Suomen Osuuskauppojen Keskuskunta SOK Corporation - S

Transcription

Suomen Osuuskauppojen Keskuskunta
SOK Corporation
Annual Report 2004
Suomen Osuuskauppojen Keskuskunta
SOK Corporation
Annual Report 2004
1
Contents
4 CEO’s Review
7 SOK 100 years
8 Profile of the S Group
13 SOK Corporation
16
16
18
19
20
23
25
Business-by-business review
Supermarkets
Service station stores and fuel sales
Department store and speciality store trade
Hotel and restaurant business
Motor trade
Agricultural, hardware and gardening trade
26 Procurements and logistics
29 Neighbouring countries
30 Corporate governance within SOK Corporation
36
36
41
43
Accountability
Personnel
Environment
Sponsorship and international contacts
46
46
50
51
52
54
55
56
57
60
74
75
76
76
Financial Statements 2004
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 Policy
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
“You are few in number, but you have a future and you are backed
by supporters and helpers,” said Viktor Fagerström, chairman of
the meeting that established Suomen Osuuskauppojen Keskuskunta, SOK, in Tampere, on 22 March 1904.
A centennial year – Onwards Together
In 2004, Suomen Osuuskauppojen Keskuskunta, SOK, celebrated
a jubilee year. It was SOK’s centennial. Because the establishment
of SOK back then laid the foundation for the birth of the entire
S Group, we celebrated 2004 as the centennial of the entire
S Group as well. The theme chosen for the centennial year was
“Onwards Together,” which embodies the activities and essence of
the S Group, the regional enterprises and SOK, which is owned
by them. As a Finnish, regional and cooperative member-owned
group of companies, the S Group has for a hundred years striven
to be an enterprise that represents a humane market economy and
a feeling of social responsibility as well as fundamental Finnish
values. At the same time, it has been efficient and successful as a
business.
“Onwards Together” betokens the cooperative ideal of collective entrepreneurship. Members, the customer-owners, originally
jointly established the cooperative enterprises to produce services
for themselves efficiently and affordably. The Onwards Together
theme also portrays today’s S Group – the co-operation network of
companies formed by the cooperative societies and SOK – which
seeks, by dint of mutual, co-operation, to realise in a competitive
way the S Group’s business idea: to produce services and benefits
for committed customer-owners.
In a century, the S Group has grown from a loose collaborating
group of small cooperative enterprises and their modest central
organisation, SOK, into a major and modern network of retail
and service companies all across Finnish society. Today still – in
2005 – SOK and the cooperative enterprises are continuing their
efforts to carry out the S Group’s business idea and to operate in
a modern way on behalf of their present members. Onwards Together can thus very well also be the S Group’s motto as the Group
embarks on a new century.
SOK’s centennial year consisted of a multitude of festive events
at workplaces and in auditoriums. Hundreds of S Group staff,
numerous guests from Finland and abroad and tens of thousands
of our members have worked on arranging our celebrations, participated in our festivities as our guests and made our centennial a
true cooperative society jubilee. I wish to express my warm thanks
to all of you for joining in.
Success in realising the S Group’s
business idea
The success of the entire S Group can be evaluated primarily in the
light of how well the S Group’s regional enterprises and SOK have
succeeded in realising the S Group’s business idea. Carrying out
the business idea is at the same time the starting point and goal
4
of the entire S Group’s operations. The business idea guides the
S Group’s strategic development, practical business solutions and
daily business operations at all S Group locations.
The S Group succeeded well in carrying out its business idea in
2004. Our members increased their patronage of the S Group’s
service units, thereby demonstrating their confidence in the S
Group’s way of operating in an increasingly tight competitive situation. The aggregate Bonus paid to the S Group’s members during
2004 rose to EUR 167 million, an increase of 27 per cent on the
previous year. In addition, a number of cooperative enterprises will
pay out to their members, for the 2004 financial year, extraordinary bonus payments and interest on cooperative capital to a total
amount of about EUR 15–20 million. Bonus sales to members
accounted for nearly 60 per cent of the S Group’s aggregate sales in
2004. Bonus sales amounted to over 75 per cent of the aggregate
grocery, service station store, fuel and department store sales.
