
the Cooperative Department and Field Management took part in
a number of sessions that were arranged by the cooperative enterprises for administrative staff and stakeholders.
Cooperative Advisory Board
The S Group is a party to the Cooperative Advisory Board
established by cooperative companies. Its purpose is to act as the
body of co-operation for Finnish cooperative organisations and
companies. The Advisory Board fulfils its functions by acting as the
overall lobbyist and discussion forum for cooperative activities and
by co-ordinating or in some other way implementing projects that
improve the common conditions for the activities of cooperative
companies. The members of the Advisory Board are: the Pellervo
Confederation of Finnish Cooperatives, the Cooperative Tradeka
Corporation, the Finnish Cooperative Union, SOKL ry and the
OP Bank Group Central Cooperative. Jukka Huiskonen, Senior
Judge, Otto Mikkonen, Titular Industrial Counsellor, Managing
Director, and Professor Kauko Mikkonen serve on the Advisory
Board as representatives of the S Group.
International contacts
SOK Corporation’s contacts with international cooperative
organisations are handled in the name of SOKL ry, the Finnish
Cooperative Union. The Union is a member of the International
Cooperative Alliance (ICA) and Euro Coop, a Brussels-based
lobby organisation for consumer cooperatives.
The ICA is an impartial independent organisation, which brings
together, represents and serves its member cooperatives throughout
the world. ICA has 223 member societies in 89 countries and the
member societies have a total membership of more than 800 million. It is the world’s second largest such body immediately after
the United Nations.
Founded in 1957, the goal of Euro Coop’s activities is to sustain
and nurture the intensity and values of consumer cooperative
activities in a changing Europe. Actively functioning working
groups, who work in close association with the European Commission, are one of the most important tools for fulfilling this
goal. The working groups get to grips with the up-to-the-minute
changes that have a bearing on consumers and consumer cooperatives. Working groups have been put together for product safety,
foodstuffs safety and environmental matters. One of Euro Coop’s
primary objectives is to influence legislation at EU level to ensure
that the interests of consumers and consumer cooperatives are
taken into due consideration and safeguarded when new legislation
is being drafted.
The consumer cooperative enterprises of 17 European countries
are members of Euro Coop. They represent 3,200 cooperative
societies and their 22 million members.
Euro Coop has EU status, and its prestige as a body that issues
statements and exercises influence in Brussels is significant.
Anne Santamäki, SOK’s director for contacts with organisations,
is the vice chairman of both ICA Europe and Euro Coop.
47
Financial Statements
Executive Board Report on Operations
Retail operating environment in 2005
The world economy again grew quite rapidly last year. In the
United States, broad-based growth continued at nearly the previous year’s level. In China, India and Russia, growth was markedly
stronger than in the western countries. The economic trend in the
eurozone improved in the latter months of the year, but full-year
growth in 2005 will probably come in well below two per cent.
Record-high crude oil prices fuelled inflation in the United States
and the eurozone. The United States Federal Reserve Bank hiked
the federal funds rate a number of times. Weak economic growth
in the eurozone has maintained a stimulatory level of interest
rates. The European Central Bank raised its main lending rate only
slightly. In 2006 the world economy is set to grow at roughly last
year’s rate.
The trend in Finland’s gross domestic product last year appears
to be clearly weaker than the 3.6 per cent growth seen in 2004. In
January–September of last year, gross domestic product was only
1.5 per cent greater than a year earlier. Last summer’s industrial
disputes in the paper industry cut into GDP growth temporarily.
During the autumn, GDP returned to its previous growth trend.
Growth over the full year was driven by private consumption and
exports, despite the problems in the paper industry. The growth
trend of the Finnish economy is still markedly faster than in the
eurozone on average. Last year growth in the eurozone was only
about one and a half per cent.
Consumers’ confidence in their own finances and ability to save
remained at a good level all year long. Faith in the trend in the
Finnish economy and the outlook for receding unemployment
weakened greatly owing to the labour dispute in the paper industry. The hurricanes in North America in the autumn also jolted
consumer confidence. Towards the end of the year, consumer
confidence nevertheless returned to an even higher level than in
the early part of the year. In particular, consumers were more confident about the future trend in employment, which did improve
quite favourably during the year. Towards the end of the year, the
industrial confidence indicator was at its long-term average. The
confidence indicators for construction and services strengthened
markedly last year.
The average rate of inflation in 2005 was 0.9 per cent. The biggest increase in consumer prices was due to the rise in fuel prices.
The rise in consumer prices in Finland was clearly slower than in
the eurozone, where it was at around two per cent.
The growth in private consumption last year is estimated at just
under 3 per cent. The strongest growth, just like last year, was in
consumer durables and is estimated at 8 per cent. Within semi-durables, growth was 4 per cent, whereas for services and consumer
non-durables, growth was only 2 per cent.
The value of retail sales, excluding the motor trade, grew by 4.9
per cent by the end of November, according to Statistics Finland.
Vehicle sales were up 6.6 per cent. The number of new cars registered last year was up 3.9 per cent on the previous year. By the end
of October, the best growth figures were reached in home-related
retail sectors. Sales of home appliances and electronics grew by
12.7 per cent, with hardware and furniture sales up 8.8 per cent
and 8.0 per cent, respectively. Prices in the home appliance trade
were on a declining trend, and this meant that the sales volume
48
increased markedly more than the monetary amount of sales. The
rise in the price level of hardware sales contributed to aggregate
sales growth. The department store trade grew by 5.6 per cent by
the end of November. Sales by the member companies of the Finnish Food Marketing Association showed increases of 3.1 per cent
in the department store trade and 0.5 per cent in the grocery trade
in 2005. According to the retail figures published by Statistics
Finland, the growth in grocery sales was 2.6 per cent by the end of
November. The price level in the grocery trade was still declining
slightly, with sales volume outpacing the value of sales.
The overall market for agritrade held up at the previous year’s
level in Finland. Trade in production inputs used on farms also
held steady. The total market for tractor sales declined, as it did last
year. Finland’s grain harvest of 4.0 billion kilograms was 12 per
cent larger than the harvest a year earlier.
Guests at Finland’s hotels, motels and inns stayed the night 11.8
million times by the end of October. The number of overnight
stays grew by 3.4 per cent. The hotel occupancy ratio during the
period was 49.7 per cent, an increase of 1.3 percentage points.
Sales by licensed restaurants grew by just under 4 per cent. The
growth in restaurant sales came from sales of dining services, an
area in which growth is set to continue this year as well.
The employment trend in the retail sector was good last year.
During the first three quarters, the retail wage bill rose by nearly 6
per cent and the number of people employed was up almost 3 per
cent.
Changes in the Group structure
Changes during the report period
At the beginning of 2005, the Tampereen Sokos Oy business
was sold to Pirkanmaa Cooperative Society. In the same connection, SOK sold its shares in the real-estate management company
Kiinteistö Oy Kauppahalli Piha to Pirkanmaa Cooperative Society,
and Kiinteistö Oy Tampereen Valtakulma sold the Tampere Sokos
department store property it owned to Sampo Pankki plc, a bank.
Tampereen Sokos Oy and Kiinteistö Oy Tampereen Valtakulma
merged into SOK at the end of August. The companies’ operations
had ended.
In transactions between SOK and Helsinki Cooperative Society
Elanto (HOK-Elanto), SOK’s Sokotel Oy subsidiary sold the
Ravintola Memphis and Coffee House businesses that operate
in the Sokos property in Helsinki to HOK-Elanto at the beginning of 2005. Concurrently, Sokotel Oy purchased the Hotelli
Presidentti business from HOK-Elanto. Uudenmaan ABC Oy,
which develops the network of service station stores in the Greater
Helsinki area and Uusimaa county as well as three real-estate
management companies which own the ABC service station stores
in Tuomarinkylä, Järvenpää and the store in Hyvinkää that is to
be completed in early 2006 were sold to HOK-Elanto in May. In
September, SOK sold to HOK-Elanto the shares in the real-estate
management company Kiinteistö Oy Asematie 8, which entitle
their holder to possession and occupancy of the extension to the
Prisma hypermarket in Tikkurila.
In the first part of 2005, SOK founded the real-estate management companies Kiinteistö Oy Peltokuumolantie 1 and 4. The
latter will soon be the site of the Agricentre in Hyvinkää, where
SOK’s subsidiary Hankkija-Maatalous Oy will move its retail loca-
tion from Helsinki’s Vallila district in the early part of 2006.
In April, SOK’s subsidiary Sokotel Oy sold Sokos Hotel Porin
Vaakuna’s business to Satakunta Cooperative Society. SOK’s
Estonian subsidiary AS Prisma Peremarket bought the shares
in AS Ramare from ETK (Eesti Tarbijateühistute Keskühistu),
a local company, in April. AS Ramare operated the business of
the Tallinn-based Prisma Rocca al Mare. Rocca al Mare became
Peremarket’s fourth Prisma hypermarket in Tallinn. AS Ramare
merged into AS Prisma Peremarket in June. In addition, Peremarket has made an agreement on building a fifth Prisma in Tallinn’s
Lasnamäe district. The unit will be completed in September 2006.
A number of real-estate deals were completed in 2005. In January, SOK sold the shares in the real-estate management company
Kiinteistö Oy Joensuun Valtakulma, which owns the Joensuu
Sokos, to Northern Karelia Cooperative Society. In September
Kiinteistö Oy City-Oskari was dissolved, and SOK sold the shares
in Kiinteistö Oy Riihimäen Hämeenkatu 40–42 to Interavanti
Oyj. In December SOK sold the shares in Seinäjoen Torihotelli
Oy to Southern Ostrobothnia Cooperative Society. The company
owns Hotelli Vaakuna, which is located in Seinäjoki’s Torikeskus
commercial centre. In December, Kiinteistö Oy Turun Brahenkatu
8 became an SOK subsidiary when SOK purchased the real-estate
management company’s shares that were owned by the construction company NCC Rakennus Oy. The property is located in the
centre of Turku in the Wiklund block.
On 15 December 2005 SOK’s Executive Board decided to
found a deposit banking company to develop and handle financing services for the S Group’s members. The background to the
decision is a reform of the Cooperative Societies’ Act that will
lead to a stage-by-stage discontinuance of savings fund activities
by 2013. Accordingly, on 19 December 2005 SOK founded a
company named S-Eturahoitus Oy and applied for a credit institution licence on 20 December 2005. A final decision on founding
of a deposit bank is to be taken by SOK’s Supervisory Board on 16
February 2006.
Changes after the close of the report period:
On 2 January 2006, SOK sold the shares in the real-estate
management company Kiinteistö Oy Imatran Koskenhelmi in
the city of Imatra and the so-called Urhonkatu plot to HS-Välitys
Oy. SOK sold the shares it owned in Kiinteistö Oy Tullintori to
Citycon Oyj on 1 February 2006.