The S Group’s companies have been involved in a number of
ways in important national and regional development projects
connected with business, culture and sports. These projects have
played a part in developing the economic, cultural and social wellbeing of the companies’ own territories in accordance with the
S Group’s operational principles and values that highlight social
responsibility. Part of the earnings from the operations of the
S Group’s cooperative societies and SOK will be used indirectly on
behalf of our membership and other people living in the same area
via joint activities of this kind.
The number of members of the S Group’s cooperative enterprises grew significantly in 2004. At the end of the year there
were 1,468,572 members of the S Group’s cooperative enterprises
– their customer-owners. This represents 62 per cent of Finland’s
households. More than 282,000 new members joined the
S Group’s cooperative societies during 2004. For the fourth year
running, over 100,000 members a year have joined the S Group’s
cooperative societies. The S Group’s operations and broad range of
services appear to be of interest to Finns.
Sales and financial performance of the
S Group and SOK Corporation
The S Group’s retail sales in Finland rose to a total of EUR 7,929
million in 2004, up 10.9 per cent on the corresponding figure a
year ago and far outstripping the average growth in the Finnish
retail trade as a whole. The big jump in growth was due largely to
the HOK-Elanto merger, which lifted the S Group’s sales, as well
as to the good trend in sales by the other cooperative enterprises
and SOK Corporation. The HOK-Elanto merger has been instrumental in expanding the entire S Group’s operational muscle in
the S Group’s main business areas.
The cooperative enterprises’ share of the S Group’s sales in 2004
was EUR 6,653 million, or 83.9 per cent. SOK Corporation, SOK
Cooperative and its subsidiaries contributed 16.1 per cent to the
S Group’s sales.
The S Group’s grocery sales increased by 11.4 per cent in value
CEO’s Review
compared with 2003 and amounted to EUR 3,963 million.
Because the growth in the S Group’s grocery sales was clearly faster
than the average retail growth in Finland, the S Group increased
its market share of the grocery trade substantially during 2004.
Sales by the ABC service station stores and the Sokos department
stores likewise exceeded the average rate of the S Group’s sales
during 2004.
SOK Corporation’s turnover in 2004 totalled EUR 3,781 million. Because of the additional sales increase brought by the business areas that started up in 2004, turnover grew by a hefty 21.5
per cent compared with the value of sales a year earlier.
Sales by SOK’s businesses in the Baltic countries, which totalled
EUR 151 million in 2004, are not included in the above aggregate
sales figure for the S Group. Particularly good sales growth was
reported by the grocery units in the Baltic area, rising by 15.7 per
cent on the previous year.
SOK Corporation’s profit before extraordinary items was EUR
54.4 million, an increase of EUR 2.6 million on the corresponding
figure in 2003. SOK Corporation’s aggregate return on investment
in 2004 was 7.2 per cent, as against 19.6 per cent for SOK’s business area companies. SOK Corporation’s profitability and financial
position remained stable during 2004. The equity ratio at the end
of 2004 was 30.2 per cent.
The S Group posted aggregate profit before extraordinary items
of EUR 321 million, up EUR 38 million on the year-ago figure.
The cooperative enterprises reported earnings of EUR 267 million,
an increase of EUR 38 million compared with the previous year.
The S Group’s gross investments amounted to EUR 323 million
in 2004, of which SOK Corporation accounted for EUR 52.5
million.
Operationally, 2004 was one of the best years in the S Group’s
history.
The S Group had a payroll in 2004 of 26,353 employees, of
whom 4,790 people were employed by SOK Corporation. The S
Group’s number of employees increased by 2,916 during the year,
owing to the increased business volume resulting from the HOKElanto merger as well as the establishment of new business areas
and units.
The S Group and near-term challenges
Over the next few years, market competition will increase in all the
S Group’s business areas as both domestic and foreign players vie
for business. The S Group must be able to meet these new business
challenges. As a major national player in all its business areas, the
S Group, the cooperative enterprises and SOK Corporation must
take an active part in developing their business and service operations for the future. They must work ceaselessly to build for the
future by enhancing their functions.
During 2004 the S Group has continued its long-term strategic
development work aiming to ensure and develop the competitiveness of the cooperative enterprises and SOK Corporation in step
with the requirements of the future. The strategies are built around
a growth-oriented approach.