On 3 January 2006 SOK’s subsidiary Maan Auto Oy purchased
the entire shares outstanding in Auto-Kivitila Oy and AutoKivitila Metro Oy. Auto-Kivitila Oy is a dealer for Ford cars and
commercial vehicles in the Pirkanmaa economic area. Auto-Kivitila Metro Oy carries on servicing of Ford vehicles in the Turku economic area. Under a business acquisition agreement signed on 20
January 2006, the Maan Auto Group purchased Stockmann Auto
Oy Ab’s Ford businesses in Espoo and Turku. The dealerships will
continue to be operated at their present locations by Maan Auto’s
subsidiary Automaa, which currently operates a Peugeot dealership
and carries on spare parts and repair operations in both cities.
On 12 January 2006, SOK purchased all the shares in Suomen
Spar Oyj that were owned by Axfood AB along with other shares,
whereby SOK’s holding of Suomen Spar shares and the voting
rights conferred by all the shares rose to over 90 per cent. Under
the Companies Act, SOK will thereafter have the right to redeem
the shares held by other shareholders as well. After SOK has
acquired all of Suomen Spar’s shares, it will apply for delisting the
shares from the Helsinki Stock Exchange. This is estimated to take
place during spring 2006. The Finnish Competition Authority
approved the share purchase, subject to certain conditions, on 4
January 2006. SOK’s Executive Board has decided to carry out the
transaction in accordance with the Finnish Competition Authority’s terms and conditions.
SOK and Tradeka (Cooperative Tradeka Corporation) signed an
agreement on 31 January 2006 under which SOK will purchase
from Tradeka all the shares it owns in Inex Partners Oy. After the
purchase of shares is completed, Inex Partners Oy will become
a wholly-owned subsidiary of SOK. Completion of the transaction is still contingent upon approval by the Finnish Competition
Authority.
The former Hotelli Marina Palace in Turku will be opened as the
Radisson SAS Marina Palace Hotel on 28 February 2006. Sokotel
Oy has a number of hotel projects in the pipeline. In the Greater
Helsinki area, three new hotels are in the planning stage, and furthermore, two Sokos hotels are to be opened in St Petersburg.
In January, SOK founded a company named AS Prisma Latvija
to carry on the Prisma business in Latvia. The first unit, to be
located in the Domina Shopping Centre, will open its doors in
autumn 2006. The objective in the first phase is to open 3–4
Prismas in different parts of Riga. Over the longer term, the target
is to become the market leader in the hypermarket trade in Riga,
Latvia’s capital.
Net turnover
SOK Corporation had net turnover of EUR 4,209 million, up
11.3 per cent on the previous year. The bulk of the growth in net
turnover is attributable to fuel deliveries by the fuel procurement
company North European Oil Trade Oy to its customers, who are
the cooperative enterprises, Greeni Oy and Hankkija-Maatalous
Oy. SOK’s net turnover does not include the EDI-based SOK
invoicing that is handled through the associated company Inex
Partners Oy.
Thanks to the good business trend and the overhaul of the network, net turnover in the supermarket trade in the Baltic countries
grew to EUR 81 million, an increase of 37.5 per cent.
Net turnover from fuel sales, EUR 744 million, consisted of
the fuel sales by North European Oil Trade Oy (NEOT) and the
service station store sales in January-April of Uudenmaan ABC
Oy, which was sold to HOK-Elanto in May. North European Oil
Trade Oy is a fuel procurement company that is jointly owned by
SOK and Greeni Oy. Net turnover for the first full year of operations rose to EUR 740 million. The growth in turnover compared
with the previous year is attributable to a full year of operations,
the rise in market prices and higher sales by the customer chains.
SOK Corporation ran Sokos operations through the companies
which it owns jointly with the regional cooperative enterprises,
these being located in Espoo, Turku and Raisio. The companies
had net turnover of EUR 36.3 million, down 62.6 per cent on the
previous year due to the divestment of the department store business in Helsinki on 1 May 2004 and to the sale of the department
49
store business in Tampere on 1 January 2005. Like-for-like net
turnover grew by 3.0 per cent, coming in above budget.
Within SOK Corporation, hotels and restaurants are operated
by Sokotel Oy in Finland and AS Sokotel in Estonia under the
Sokos Hotels and Radisson SAS brands. Sokotel Oy’s net turnover
was up 4.0 per cent on the figure a year ago. The hotel network
changed at the beginning of 2005 when the Sokos Hotel Presidentti became part of the chain and Porin Vaakuna was sold to
Satakunta Cooperative Society in April 2005. When Presidentti
became a part of the Sokos Hotels chain, the Memphis and
Coffee House restaurants in the Hotel Vaakuna in Helsinki were
transferred to HOK-Elanto. The Klaus Kurki hotel also closed at
the beginning of 2005. Like-for-like net turnover grew by 4.2 per
cent. The company’s sales remained good in spite of large investments, which disturbed operations in some of the Sokos hotels and
Radisson SAS hotels. The occupancy ratio and average room rate
rose compared with a year ago. This meant that the room yield also
increased and was clearly better than the average for the country as
a whole.
AS Sokotel operated the Sokos Hotelli Viru in Tallinn for the
second full year in 2005. The company had net turnover of EUR
18.4 million, coming in markedly ahead of the target set. The
good trend in net turnover was attributable to strong restaurant
and conference sales and to the growth in accommodation sales.
Net turnover derived from the Corporation’s motor trade
declined by 3.1 per cent compared with the level in 2004 and was
EUR 344.9 million. Net turnover of the Maan Auto Group, which
operates in Finland, declined by 3.7 per cent on the previous year,
to EUR 283.4 million. By contrast, the comparable net turnover
of the Kommest Group, which operates in Estonia and Latvia,
increased by 3.0 per cent on the year-ago figure, rising to EUR
61.5 million. The market share of Peugeot cars in Finland dropped
from 7.0 per cent to 5.9 per cent and in the Baltic countries from
8.0 per cent to 6.2 per cent. In Finland the market share of vans,
however, increased by 0.5 per cent to 5.1 per cent.
Net turnover from the agritrade, including hardware sales, increased by 0.1 per cent. Hankkija-Maatalous Oy had net turnover
in 2005 of EUR 746.6 million, representing growth of 3.7 per
cent on the previous year. Hardware and gardening sales developed
favourably in step with store enlargements. Sales of grain and feed
declined owing to the fall in the market price of grain.
Financial performance
SOK Corporation’s profit before extraordinary items was EUR
69.0 million. The corresponding earnings in the previous year
were EUR 54.4 million. The figure includes other operating
income, a share of the associated companies’ profits, write-downs
on non-current assets and investments, including reversals on
them, and the change in obligatory provisions. SOK Corporation’s
operational result, which does not include the items listed above,
was smaller than the previous year’s earnings. The Corporation’s
return on investment, including wholesale operations that serve
the cooperative enterprises and are organised under finance and
sourcing operations, were 7.6 per cent (7.2 per cent). The return
on investment from SOK’s ordinary operations was 17.0 per cent
(19.6 per cent).
50
Write-downs of EUR 4.9 million were made on non-current assets. These were primarily write-downs on buildings and structures
as well as impairment of goodwill.
SOK Corporation’s net financial expenses were in the black, as
in the previous year, and were up EUR 5.5 million on the year-ago
figure.
Owing to the good business trend, operating profits from the
grocery trade and fuel trade were above budget and higher than
a year ago. The aggregate operating profit of the Sokos companies weakened due to the sales of businesses to the cooperative
enterprises, but comparable operating profit was above budget and
better than a year ago. The operating profit posted by Sokotel Oy,
which carries on the hotel and restaurant business in Finland, was
at the budgeted level, but fell slightly short of the previous year’s
earnings owing to changes in the network. On a like-for-like basis,
profits improved markedly on the previous year. AS Sokotel, which
runs hotels and restaurants in Estonia, turned in operating profit
that was clearly ahead of budget and better than was reported in
the previous financial year.
The Maan Auto Group’s operating profit was below budget and
weaker than a year ago. The poor earnings trend was attributable
to tougher competition and the fall in the price level of trade-in
vehicles owing to imports of used vehicles. The Kommest Group’s
operating profit did not reach the budgeted figure or the level of
earnings achieved in 2004. The operating profit reported by Hankkija-Maatalous Oy was below budget and lower than the year-ago
figure owing to investments made in developing the store network
and to the fall in the tractor market. The property business and
other service units reported operating profit that was above budget
but weaker than a year ago. Operating profit from consumer goods
was at the planned level. Capital gains on fixed assets, which are
recognised as income within the Corporation, are included in
eliminations.
Operations of SOK
SOK is the parent company of SOK Corporation. In accordance
with its Statutes, SOK acts as the central organisation of the S
Group, promoting and developing the operations of the cooperative enterprises and other organisations belonging to the S Group
and attending to the management and supervision of the Group’s
overall resources for maximum efficiency, whilst also monitoring
the operations and seeing to the interests of the S Group and its
different constituent organisations.
SOK is in charge of the S Group’s strategic management. Its
tasks are to provide the S Group’s companies with services related
to chain management, customer-ownership and marketing along
with general chain and corporate services, including development
activities connected with these services and the S Group’s other operations. Other important services for the S Group’s operations are
purchasing, rental services and assortment and invoicing services
for goods delivered directly from manufacturers to the chain units.
Via its nationwide and regional subsidiaries, SOK is able to offer
its members a wider spectrum of services in accordance with the
decisions taken within the S Group. In addition, in the Baltic area
SOK engages in the supermarket and vehicle trade as well as the
hotel business via its subsidiaries.
SOK’s net turnover totalled EUR 2,526 million, increasing by
15.5 per cent on the figure a year earlier. The increase in net turnover is attributable mainly to higher EDI invoicing through SOK,
primarily owing to the increase in North European Oil Trade
Oy’s invoicing to the cooperative enterprises (an increase of about
EUR 135 million) and to grocery suppliers’ higher volumes (an
increase of about EUR 100 million). Apart from actual growth,
part of the increase is due to new locations and part is attributable to a change in the invoicing channels used by some suppliers.
SOK’s profit before extraordinary items was EUR 5.6 million,
compared with the previous year’s profit of EUR 25.2 million,
which stemmed largely from reversals of write-downs on non-current investments.
The rents included in other operating expenses consist primarily
of the rental expenses of SOK Corporation or are for premises that
have been sublet to other S Group companies.
Capital expenditures and disposals
of fixed assets
SOK Corporation’s purchases booked in non-current assets, i.e.
capital expenditures on fixed assets, amounted to EUR 68.2 million in 2005. The largest items in the figure were the purchase of
the Sokos Hotel Presidentti business as well as other investments
in the hotel and restaurant business. Other important outlays were
for the construction of the Hyvinkää Agricentre and the purchase
of a car dealership property in Helsinki’s Pitäjänmäki district.
By contrast, disposals of non-current assets and businesses
totalled EUR 56.9 million. The most important disposals were the
divestments of the Sokos properties in Tampere and Joensuu.
Financing
Short-term interest rates in the eurozone remained low for most
of the year, but following the rise in rates that got under way in
September, they ended up at clearly higher levels than a year ago.
Longer rates were still declining slightly in the first part of the year,
but they too turned upwards in September, ending up at nearly the
levels that prevailed at the turn of the previous year.
Cash flow before financial items according to SOK Corporation’s cash flow statement was EUR 20.8 million in the black.
SOK Corporation’s liquidity remained good throughout 2004.
Liquid cash assets and money market investments totalled EUR
789.8 million at the end of the year. In addition, SOK Corporation had EUR 171.6 million of undrawn binding credit facilities,
of which EUR 152.4 million were long-term.
SOK Corporation’s equity ratio remained good and net interestbearing liabilities were EUR 128.8 million in positive territory, an
improvement on the previous year of EUR 26.4 million.
The SOK Group’s financial income and expenses, not counting
in write-downs on investments held in non-current assets, contributed EUR 6.8 million to earnings, representing an improvement
on the previous year of EUR 3.6 million.
Personnel
The average number of SOK Corporation employees, converted to
full-time staff, was 4,346 during the financial year. SOK Corporation’s number of personnel at the end of 2005 was 5,052 employees, of whom 696 (13.8%) were SOK staff and 4,356 (86.2%)
employees of the subsidiaries. The number of personnel grew by
262 from the previous year (5.2%). The number of staff working
abroad was 1,095 employees. The average age of the personnel
during the report year was 38 years.
The number of employees was increased by the transfer of
Hotelli Presidentti to SOK Corporation and by the purchase of AS
Ramare.
The staff level was reduced in turn by the sale of the Tampereen
Sokos Oy business to Pirkanmaa Cooperative Society, the sale of
Sokos Hotel Porin Vaakuna to Satakunta Cooperative Society and
the sale of Uudenmaan ABC to HOK-Elanto.
SOK’s management and auditors
CEO Kari Neilimo has served as chairman of SOK’s Executive
Board. In addition to the CEO, the other members of the Executive Board in 2005 were Managing Director Esko Hakala, Managing Director Arto Hiltunen, Managing Director Kuisma Niemelä,
Managing Director Veli-Matti Puutio, Jukka Salminen, Director
of SOK’s Administrative Division, and Managing Director UllaMaija Tolonen.
The Corporation’s auditors in 2005 were the Authorised Public
Accountants Tomi Englund, Juhani Heiskanen and Tapani RotolaPukkila.
SOK’s Supervisory Board appointed to seats on SOK’s Executive Board for the term of office beginning on 1 January 2006
the following directors: CEO Kari Neilimo, chairman, Managing Director Esko Hakala, Managing Director Arto Hiltunen,
Managing Director Kuisma Niemelä, Manager Director Veli-Matti
Puutio, Jukka Salminen, Director of SOK’s Administrative Division, Managing Director Kimmo Simberg and Managing Director
Ulla-Maija Tolonen.
SOK’s chief executive has been assisted in the strategic management of SOK Corporation and the S Group by SOK’s Management Team, whose members during 2005 were Managing Director
Ensio Hytönen; Reijo Kaltea, Senior Vice President, Customerownership and Speciality Stores Division; Suso Kolesnik, Director
of Corporate Communications; Harri Miettinen, Vice President,
Strategic Development and Human Resources; Matti Pulkki,
Senior Vice President, Hotels and restaurants; Jukka Salminen,
Director of SOK’s Administrative Division; Antti Sippola, Vice
President, Retail, and Heikki Strandén, Director, ABC Service Station Chain Management.
Risks and factors of uncertainty
SOK Corporation is fully cognizant of the need for strategy-driven
and organisation-wide risk management. Particular attention
has been paid to managing risks to the achievement of strategic
objectives. Within SOK Corporation, risk management is viewed
as a strategic competitive factor. Risk management is made an
51
Pääjohtajan
Financial
Statements
katsaus
integral part of the management process. The steering and control
of integrated risk management is carried out by the Corporation’s
Security Unit.
SOK’s Finance unit has central responsibility for managing SOK
Corporation’s treasury operations and financial risks. The SOK
Executive Board has confirmed SOK Corporation’s guidelines for
financial policy, strategy and the management of financial risks.
These guidelines define the principles of managing financial risks
and the maximum amounts of financial risks. Furthermore, numerical targets have been set for the different subareas of treasury
operations in order to assure the adequacy, balance and affordability of financing under all circumstances.
Environmental risks connected with SOK Corporation’s business operations are identified and analysed annually as part of
the analysis of business risk. The most important environmental
aspects and the measures connected with them are described in the
environment section of SOK Corporation’s Annual Report. In addition, an Accountability Report covering the entire S Group will
be published on the Internet in spring 2006. The main key ratios
describing SOK Corporation’s business operations, financial position and result are presented in the key ratios table in the Notes to
SOK Corporation’s Annual Report.
Planned adoption of IFRS
SOK Corporation intends to adopt International Financial Reporting Standards in reporting its consolidated financial statement
information for the financial year beginning on 1 January 2007.
Outlook for the current financial year
The outlook for the Finnish economy is at present good compared
with the eurozone. The economy is growing at a faster than average pace, and inflation is slower than average. Growth in gross
domestic product will be on a broader footing as exports and
investments increase. Growth will be supported by a slight pick-up
in the eurozone economy and Russia’s good economic growth. The
main risks relate to the imbalances in the United States economy.
The sales outlook for the retail trade in the current year is quite
good. Growth in private consumption expenditure will continue at
a level of just under three per cent. Expectations of a slight rise in
the level of interest rates will dampen demand for loans and slow
down growth in sales of consumer durables.
Net turnover generated by SOK Corporation’s business units is
estimated to outpace the overall growth in the retail trade this year.
The largest growth expectations are for the SOK Corporation’s
vehicle sales in Finland and for the supermarket trade in the Baltic
countries. Growth in the department store trade, the hardware and
agritrade as well as the hotel and restaurant business is expected
to be close to the general trend. Despite the prospects for good
growth, SOK Corporation’s business units are estimated to report
slightly lower earnings than in 2005. The earnings trend will be
affected by major investments in the hotel business and in the
Baltic area.
The volume of the S Group’s chain management and service
activities for which SOK has overall responsibility, will increase in
2006. This year SOK will again continue making strong inputs
52
52
into development projects that boost the efficiency of the S
Group’s processes. Major investments in systems and new operating models will weaken the earnings level of the chain management and service functions in the current year.
Because of the above factors, SOK Corporation is estimated to
post a lower operational result than in 2005.
In its ruling, delivered on 14 February 2006, the Helsinki Court
of Appeal overturned the judgement handed down by the Helsinki
District Court on 24 February 2003 concerning a contract agreement made between SOK and YIT Corporation in 1998. The contract related to the conversion of SOK’s old head office located in
Vilhonkatu in Helsinki into a hotel. The Court of Appeal assessed
the evidence presented in the case in a substantially different way
than the District Court and ruled that YIT Corporation has the
right to receive compensation for part of the demands it presented
for additional and conversion works as well as compensation for
the additional costs incurred. The ruling does not have an effect
on SOK Corporation’s financial statements at 31 December 2005.
SOK will go through the grounds given in the Court of Appeal’s
ruling and will later take a decision on the possible making of an
appeal to the Supreme Court.
Helsinki
16 February 2006
SUOMEN OSUUSKAUPPOJEN
KESKUSKUNTA
Executive Board
SOK CORPORATION NET TURNOVER
2001–2005
PROFIT BEFORE EXTRAORDINARY ITEMS
RETURN ON INVESTMENT, %
PERSONNEL AT 31 DEC.
2001–2005
OPERATING PROFIT
2001–2005
NET INTEREST PAYABLE 2001–2005
(% of net turnover)
GROSS INVESTMENT IN FIXED
ASSETS 2001–2005
INTEREST-BEARING NET LIABILITIES
AT 31 DEC. 2001–2005
CAPITAL AND RESERVES* AT 31 DEC.
2001–2005 (equity ratio, %)
GEARING, %
2001–2005
* Excluding capital loan
53
Consolidated Income Statement
EUR million
Ref.
Net turnover
Other operating income
(1)
(2)
Materials and services
Raw materials and consumables
External services
(3)
Staff costs
Wages and salaries
Social security costs
(4)
Depreciation and value adjustments
(5)
Other operating expenses
Rents
Other expenses
Share of associated companies’ profits (+/-)
Operating profit
Share of associated companies’ profits (+/-)
Financial income and expenses (+/-)
(6)
Profit for the financial year
54
4 209.4
36.2
3 781.1
13.1
3 800.8
3 266.7
95.5
3 362.2
155.6
125.5
29.6
155.1
42.8
68.0
118.6
186.6
2.4
40.5
65.7
119.5
185.1
1.8
62.3
53.2
(8)
-0.0
6.8
-0.0
1.2
69.0
54.4
69.0
54.4
-11.3
-0.3
-14.1
-0.1
57.4
40.2
(9)
Profit before taxes
Direct taxes (+/-)
Minority interest (+/-)
125.1
30.5
1.1.–31.12.2004
(1)
Profit before extraordinary items
Extraordinary items (+/-)
3 702.7
98.1
1.1.–31.12.2005
(11)
Consolidated Balance Sheet
ASSETS EUR million
Ref.
NON-CURRENT ASSETS
Intangible assets
Group goodwill
Tangible assets
Shares in associated companies
Other investments
(12)
(12)
(12)
(13)
(13)
CURRENT ASSETS
Stocks
Long-term debtors
Deferred tax assets
Short-term debtors
Securities
Cash in hand and at bank
(15)
(16)
(17)
(18)
(19)
31.12.2005
63.6
239.2
52.6
42.8
160.7
0.3
1.8
475.9
688.8
101.0
LIABILITIES EUR million
CAPITAL AND RESERVES
Cooperative capital
Supplementary cooperative capital
Revaluation reserve
Legal reserve
Supervisory Board’s disposal fund
Profit brought forward
31.12.2004
398.2
57.8
0.7
272.7
56.0
35.9
423.1
1 428.5
136.7
3.9
2.9
384.4
571.7
86.1
1 185.6
1 826.7
1 608.8
31.12.2005
31.12.2004
(20)
86.9
16.8
15.3
0.1
315.7
57.4
MINORITY INTEREST
PROVISIONS
(22)
CREDITORS
Long-term creditors
Deferred tax liability
Short-term creditors
(23)
(24)
(25)
492.2
71.1
16.8
25.4
14.8
0.0
287.7
40.2
13.7
2.5
30.9
9.2
1 278.3
1 318.4
1 826.7
456.0
17.3
5.6
30.2
9.8
1 089.9
1 129.9
1 608.8
55
Consolidated Cash Flow Statement
1.1.–31.12.2005
1.1.–31.12.2004
BUSINESS OPERATIONS
Operating profit
Adjustments to operating profit
(1)
Change in working capital
(2)
Cash flow from business operations before financing and taxes
Interest paid and other financial expenses
Interest received and other financial income
Dividends received from business operations
Direct taxes paid
Cash flow from business operations
62.3
2.4
-25.6
39.1
-13.6
16.8
1.1
-13.3
30.1
53.2
23.2
20.5
96.8
-16.1
17.3
5.1
-6.0
97.0
INVESTMENTS
Subsidiary shares purchased
Acquisition of other fixed assets
Subsidiary shares sold
Sale of other fixed assets
Change in other long-term investments
Adjustment of items booked on accrual basis
Liquid assets of divested and acquired subsidiaries
Dividends received from investments
Cash flow from investments
-6.1
-62.1
18.1
38.8
-0.3
0.0
1.1
1.2
-9.2
-5.2
-47.3
5.4
46.2
-0.9
0.1
-0.5
1.0
-1.2
FINANCING
Increase in long-term creditors
Decrease in long-term creditors
Increase (+) / decrease (-) in short-term creditors
Increase (-) / decrease (+) in short-term debtors
Change in short-term investments
Minority interests in subsidiaries
Increase in cooperative capital and supplementary cooperative capital
Interest paid on the cooperative capital and supplementary cooperative capital
Decrease in capital and reserves
Cash flow from financing
8.7
-6.5
103.6
0.8
3.1
-0.3
15.8
-10.8
-0.1
114.3
4.0
-0.9
59.2
-1.5
-14.5
0.5
4.5
-6.4
-0.7
44.1
Increase (+) / decrease (-) in liquid funds
135.1
140.0
Liquid funds at the beginning of the year
Liquid funds at the end of the year
633.3
768.4
493.4
633.3
-34.9
42.8
-5.5
2.4
-11.4
40.5
-5.9
23.2
-86.5
-23.3
84.2
-25.6
-61.5
-9.8
91.8
20.5
EUR million
Ref.
(1)
Gains (-) and losses (+) from the sale of fixed assets
Income and expenses which do not involve payment
(2)
Change in trade debtors
Change in stocks
Change in short-term interest-free creditors
56
56
SOK Income Statement
EUR million
Ref.
Net turnover
(1)
(2)
Materials and services
Raw materials and consumables
External services
(3)
2 361.5
43.0
29.9
8.5
1.1.–31.12.2005
1.1.–31.12.2004
2 525.7
6.0
2 187.4
4.5
2 404.6
2 026.3
42.7
2 068.9
38.4
26.4
6.3
32.6
Staff costs
Wages and salaries
Social security costs
(4)
(5)
Rents
Other expenses
(6)
Operating profit (loss)
(1)
-4.6
-4.3
Financial income and expenses (+/-)
(8)
10.2
29.5
5.6
25.2
29.2
17.7
34.8
42.8
3.5
-6.3
-2.0
-10.7
32.0
30.2
Profit before extraordinary items
Extraordinary items (+/-)
(9)
Profit before appropriations and taxes
Appropriations (+/-)
Direct taxes (+/-)
(10)
(11)
7.5
52.2
33.5
85.7
6.5
54.9
33.1
88.0
57
SOK Balance Sheet
31.12.2005
ASSETS EUR million
Ref.
NON-CURRENT ASSETS
Intangible assets
Tangible assets
Shares in Group companies
Other investments
(12)
(12)
(13)
(13)
10.4
19.3
243.1
233.1
(15)
(16)
(18)
(19)
2.4
0.2
399.3
688.8
84.6
CURRENT ASSETS
Stocks
Long-term debtors
Short-term debtors
Securities
Cash in hand and at bank
LIABILITIES EUR million
CAPITAL AND RESERVES
Cooperative capital
Legal reserve
(20)
ACCUMULATED APPROPRIATIONS
PROVISIONS
(21)
(22)
CREDITORS
Long-term creditors
Short-term creditors
(23)
(25)
86.9
16.8
15.3
0.1
336.2
32.0
505.9
29.5
9.6
234.2
245.5
518.8
1 175.4
2.5
3.1
323.6
571.7
70.5
971.4
1 681.3
1 490.2
31.12.2005
31.12.2004
487.2
71.1
16.8
14.8
0.0
317.4
30.2
1.8
1.7
15.4
1 175.1
1 190.6
1 681.3
58
31.12.2004
450.3
5.3
3.5
6.8
1 024.3
1 031.1
1 490.2
SOK Cash Flow Statement
EUR million
Ref.
1.1.–31.12.2005
1.1.–31.12.2004
-4.6
-0.1
1.3
-3.4
-13.5
22.7
1.0
-9.5
-2.5
-2.5
-4.3
-0.4
8.9
4.2
-14.5
23.0
5.0
-1.0
16.8
0.1
16.8
-50.3
41.4
4.9
1.3
-2.8
-26.6
20.9
24.0
2.1
20.4
BUSINESS OPERATIONS
Operating profit
(1)
(2)
Cash flow from business operations before financing and taxes
Interest paid and other financial expenses
Interest received and other financial income
Dividends received from business operations
Direct taxes paid
Cash flow before extraordinary items
Cash flow from the extraordinary items of business operations
Cash flow from business operations
INVESTMENTS
Acquisition of fixed assets
Sale of fixed assets
Change in other long-term investments
Dividends received from investments
Cash flow from investments
FINANCING
Increase in long-term creditors
Decrease in long-term creditors
Increase (+) / decrease (-) in short-term creditors
Increase (-) / decrease (+) in short-term debtors
Change in short-term investments
Increase in cooperative capital and supplementary cooperative capital
Interest paid on the cooperative capital and supplementary cooperative capital
Other decrease in capital and reserves
Group contributions received
Group contributions paid
Liquid funds from merger
Cash flow from financing
106.3
4.2
3.1
15.8
-10.8
-0.1
33.7
-22.1
0.5
139.3
0.0
106.0
7.7
-14.5
4.5
-6.4
-0.7
13.8
-5.9
0.1
104.6
Increase (+) / decrease (-) in liquid funds
134.0
141.9
Liquid funds at the beginning of the year
Liquid funds at the end of the year
617.7
751.7
475.8
617.7
-5.8
7.5
-1.8
-0.1
-4.4
6.5
-2.6
-0.4
-82.2
0.0
83.5
1.3
-43.0
0.0
51.9
8.9
(1)
Gains (-) and losses (+) from the sale of fixed assets
Income and expenses which do not involve payment
(2)
Change in trade debtors
Change in stocks
Change in short-term interest-free creditors
8.7
59
Pääjohtajan
Financial
Statements
katsaus
Notes to the Financial Statements
Accounting Policies
In accordance with SOK’s Statutes, the name SOK Corporation
is used for the SOK Group. SOK Corporation comprises Suomen
Osuuskauppojen Keskuskunta (SOK) and its subsidiaries.
SOK’s financial statements and consolidated financial statements have been prepared in the manner prescribed by Finnish
legislation governing the preparation of financial statements (Finnish Accounting Act). The cash flow statement has been prepared
in accordance with the general recommendations of the Finnish
Accounting Standards Board, applying the indirect form of cash
flow statement.
Cash pool receivables and authorisation account receivables
have been transferred from securities to short-term debtors in
SOK Corporation’s accounts. The comparative figures have been
adjusted accordingly.
Scope of the consolidated financial
statements
The consolidated financial statements include the parent cooperative and all the companies in which the parent cooperative held, at
the close of the financial year, either directly or through its subsidiaries, more than half of the voting rights conferred by the shares.
Of the above-mentioned companies, four subsidiaries operate in
Estonia and two in Latvia.
The financial statement information of the associated companies (voting rights of 20%–50%) are included in the consolidated
financial statements.
Of the subsidiaries, one dormant company has been excluded
from the consolidated financial statements. In addition, of the
associated companies, three housing corporations have been
excluded from the consolidation, two of which are subject to State
Housing Board regulations. The exclusion of the above-mentioned
subsidiary and associated companies does not have a material effect
on the Group’s result and shareholders’ equity.
Principles of consolidation
The consolidated financial statements have been prepared by
combining the Group companies’ income statements and balance
sheets as well as the notes to them. The financial statements of the
Group companies are for the period 1 January – 31 December
2005. Companies acquired or formed during the financial year
have been consolidated from the date of acquisition or formation.
Divested subsidiaries or associated companies have been consolidated up to the date of sale.
Intra-Group holdings
Intra-Group holdings in subsidiaries have been eliminated using
the acquisition cost method. The intra-Group shareholding has
been eliminated by subtracting their acquisition cost as well as,
from the shareholders’ equity of the subsidiaries, an amount corresponding to the Group’s holding in them. The shareholders’ equity
of subsidiaries acquired also includes accelerated depreciation less
the deferred tax liability and voluntary provisions. Differences
arising in the eliminations, to the extent that they are due to differences between the current and book values of properties, have
been allocated to the relevant fixed assets and the remaining part is
stated as Group goodwill in the balance sheet.
60
Group goodwill attributable to buildings has been amortised in
line with the depreciation plan for the building in question. Group
goodwill is amortised over a period of 5 years on a straight-line
basis.
Intra-Group transactions and margins
When preparing the consolidated financial statements, all intraGroup income and expenses, distribution of profits, receivables
and liabilities as well as unrealised profit margins from intra-Group
transactions have been eliminated.
Minority interests
Minority interests in the profit for the financial year are shown as
a separate item in the income statement. The minority interest in
capital and reserves is also shown as a separate item in the consolidated balance sheet.
Translation differences
The financial statements of foreign subsidiaries have been translated into euros at the exchange rate on the balance sheet date.
Translation differences arising from the elimination of shareholders’ equity have been entered under profit brought forward in the
consolidated balance sheet.
Associated companies
Associated companies have been consolidated using the equity
method. The Group’s share of the associated companies’ profit
for the financial year, in accordance with the Group’s proportional holdings and adjusted for any amortisation of goodwill
and dividends received, is shown in the consolidated income
statement below operating profit. By contrast, the result of the
associated companies that carry on the Group’s mainline business
are included in the operating profit calculations and stated on the
previous line. Inex Partners Oy’s EDI invoicing through SOK is
not included in SOK’s net turnover.
In the consolidated balance sheet, the acquisition cost of associated companies and the Group’s shareholders’ equity includes
the Group’s post-acquisition share of an associated company’s
accumulated net assets, inclusive of total appropriations less the
deferred tax liability.
Intra-Group profit margins arising in transactions between
Group companies and associated companies have been eliminated
in proportion to each party’s holdings. Such margins have been
subtracted from the Group’s profit brought forward and from the
cost of acquiring the shares in associated companies. Eliminated
capital gains are recognised as income in step with depreciation.
Items in foreign currency and
derivative contracts
Transactions in foreign currency have been booked at the exchange
rate on the date of the transaction. Foreign currency receivables
and liabilities that are open at the end of the financial year have
been translated into euros at the exchange rate quoted by the
European Central Bank on the closing day of the financial year
and the exchange rate differences have been booked as a credit or
charge to income.
Financial
Pääjohtajan
Statements
katsaus
Derivative contracts taken out
for hedging purposes
Forward exchange contracts
Exchange rate differences on forward contracts taken out for hedging purposes have been entered as a credit or charge to income
against the exchange rate difference arising from the hedged item
in the course of the financial year during which the exchange rate
difference of the hedged item was incurred. Unrealised foreign
exchange gains are entered as a credit to earnings to a maximum
of the amount of a loss arising from the hedged item and the
proportion in excess of this is booked to a balance sheet account.
Unrealised foreign exchange losses on derivatives hedging balance
sheet items are booked to the full amount as a charge to earnings.
Unrealised foreign exchange differences on forward exchange contracts hedging future cash flows are booked to the balance sheet.
Forward rate agreements and interest rate swaps
Unrealised changes in the value of forward rate agreements are
booked to the balance sheet, whereas realised changes in value
are periodised over the contract period as a credit or charge to
earnings. The financial statements contain no open forward rate
agreements taken out for hedging purposes.
The interest on interest rate swaps has been periodised over the
contract period to adjust interest income or expense. Changes in
value of interest rate swaps taken out for hedging purposes are
booked to a balance sheet account.
Equity forwards
Realised gains and losses are booked as a credit or charge to earnings. Equity derivatives are valued at the stock exchange prices
on the last stock exchange day of the financial year. The valuation profit on equity forwards has been recognised as income to
a maximum of the amount of a loss charged to expense for the
hedged item, and the proportion in excess of this is booked to the
balance sheet. Negative changes in value have been booked to a
balance sheet account up to the unbooked valuation gain on the
hedged item, and the proportion in excess of this has been entered
as a credit or charge to earnings. The financial statements contain
no open equity forwards.
Interest rate, foreign currency, equity and share index options
Premiums received and paid for options have been entered in the
balance sheet. Premiums on interest rate options and realised gains
or losses have been periodised over the contract period to adjust
entered, hedged interest. Unrealised changes in value have been
entered in the balance sheet. Exchange rate differences of foreign
currency options have been entered as credits or charges to income
against the exchange rate difference caused by the hedged item for
the financial year during which the exchange rate difference of the
hedged item has arisen. The valuation profit on equity and equity
index options has been recognised as income to a maximum of
the amount of a loss charged to expense for the hedged item, and
the proportion in excess of this has been booked to a balance sheet
account. Negative changes in value have been booked to a balance
sheet account up to the unbooked valuation gain on the hedged
item, and the proportion in excess of this has been entered as a
credit or charge to earnings. The financial statements contain no
open option contracts taken out for hedging purposes.
Electricity derivatives
Electricity derivatives are used mainly for hedging the price risks of
electricity. Unrealised changes in the value of electricity forwards
taken out for hedging purposes are booked to the balance sheet,
whereas realised changes in value are periodised over the contract
period. Only electricity forwards were used as hedging instruments
during the financial year.
Oil commodity derivatives
Oil commodity derivatives are used to hedge price risk in fuel
trading. Realised and unrealised changes in the value of futures
taken out for hedging purposes are booked as a credit or charge
to income to adjust purchases. Premiums on options written for
hedging purposes are booked to the balance sheet and changes in
them are recognised as income to adjust purchases. Options written are treated in the financial statements as non-hedging items.
Oats-related derivatives
Oats-related derivatives are used to secure the price level of sales
that will be made in the future. Unrealised changes in the value
of oats futures taken out for hedging purposes are booked to the
balance sheet. Realised changes in value are recognised in income
to adjust purchases if the item hedged has already been realised, or
otherwise they are entered in the balance sheet.
Derivative contracts for purposes
other than hedging
Derivative contracts are taken out mainly for hedging purposes.
Non-hedging derivative contracts may only be taken out within
the risk limits specified in the Corporation’s risk management
regulations, which are approved by SOK’s Executive Board. Negative changes in the value of derivative contract positions other than
for hedging and outstanding at the balance sheet date have been
charged as expenses. Valuation profits on outstanding positions
have only been recognised as income to an extent corresponding to the losses entered earlier for the contracts included in the
position, and the proportion in excess of this has been entered in
a balance sheet account. Changes in the value of closed positions
have been entered as a credit or charge to income. The fair value of
outstanding contracts made for purposes other than hedging at 31
December 2005 was EUR 154,600.
Fixed assets and depreciation
In the balance sheet, fixed assets have been valued at cost less accumulated planned depreciation. In preparing the financial statements, the remaining revaluations of EUR 26.1 million have been
reversed in line with the depreciation schedule.
Depreciation according to plan has been calculated on the
original acquisition cost of the fixed assets in accordance with an
advance schedule and on a straight line basis. Depreciation has
been calculated from the beginning of the month after the asset
was placed in use. Depreciation periods, which are based on the
expected useful life of the assets, are shown in the notes to the
income statement under “Depreciation”.
Stocks
Stocks are entered in the balance sheet on a fifo basis at the lower
of the acquisition cost or repurchase price or probable market
price.
Financial assets
Securities are valued at acquisition cost or the market price, whichever is the lower.
61
Pääjohtajan
Financial
Statements
katsaus
Leases
Lease payments are shown as rent expenses in the income statement.
Future expenses and losses
Future expenses and losses representing a commitment of the
company or which are likely to materialise are charged as expenses
under the relevant expense item. In the balance sheet these provisions for expenses are stated in the item “Compulsory provisions”
or “Accruals and deferred income”.
shown in the consolidated balance sheet, whereas the change in the
deferred tax assets is shown in the consolidated income statement.
The deferred tax liabilities and assets arising on consolidation
are included in the deferred tax liabilities and assets shown in the
consolidated balance sheet, and any change therein is included
in the change in deferred tax liabilities and assets shown in the
consolidated income statement.
In line with conservative accounting practice, the consolidated
balance sheet shows the deferred tax liability in its entirety and
deferred tax assets as the estimated and probable amount. The
deferred tax liabilities and assets were calculated applying the
confirmed tax rate, which is 26%.
Deferred taxes
In the consolidated balance sheet, the accumulated appropriations
shown in individual financial statements have been divided into
a deferred tax liability, shareholders’ equity and minority interest,
and changes in them are shown in the consolidated income statement. So-called depreciation not deducted in taxation has been
taken into account as a reducing factor in calculating the abovementioned deferred tax liability. Deferred tax assets arising from
Group companies’ compulsory provisions and confirmed losses are
Pension arrangements
The pension liabilities of SOK Group companies have been
insured through external pension insurance companies. A supplementary pension policy has been taken out for the former
Elonvara members who are employed by the SOK Group. The
policy provides coverage for the earned and future pension benefits
corresponding to the rules and regulations of the pension fund.
Management of financial risks and electricity price risk in 2005
Liquidity risk
SOK Corporation seeks to minimise liquidity and refinancing risks
by means of a balanced distribution of loan maturities and sufficient financial reserves. Adequate liquidity is maintained through
cash, overdraft accounts, liquid money-market investments and
long-term binding credit facilities. In accordance with its financing
strategy, SOK Corporation strives to maintain an amount of liquid
funds and undrawn long-term binding credit facilities that is at
least 10% of its total assets plus the amount of the undrawn credit
facilities. Liquid funds at the end of the year totalled EUR 789.8
million and undrawn long-term binding credit facilities amounted
to EUR 152.4 million, for a total of 47.6%. The quick ratio target
has been set at more than 1, including long-term undrawn credit
facilities. At the end of the year the quick ratio calculated in the
above manner was 1.15.
Interest rate risk
SOK Corporation’s interest rate risk is reviewed over 12-month
and three-year periods. A linear change of one percentage point
in the level of market interest rates must not cause an increase of
more than 0.5 percentage point in the interest rate level of SOK
Corporation’s average interest-bearing net liabilities.
Foreign exchange risk
SOK Corporation’s net turnover is generated largely in Finland.
The Group’s commercial foreign exchange risks are the responsibility of the unit closing the business deal. The extent of the foreign
exchange risk for the balance sheets of the Baltic subsidiaries is
examined on the basis of balance sheet source-application analysis.
The foreign exchange risk is reduced by financing the companies’
operations in the same currency in which the money is spent and
by means of derivatives. SOK and its Finnish subsidiaries did
not have loans denominated in foreign currency at the end of the
financial year.
62
62
Credit risk
The management of credit risks connected with commercial
activities is part of the business units’ operations. Investments and
trade in derivatives can only be undertaken with counterparties
approved by SOK’s Executive Board, within the limits approved by
the Executive Board.
Electricity price risk
SOK Corporation evaluates the price risks of electricity for a
three-year period. The minimum hedging degrees for the following
years are defined in the guidelines for managing electricity price
risk, which have been approved by SOK’s Executive Board. Of the
estimated consumption and binding electricity deliveries, 100%
has been hedged for the next calendar year after the closing date
of the accounts, 43% for the year after that and 22% for the third
year. The hedging instruments that can be used are fixed-price
delivery contracts, futures, forward contracts, options or other
similar electricity derivatives.
Price risk in fuel trading
The S Group’s fuel procurements are handled by SOK’s subsidiary
North European Oil Trade Oy. In procuring fuels, the company
incurs price risk for its fuel stocks, and this is managed in the manner defined in the company’s risk management policy. To manage
price risk, the company makes use of hedging instruments such as
futures and options that are traded on the London and New York
oil exchanges as well as swaps made on the OTC market.
Price risk in grain trading
To hedge the price risk of oat basis trading, SOK’s subsidiary
Hankkija-Maatalous Oy employs oats-related derivatives.
Notes to the Accounts
EUR million
SOK CORPORATION
2005
2004
SOK
2005
2004
2 362.0
163.6
2 031.6
155.8
2 525.7
2 187.4
0.2
-4.8
0.3
-4.6
-4.6
-4.3
NOTES CONCERNING THE INCOME STATEMENTS
1a. Net turnover by business area
Supermarket trade
Fuel sales
Agricultural trade
EDI invoicing
Eliminations
Total
81.1
743.6
36.3
176.7
344.9
827.5
533.7
2 362.0
209.7
-1 106.1
4 209.4
59.0
444.5
97.0
169.2
356.0
826.8
491.5
2 031.6
204.4
-898.9
3 781.1
*) includes EUR 956 million of intra-Group EDI invoicing (prev. yr. EUR 727 million)
Domestic business operations constitute 95.3 % of net turnover.
1b. Operating profit by business area
Supermarket trade
Fuel sales
Agricultural trade
EDI invoicing
Share of associated companies’ profits
Eliminations
Total
2.5
1.6
0.8
14.6
4.8
8.3
-0.0
0.2
6.8
2.4
20.3
62.3
0.6
-0.9
4.2
10.6
9.1
12.8
2.5
0.3
12.4
1.8
-0.3
53.2
2. Other operating income
Profits on sale of fixed assets
Goodwill income
Total
30.9
4.1
1.2
36.2
8.9
3.1
1.2
13.1
5.8
4.4
0.2
6.0
0.1
4.5
3 725.0
-22.3
3 702.7
3 269.9
-3.2
3 266.7
2 361.5
0.0
2 361.5
2 014.7
11.6
2 026.3
125.1
21.1
9.5
155.6
125.5
20.5
9.1
155.1
29.9
6.0
2.5
38.4
26.4
4.1
2.1
32.6
3. Raw materials and consumables
Purchases during the financial year
Change in stocks (+/-)
Total
4. Staff costs
Wages and salaries
Pension costs
Other social security costs
Total
Information concerning the staff and members of the boards is presented under item 26.
63
EUR million
SOK CORPORATION
2005
2004
5. Depreciation and value adjustments
Depreciation according to plan
Value adjustments on non-current assets
Total
37.9
4.9
42.8
34.3
6.2
40.5
SOK
2005
2004
7.5
0.0
7.5
5.1
1.4
6.5
The itemised specifications of the change in depreciation and accelerated depreciation are included under fixed assets
and accumulated appropriations in the notes to the balance sheet.
Planned depreciation is calculated on a straight-line basis so as to write off the cost of fixed assets over their expected useful lives.
Revaluations have not been written down. Planned depreciation is as follows:
Year
30–35
Buildings
10–15
Light constructions and building equipment
10
Office and warehouse fixtures
7
Warehouse, servicing and processing machinery
5–10
Restaurant and hotel furnishings
5–7
Shop furnishings
5
Motor vehicles and computer hardware (other than PCs)
5–10
Goodwill
as permitted by taxation laws
Other tangible and intangible assets
6. Other operating expenses
Losses on sale of fixed assets
Total
0.1
118.5
118.6
0.6
118.9
119.5
0.0
33.5
33.5
33.1
33.1
1.7
-0.1
2.4
0.2
1.8
0.2
2.6
1.5
7.0
1.4
9.9
Rents are presented as a separate item in the income statement.
7. Increase (-) / decrease (+) in provisions for liabilities and charges
Increases related to partially vacant premises
1.7
Decreases related to partially vacant premises
-0.3
Increase in other future expenses and losses
1.7
Decrease in other future expenses and losses
3.1
Total
-0.1
2.6
-0.6
1.6
3.6
8. Financial income and expenses
Dividend income from Group companies
Dividend income from participating interest companies
Dividend income from others
1.2
Total dividend income from investments in non-current assets 1.2
1.4
1.4
0.1
1.0
1.2
2.3
Interest income from other non-current assets
From Group companies
From others
1.0
0.8
8.6
0.8
9.9
0.8
18.9
20.0
16.7
17.4
2.4
13.9
25.7
1.3
11.5
23.5
0.0
2.0
3.1
2.0
Other interest and financial income
From Group companies
From others
Total interest and financial income
Value adjustments of investments in non-current assets
Reversed value adjustments of investments
in non-current assets
Value adjustments of other securities held
in current assets
Interest and other financial expenses
To Group companies
To others
Total interest and other financial expenses
Total financial income and expenses
64
-13.0
0.1
-0.0
0.1
-0.0
14.2
14.2
15.6
15.6
2.5
12.1
14.6
1.2
13.6
14.8
6.8
1.2
10.2
29.5
SOK CORPORATION
2005
2004
EUR million
SOK
9. Extraordinary items
Extraordinary income
Group contributions received
Merger profit
Other
Total
2005
2004
25.0
11.3
28.7
6.0
0.1
34.9
36.2
Extraordinary expenses
Group contributions given
Merger loss
Total
6.9
0.1
7.0
17.2
Total extraordinary items
29.2
17.7
3.5
-2.0
1.7
-0.1
4.7
6.1
1.3
3.4
6.3
10.7
10. Appropriations
Increase (-) / decrease (+) in accelerated depreciation
11. Direct taxes
Income taxes on ordinary operations for the year
Income taxes on ordinary operations for the previous year
Income taxes on extraordinary items
Effect of consolidation
Change in deferred tax liability / assets
Total
11.0
-0.3
-0.0
-0.0
0.7
11.3
14.3
1.4
0.0
-2.4
0.9
14.1
17.2
NOTES CONCERNING ASSETS IN THE BALANCE SHEETS
12. SOK Corporation’s intangible and tangible assets, EUR million
Intangible assets
Intangible
rights
Goodwill
Other
capitalised
expenditure
Advance
payments
Total
intangible
assets
Group
goodwill
Group
reserve
Acquisition cost at 1.1.2005
Increase
Decrease
Transfers
66.7
23.9
-29.9
3.9
64.6
22.9
9.3
-2.3
7.9
14.8
-5.1
-9.3
8.3
134.1
49.7
-43.7
-0.2
140.0
19.9
1.6
-1.6
1.6
29.9
36.6
1.7
-6.4
5.2
37.1
19.9
1.6
Accumulated depreciation at 1.1.2005
Companies acquired
Accumulated depreciation on decreases and transfers
Depreciation for the financial year
Value adjustments
36.2
0.1
-13.1
10.3
0.1
33.6
17.2
22.9
19.2
-2.3
3.4
1.7
20.0
-4.5
4.3
76.4
0.1
-19.9
17.9
1.8
76.3
22.7
-0.2
0.2
0.7
19.9
Accumulated income entries at 1.1.2005
Accumulated income entries at 31.12.2005
1.6
1.6
Book value at 31.12.2005
31.0
9.9
14.4
8.3
63.6
0.0
0.0
30.5
5.7
13.6
7.9
57.8
0.7
0.0
65
Tangible assets
Land
Buildings
and
and
water constructions
Increase
Decrease
Transfers
Machinery
and
equipment
Other
Advance
tangible payments and
assets construction
in progress
30.1
2.6
-3.4
0.0
29.3
279.2
5.7
-23.4
9.9
271.4
78.2
10.0
-8.8
2.7
82.1
3.9
0.4
-0.0
-0.1
4.1
Accumulated depreciation and
2.4
value adjustments at 1.1.2005
0.3
Companies acquired
Accumulated depreciation on decreases and transfers -0.3
0.0
Value adjustments
2.4
103.3
1.4
-5.5
9.5
2.4
111.1
43.7
1.1
-3.9
9.9
0.1
50.9
1.4
0.1
0.0
0.3
0.0
1.8
11.6
-11.6
0.0
14.5
-14.5
0.0
26.9
160.3
31.2
2.3
18.7
239.3
39.3
190.5
34.5
2.4
6.0
272.7
Revaluations at 1.1.2005
Decrease
Revaluations at 31.12.2005
6.0
27.5
-2.4
-12.4
18.7
Total
tangible
assets
397.3
46.2
-38.1
0.2
405.5
150.7
3.0
-9.7
19.8
2.4
166.3
26.1
-26.1
0.0
Share of machinery in the book value of machinery and equipment EUR 0.3 million (prev. yr. EUR 0.3 million)
13. SOK Corporation’s financial assets, EUR million
Shares in
participating
interest
companies
Other
shares and
memberships
Total
shares
59.4
0.4
-1.4
-2.4
55.9
8.8
0.1
-0.3
8.6
68.2
0.4
-1.7
-2.4
64.5
3.3
0.2
-0.2
3.5
-0.2
0.0
3.4
0.0
0.0
0.0
3.4
52.6
8.6
61.2
56.0
8.6
64.7
Increase
Decrease
Transfers
Accumulated value adjustments at 1.1.2005
Accumulated value adjustments on decreases
and transfers
Value adjustments
Undepreciated part of Group goodwill due to associated companies EUR 0.1 million (prev. yr. EUR 1.1 million)
Unentered part of Group reserves due to associated companies EUR 0.0 million (prev. yr. EUR 0.1 million)
66
Capital loan
debtors from
participating
interest
companies
Debtors
from
participating
interest
companies
Capital loan
debtors
from others
Other
debtors
from
others
Total other
financial
assets
0.8
1.3
0.9
-0.6
-0.0
0.7
0.9
24.4
1.0
-0.6
7.1
31.8
27.3
1.0
-1.2
7.1
34.2
Amount at 1.1.2005
Increase
Decrease
Transfers
Amount at 31.12.2005
0.8
0.0
0.0
0.0
0.0
0.8
0.7
0.9
31.8
34.2
0.8
1.3
0.9
24.4
27.3
95.4
92.0
Total financial assets of SOK Corporation 31.12.2005
Total financial assets of SOK Corporation 31.12.2004
12. SOK’s intangible and tangible assets, EUR million
Intangible assets
Intangible
rights
Other
capitalised
expenditure
Advance
payments
Total
intangible
assets
36.5
3.8
-27.3
4.5
17.5
6.1
7.4
6.5
-5.1
-5.0
3.8
50.0
10.3
-32.4
0.0
27.9
15.8
6.0
12.6
4.7
5.0
1.6
3.8
10.4
20.7
1.4
7.4
29.5
Land
Buildings
and
and
water constructions
Machinery
and
equipment
Increase
Decrease
Transfers
0.5
6.6
20.5
-9.3
6.3
17.5
0.2
5.0
Tangible assets
Increase
Decrease
2.6
0.0
-0.1
2.6
Accumulated depreciation and
value adjustments at 1.1.2005
0.1
Value adjustments
0.0
0.1
10.5
Other
Advance
tangible payments and
assets construction
in progress
12.7
1.0
-1.8
12.0
0.4
0.0
0.0
7.5
9.4
-0.6
1.0
0.0
9.8
10.5
7.3
0.3
0.4
0.2
12.3
-1.2
11.2
Total
tangible
assets
26.3
13.4
-3.0
36.7
16.7
-0.6
1.3
0.0
17.4
0.0
2.5
3.0
2.2
0.4
11.2
19.3
2.6
3.2
3.3
0.4
0.2
9.6
67
13. SOK’s financial assets, EUR million
Shares
in group
companies
Shares in
participating
interest
companies
Other
shares and
memberships
Total
shares
252.1
26.3
-16.8
2.4
264.0
48.6
0.4
-2.7
-2.4
43.9
10.2
0.0
-0.0
10.2
310.8
26.7
-19.5
0.0
318.0
17.9
9.8
0.0
27.7
-0.0
3.0
20.9
0.0
9.8
0.0
0.0
0.0
0.0
3.1
30.7
243.1
34.1
10.2
287.3
234.2
38.8
10.2
283.2
Capital loan
debtors
from
Group
companies
Debtors
from
Group
companies
Capital loan
debtors from
participating
interest
companies
Debtors
from
participating
interest
companies
Capital
loan
debtors
from
others
Other
debtors
from
others
Total
other
financial
assets
41.0
131.7
57.3
-29.4
-7.1
152.5
0.8
1.3
0.9
-0.6
-0.0
0.7
0.9
22.7
1.0
-0.5
7.1
30.2
198.3
58.3
-65.9
0.0
190.7
Increase
Decrease
Transfers
and transfers
Value adjustments
Amount at 1.1.2005
Increase
Decrease
Transfers
Amount at 31.12.2005
and transfers
-35.4
5.6
0.8
1.8
0.0
1.8
-0.0
1.8
0.0
0.0
1.8
3.8
152.5
0.8
0.7
0.9
30.2
188.9
39.2
131.7
0.8
1.3
0.9
22.7
196.5
Total financial assets of SOK 31.12.2005
Total financial assets of SOK 31.12.2004
Liabilities to secure Group companies’ loans EUR 31.3 million
68
476.2
479.7
14. Companies owned by SOK Corporation and SOK 31.12.2005
Corporation’s
Group companies
Commercial
AS Kommest Auto Group
AS Sokotel
Hankkija-Maatalous Oy Group
Intrade Partners Oy
Jollas-Opisto Oy
Maan Auto Oy Group
North European Oil Trade Oy
Prisma Peremarket AS
Rainex Yrityspalvelu Oy
Rekla Oy
S-Etuluotto Oy
S-Eturahoitus Oy
SOK-Business Oy
SOK-Invest Oy
Sokotel Oy Group
SOK-Takaus Oy
Tapiolan Sokos Oy
Turun Sokos Oy
Real-estate companies (21 pcs)
Real-estate companies under stock (8 pcs)
Total Group companies 55 pcs
Registered
office
Estonia
Estonia
Helsinki
Helsinki
Helsinki
Helsinki
Helsinki
Estonia
Helsinki
Helsinki
Helsinki
Helsinki
Helsinki
Helsinki
Helsinki
Helsinki
Helsinki
Turku
shareholding %
voting
rates %
SOK’s
shareholding %
90.0
100.0
100.0
100.0
100.0
100.0
66.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.9
100.0
90.0
90.0
100.0
100.0
100.0
100.0
100.0
66.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.9
100.0
90.0
90.0
100.0
100.0
100.0
100.0
100.0
66.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.9
100.0
90.0
38.6
22.2
33.0
33.3
50.0
50.0
31.5
49.7
38.6
33.3
21.9
45.1
38.6
22.2
33.0
33.3
50.0
50.0
31.5
40.2
38.6
33.3
21.9
30.0
38.6
22.2
Participating interest companies
Associated companies
Asunto Oy Kauniaisten Kirkkomäki
Elielin Pysäköinti Oy
Hotelli Joensuun Kimmel Oy
Hotellipankki Oy
Inex Partners Oy Group
Kauppakeskus Mylly Oy
Keskuskorttelin Huolto Oy
Kiinteistö Oy Pysäköintiveturi
Kiinteistö Oy Turun Toripaikoitus
Movere Oy
Oy Realinvest Ab Group
Tullin Parkki Oy
Total Associated Companies 12 pcs
Kauniainen
Helsinki
Joensuu
Helsinki
Helsinki
Turku
Vaasa
Tampere
Turku
Lahti
Helsinki
Tampere
50.0
50.0
31.5
49.7
28.6
21.9
45.1
Other shares owned by the parent company
Sato-Yhtymä Oyj
Helsinki
8.7
8.7
69
EUR million
SOK CORPORATION
2005
2004
15. Stocks
Goods
Other stocks
Advance payments
Total
158.9
0.3
1.4
160.7
135.6
0.4
0.7
136.7
16. Long-term debtors
Trade debtors
Loan receivables
Other receivables
Prepayments and accrued income
Total long-term debtors
0.0
0.2
0.0
0.1
0.3
3.1
0.7
0.0
0.1
3.9
17. Deferred tax assets
Temporary differences
From consolidation
Total
1.3
0.5
1.8
2.1
0.8
2.9
SOK
2005
2004
2.4
2.5
2.4
2.5
0.0
0.2
2.4
0.7
0.2
3.1
315.1
225.0
3.3
8.3
26.0
9.6
47.2
7.9
3.3
38.7
7.7
57.6
The deferred tax asset due to temporary differences has been consolidated and
is shown in the consolidated balance sheet, but not in the Group company balance sheet.
18. Short-term debtors
Trade debtors
395.4
291.2
Amounts owed by Group companies
Trade debtors
Loan receivables
Other receivables
Total
Amounts owed by participating interest companies
Trade debtors
Loan receivables
Total
Loan receivables
Other receivables
Total short-term debtors
Specification of prepayments and accrued income
Financial items
Other
Total prepayments and accrued income
19. Securities
Other shares and participations
Money market securities
Total
70
0.6
0.0
15.2
15.8
0.6
0.0
27.2
27.7
0.4
0.4
15.1
15.5
27.1
27.5
17.0
15.5
32.3
475.9
16.8
10.3
38.3
384.4
1.5
20.0
399.3
1.8
11.8
323.6
9.2
38.3
47.5
6.1
59.5
65.6
9.0
35.6
44.7
6.1
40.5
46.5
21.3
667.5
688.8
24.5
547.2
571.7
21.3
667.5
688.8
24.5
547.2
571.7
NOTES CONCERNING LIABILITIES IN THE BALANCE SHEETS
EUR million
SOK CORPORATION
2005
2004
2005
2004
20. Capital and reserves
Cooperative capital at 1 Jan.
Increase
Cooperative capital at 31 Dec.
71.1
15.8
86.9
71.1
15.8
86.9
68.6
2.5
71.1
68.6
2.5
71.1
SOK
Cooperative capital consists of the cooperative payments which the cooperative enterprises make to Suomen Osuuskauppojen Keskusosuuskunta
(SOK) for cooperative shares. The number of a cooperative enterprise’s shares is determined on the basis of the cooperative enterprise’s total
membership and annual purchases.
Supplementary cooperative capital at 1 Jan.
Increase
Supplementary cooperative capital at 31 Dec.
16.8
16.8
14.8
2.0
16.8
16.8
16.8
14.8
2.0
16.8
The supplementary cooperative capital consists of voluntary investments which the cooperative enterprises make to Suomen Osuuskauppojen
Keskusosuuskunta (SOK). The cooperative enterprises have the right to a return on their supplementary cooperative capital contributions in the
manner and subject to the conditions specified in the Cooperative Societies Act and SOK’s statutes.
Revaluation reserve at 1 Jan.
Decrease
Revaluation reserve at 31 Dec.
25.4
-25.4
0.0
51.5
-26.1
25.4
All of SOK Corporation’s revaluations have been reversed in order to make the transition to measuring property, plant and equipment at cost.
Legal reserve at 1 Jan.
Increase
Legal reserve at 31 Dec.
14.8
0.5
15.3
12.8
2.0
14.8
14.8
0.5
15.3
12.8
2.0
14.8
Supervisory Board’s disposal fund at 1 Jan.
Increase
Decrease
Supervisory Board’s disposal fund at 31 Dec.
0.0
0.1
-0.1
0.1
0.2
0.5
-0.7
0.0
0.0
0.1
-0.1
0.1
0.2
0.5
-0.7
0.0
Profit brought forward at 1 Jan.
Transfer to legal reserve
Transfer to Supervisory Board’s disposal fund
Interest on cooperative capital and supplementary
cooperative capital
Revaluations: reversal from retained earnings
Translation difference
Profit brought forward at 31 Dec.
327.9
-0.5
-0.1
296.7
-2.0
-0.5
347.6
-0.5
-0.1
326.3
-2.0
-0.5
-10.8
-0.8
0.0
315.7
-6.4
-10.8
-6.4
-0.0
287.7
336.2
317.4
Total capital and reserves
57.4
492.2
40.2
456.0
32.0
487.2
30.2
450.3
315.7
57.4
287.7
40.2
336.2
32.0
317.4
30.2
-1.5
-0.1
-1.5
-0.1
-31.2
340.4
-33.2
294.5
366.6
347.4
Distributable funds at 31 Dec.
Minimum amount to be transferred to the reserve fund
in accordance with the company statutes
Share transferred to shareholders’ equity
from accumulated appropriations
Total
71
EUR million
SOK CORPORATION
2005
2004
2004
1.0
0.3
0.3
0.2
1.8
4.2
0.4
0.3
0.4
5.3
3.3
2.3
5.6
1.6
0.1
1.7
3.3
0.3
3.5
0.0
15.4
15.4
0.0
6.8
6.8
0.3
2.7
7.9
155.0
6.9
132.2
61.1
149.4
4.6
215.2
50.0
184.0
5.8
239.8
101.2
1.8
21. Accumulated appropriations
Accelerated depreciation
Intangible rights
Other capitalised expenditure
Buildings and constructions
Machinery and equipment
Total
22. Provisions
Partially vacant premises
Other future expenses
Total
1.6
0.9
2.5
23. Long-term creditors
Bonds
Loans from financial institutions
Pension loans
Trade creditors
Other long-term creditors
Total long-term creditors
0.3
15.4
30.9
5.8
16.9
0.4
0.3
6.8
30.2
24. Deferred tax liability
Appropriations
Temporary differences
Included in Group companies’ own balance sheets
Total
9.7
-0.6
9.2
10.4
-0.6
9.8
3.3
2.9
0.0
42.2
300.9
15.2
SOK
2005
25. Short-term creditors
Pension loans
Advances received
Trade creditors
46.1
344.4
Amounts owed to Group companies
Trade creditors
Other short-term creditors
Accruals and deferred income
Total
Amounts owed to participating interest companies
Trade creditors
Total
Total short-term creditors
Specification of accruals and deferred income
Staff costs
Financial items
Other
Total accruals and deferred income
NOTES CONCERNING INCOME TAXES
See 11 above.
72
103.9
1.8
0.0
105.7
65.9
2.7
0.0
68.7
103.0
63.5
2.7
0.0
66.3
662.7
116.1
1 278.3
553.8
121.4
1 089.9
632.3
61.4
1 175.1
523.4
53.0
1 024.3
26.5
10.2
79.3
116.1
29.7
9.6
82.2
121.5
8.3
8.4
49.4
66.0
7.6
7.2
43.9
58.8
NOTES CONCERNING THE STAFF AND BOARD MEMBERS
EUR million
SOK CORPORATION
2005
2004
SOK
2005
2004
26a. Average staff numbers by group
Supermarket trade
Fuel sales
Agricultural trade
Total
445
6
144
1 141
645
946
255
764
4 346
433
12
371
1 232
614
953
235
644
4 494
SOK
Subsidiaries
Total
663
3 683
4 346
558
3 936
4 494
The average number of personnel has been calculated as the average of the personnel at the end of each month and converted to full-time staff.
The number of staff at sites abroad at 31 Dec. 2005 was 1095.
26b.
Salaries and remuneration:
CEO and members of the Executive Board
Members of the Supervisory Board
3.0
0.1
3.0
0.1
0.7
0.1
0.9
0.1
1.7
1.9
1.9
1.7
1.9
1.9
Management pension liabilities:
For those members of the Executive Board in the employ of SOK and for certain
of the subsidiaries’ managing directors, the retirement age is 60–63 years.
SECURED ASSETS AND CONTINGENT LIABILITIES
27. Contingent liabilities
Pledges and contingent liabilities
Loans secured by mortgages
0.0
0.1
0.1
Mortgages
Total mortgages given as security
Loans secured by pledges
0.0
0.7
Pledged hire purchase agreements
Other creditors
Book value of pledged shares
Total pledges given as security
1.7
1.9
1.9
1.7
1.9
2.7
73
EUR million
SOK CORPORATION
2005
2004
SOK
2005
2004
0.8
0.3
2.6
1.2
2.6
83.6
113.8
0.2
0.2
0.2
0.2
Loans secured by guarantees
Guarantees given
Guarantees given, total
11.1
11.1
11.1
26.8
26.8
26.8
General security for liabilities
Mortgages
18.9
19.5
0.8
13.8
87.0
101.6
2.6
13.5
101.3
117.4
Other security given
Pledges
Mortgages
Guarantees
Total
Security given on behalf of Group companies
Guarantees
Security given on behalf of others’ liabilities
Guarantees given on behalf of associated companies’ liabilities
Guarantees given on behalf of cooperative enterprises’ liabilities
Guarantees given on behalf of others’ liabilities
Total
1.7
5.8
0.2
7.6
0.8
7.2
0.2
8.2
Security given on behalf of others
Guarantees for liabilities of the cooperative enterprises
0.1
0.2
101.4
69.3
170.7
104.3
71.2
175.5
32.4
32.4
37.0
37.0
5.7
12.2
17.9
5.0
11.2
16.2
1.4
0.8
2.3
1.4
1.3
2.7
Other contingent liabilities
Repurchasing liabilities:
Hire purchase repurchasing liabilities
Other repurchasing liabilities
Total
Leasing liabilities:
Payable next year
Payable in more than one year
Total
Rental liabilities:
Rented business facilities used by the S Group are regularly secured with long-term contracts, for which
the SOK Corporation bears rental liabilities.
Other financial liabilities:
The basic improvements and new structures in respect of the properties of Group companies involve a reduced value added
tax return liability in accordance with Section 33 of the Value Added Tax Act. The return liability materialises if the premises for which
reductions have been made are removed from the use entitling them to said reduction within the 5-year period specified by said act.
74
SOK CORPORATION
Liability under derivative contracts,
value of underlying assets, EUR million
Value of
underlying
assets
31.12.2005
Of which value
of underlying
instruments of
open agreements
31.12.2005
Value of
underlying
assets
31.12.2004
Of which value
of underlying
instruments of
open agreements
31.12.2004
40.0
40.0
0.8
0.8
75.2
75.2
246.8
101.0
75.2
75.2
268.5
133.4
Currency derivatives
Forward contracts
30.3
25.8
19.1
14.9
Forward contracts
22.6
11.4
20.8
7.9
24.3
24.3
2.2
2.2
3.1
3.1
0.6
3.9
3.3
1.1
1.1
0.4
0.4
Fair value
31.12.2005
Fair value
of open
agreements
31.12.2005
Fair value
31.12.2004
Fair value
of open
agreements
31.12.2004
-0.0
-0.0
0.0
0.0
0.1
-0.1
-1.0
-1.0
0.2
-0.2
-1.3
-1.3
Forward contracts
0.2
0.1
-0.5
-0.5
Forward contracts
2.9
2.2
-0.7
-0.8
0.4
0.4
0.0
0.0
-0.1
-0.1
-0.0
0.1
0.1
0.1
0.1
0.0
0.0
Interest rate derivatives
Forward contracts
Option contracts
Purchased
Written
Interest rate swaps
Oil product derivatives
Future contracts
Option contracts
Purchased
Written
Oat derivatives
Future contracts
fair value, EUR million
Forward contracts
Option contracts
Purchased
Written
Interest rate swaps
Oil product derivatives
Future contracts
Option contracts
Purchased
Written
Oat derivatives
Future contracts
75
SOK
value of underlying assets, EUR million
Value of
underlying
assets
31.12.2005
Of which value
of underlying
instruments of
open agreements
31.12.2005
Value of
underlying
assets
31.12.2004
Of which value
of underlying
instruments of
open agreements
31.12.2004
40.0
40.0
45.8
45.8
75.2
75.2
246.8
101.0
75.2
75.2
268.5
133.4
Forward contracts
59.2
1.3
31.5
3.9
Forward contracts
22.6
11.4
20.8
7.9
Fair value
31.12.2005
Fair value
of open
agreements
31.12.2005
Fair value
31.12.2004
Fair value
of open
agreements
31.12.2004
-0.0
-0.0
0.1
0.1
0.1
-0.1
-1.0
-1.0
0.2
-0.2
-1.3
-1.3
Forward contracts
0.0
-0.0
0.1
0.0
Forward contracts
2.9
2.2
-0.7
-0.8
Forward contracts
Option contracts
Purchased
Written
Interest rate swaps
fair value, EUR million
Forward contracts
Option contracts
Purchased
Written
Interest rate swaps
In examining the overall risk position, the position of the balance sheet items that
are to be hedged must be taken into account in addition to derivatives.
The derivative contracts that were open at the end of the financial year have been used
primarily to manage the Group’s foreign exchange, interest rate and price risks.
The open interest rate swaps are from one month to nine years in length.
Open electricity forwards will fall due within the next three years.
Other open derivative contracts are under a year in length.
The fair values of derivatives are based on market values or the present values of future cash flows.
76
SOK Corporation Key Ratios 2001– 2005
2001
2002
2003
2004
2005
2 915
2 998
3 112
3 781
4 209
Operating profit
EUR million
% of net turnover
35
1.2
55
1.8
46
1.5
53
1.4
62
1.5
Profit/loss before extraordinary items
EUR million
% of net turnover
39
1.3
55
1.8
52
1.7
54
1.4
69
1.6
Profit/loss before appropriations and taxes
EUR million
% of net turnover
33
1.1
55
1.8
52
1.7
54
1.4
69
1.6
Return on equity, %
7.5
9.9
7.0
9.0
11.8
Return on investment, %
6.4
8.4
6.9
7.2
7.6
33.2
34.1
32.9
30.2
28.4
Gross investment in fixed assets
EUR million
% of net turnover
31
1.1
43
1.4
56
1.8
53
1.4
68
1.6
Gearing, %
21
10
-2
-22
-25
4 203
4 126
4 557
4 494
4 346
Net turnover
Equity ratio, %
The average number of employees during
the financial year converted to full-time staff
CALCULATION OF KEY RATIOS
Return on equity, %
=
Profit/loss after financial items + value adjustments on investments (nett) - income taxes
x 100
Capital and reserves + minority interest, average
Return on
investment, %
=
Profit/loss after financial items + interest and other financial expenses + value adjustments on investments (nett)
x 100
Total assets - non-interest-bearing liabilities - provisions, average
Non-interest-bearing liabilities, EUR million
2001
472
2002
442
2003
483
2004
575
2005
657
Capital and reserves + minority interest
x 100
Total assets - advances received
Equity ratio, %
=
Gross investment
in fixed assets
= Acquisition costs of subsidiary shares and other fixed assets
Gearing, %
=
Interest-bearing liabilities - liquid assets
x 100
Capital and reserves + minority interest
The average number of employees during the financial year converted to full-time staff
Calculated as an average of the number of full-time equivalent employees at the end of each month
77
Executive Board’s Proposal
for the Disposal of SOK’s Profit for the Year
Surplus indicated in the income statement
Surplus from the previous financial years
Total
EUR 31,962,564.33
EUR 336,173,838.27
EUR 368,136,402.60
The Executive Board proposes that the profit for the financial
year of EUR 31,962,564.33 be used as follows:
– to be transferred to the reserve fund in
accordance with the company Statutes
EUR
1,600,000.00
– paid as interest on the suplementary cooperative capital
EUR
634,259.60
– distributed as interest on cooperative contributions
paid by the cooperative enterprises by the beginning
of the financial period
EUR
6,398,325.00
– transferred to the Supervisory Board’s disposal fund
EUR
50,000.00
– left in the retained earnings account
EUR
23,279,979.73
Providing that the Cooperative Meeting approves
the above proposal SOK’s capital and reserves will be:
EUR 86,852,500.00
EUR 16,830,000.00
EUR 16,873,154.85
EUR
141,634.97
EUR 359,453,818.00
EUR 480,151,107.82
Cooperative capital
Legal reserve
Retained earnings account
Total
Helsinki, 16 February 2006
Kari Neilimo
78
Jukka Salminen
Esko Hakala
Kuisma Niemelä
Veli-Matti Puutio
Ulla-Maija Tolonen
Arto Hiltunen
Kimmo Simberg
Financial
Pääjohtajan
Statements
katsaus
Auditors’ Report
To the members of Suomen
Osuuskauppojen Keskuskunta
We have audited the accounting records, the financial statements,
the report on operations and the corporate governance of Suomen
Osuuskauppojen Keskuskunta for the financial year 1 January
– 31 December 2005. The Executive Board has prepared a report
on operations and the financial statements, including the income
statement, balance sheet, and cash flow statement of both the
Corporation and the Cooperative as well as the notes to them.
Based on our audit we express an opinion on the financial statements, the report on operations and the Cooperative’s corporate
governance.
The audit has been conducted in accordance with sound auditing procedure. The accounting records as well as the accounting
policies, content and presentation of the financial statements and
the report on operations have been examined to an extent sufficient to determine that there are no material errors or deficiencies. In auditing the corporate governance, we have examined
the lawfulness of the activities of the members of the Supervisory
Board and the Executive Board in accordance with the regulations
of the Cooperative Societies’ Act.
In our opinion the financial statements and the report on
operations have been prepared in accordance with the Accounting
Act and other rules and regulations concerning the preparation
of financial statements and a report on operations. The financial
statements and the report on operations provide correct and
sufficient information, as intended in the Accounting Act, on
the operational results of the Corporation and the Cooperative
and their financial standing. The report on operations is fully
consistent with the financial statements. The financial statements
including the consolidated financial statements can be approved
and the members of the Supervisory Board and Executive Board
can be discharged from liability for the period audited by us. The
proposal made by the Executive Board on the disposal of retained
earnings is in compliance with the Cooperative Societies’ Act and
the Cooperative’s Statutes.
Helsinki, 9 March 2006
Tomi Englund
Authorised Public Accountant
Tapani Rotola-Pukkila
Juhani Heiskanen
Statement of the Supervisory Board
In accordance with Item 2, Paragraph 1 of Section 13 of the
Statutes of Suomen Osuuskauppojen Keskuskunta, the Supervisory Board has today examined the financial statements and
consolidated financial statements prepared by the Executive Board
for the 2005 financial year and acquainted itself with the Auditors’
Report.
The Supervisory Board proposes as its statement to the Annual
Cooperative Meeting that the financial statements and consolidated financial statements be adopted and that the Executive Board’s
proposal concerning the profit for the financial year and shareholders’ equity be approved.
The members whose term of office on the Supervisory Board
expires are Jouko Härkönen, Leo Laukkanen, Seppo Linjakumpu,
Ahti Manninen, Jorma Niiniaho, Arto Piela and Juha Vuorenhela.
In place of the above-listed persons, it is proposed that at the Annual Cooperative Meeting a corresponding number of members be
elected for the next three-year term of office. In addition, Kimmo
Simberg’s membership of the Supervisory Board ended on 1 January 2006 following his election as a member of SOK’s Executive
Board.
Helsinki, 17 March 2006
SUOMEN OSUUSKAUPPOJEN
KESKUSKUNTA
For the Supervisory Board
Otto Mikkonen
Chairman
Markku Viljanen
Secretary
79
79
Photos: Lauri Mannermaa. Printed by MIKTOR 2006
Suomen Osuuskauppojen Keskuskunta (SOK)
Fleminginkatu 34, Helsinki, Finland
P.O.Box 1, FIN-00088 S GROUP, FINLAND
Tel. +358 10 76 8011, telefax +358 10 76 82390
www.s-kanava.fi

Suomen Osuuskauppojen Keskuskunta SOK Corporation - S

Transcription

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