The strategic success factors of the future will be underpinned
by four pivotal factors. The S Group’s business chains must be
well managed and functionally cost-effective in relation to their
competitive environment. The second strategic success factor is
owner-membership in unison with cooperative entrepreneurship
and decision-making rooted in values. This, by virtue of the cooperative regional structure, gives the S Group a mastery of regional
markets. The S Group’s wide spectrum of services and comprehensive service network for its members and other customers in
most business areas is the third cornerstone of success. Nonetheless, in the business arena, success is ultimately decided by an
enterprise’s skilled management, adept supervisors and motivated
staff. In modern corporations, state-of-the-art management and
information systems – knowledge management – are also a crucial
element. Taken together, these factors form the fourth cornerstone
of the S Group’s success.
5
CEO’s Review
The challenges in coming years in every area of the S Group’s
management and operations will be linked to achieving a cost-effective, customer-focused and precision-managed mastery of the
long value chain of business and service processes across our business areas. An ever-improving command of our own operational
processes means substantial cost savings and potential for boosting
income in all the S Group’s business and support service areas. The
main strategic thrust driving the S Group’s future success will thus
spring from a cost-effective and customer-focused management
and control of long functional chains.
The S Group’s business units, both the cooperative enterprises
and SOK Corporation, must also be developed so that they have
the size and resources to achieve the requisite financial and other
competence and development resources to ensure their future success. There must be an ability and boldness to assess the S Group’s
optimal structure of regional enterprises in coming years as well as
the need to develop and consolidate sourcing and support services.
The S Group is a strategic co-operation network for producing services and benefits for its members. The co-operation and
specialisation of the cooperative enterprises and SOK Corporation
have led to the creation of an original and competitive business
model. The collaboration and specialisation that are inherent in
the business network, the decentralised decision-making structure
and the democratic administrative model that is characteristic of
the cooperative movement will require continuous refinement of
the decision-making system within the S Group, as in other organisations. Goal-oriented decision-making, a commitment to the
decisions that have been taken in all the business units as well as an
understanding of shared interests are challenges that must be taken
into account in developing the S Group’s management system to
meet the leadership and organisational needs of coming years.
Although the S Group’s business idea does single out the aim
of serving Finnish customer-owners as the chief priority of the
Group’s retail trade and service functions, in future years the S
Group must also be able to increase its business volume, prudently
and judiciously, in Finland’s nearby areas. Generating higher
operational revenue flows from abroad in order to support services
for customer-owners at home, making the best use of our own
know-how and our own business model in international markets
as well as taking part in international procurement organisations
and securing synergy benefits are among the grounds for expanding the S Group’s international operations in the years ahead.
Over the next few years, the above strategic policy lines and
actions will be translated into business, procurement and support-
6
function practices within the S Group. The appropriateness of the
strategies will be tested at different business locations in daily situations where staff and customers come together. The moment of
truth for realising the S Group’s business idea lies in this encounter
and in handling it successfully. The competence of management,
supervisors and employees, the ability to pay attention to and
to understand customers’ needs, coupled with a friendly servicemindedness, form the foundation for succeeding in this effort 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!
The S Group’s cooperative administration by its owners has
been, and will certainly also be in the future, one of our Group’s
major strengths. Democratic, wide and participative decisionmaking, a broad-based examination of matters from different
angles and a commitment to the decisions taken are characteristic
features of the S Group’s decision-making. These strengths should
be maintained and developed. My thanks go to all those who have
been involved in administrative tasks within the S Group for the
valuable work you have done.
I also wish to warmly thank our bonus partners for their good
and continually increasing partnership co-operation. Good bonus
partners have made a solid contribution to our success in 2004.
Likewise, my thanks go to all our other business partners for the
co-operation we have had during 2004.
I wish to express my special gratitude to our customer-owners,
the members of the cooperative societies, for your strong and evergrowing commitment to using the S Group’s services. As its vision
states, the S Group wants to be “Your Partner in Finland” and
you, as customers, owners and financial backers of the S Group’s
cooperative enterprises have been closely involved in realising this
vision. My warm thanks to all of you.
Helsinki, 26 January 2005
Kari Neilimo
SOK 100 years, 22 March 2004
Employees celebrated SOK’s centennial
with a feast at Sokos Hotel Vantaa on
29 March 2004.
A meeting of CEOs, past and present,
at the festive reception held at the Ässäkeskus. In the photo (from left), CEO Kari
Neilimo, Viljo Luukka, Juhani Pesonen and
Jere Lahti.
Photos: Petteri Kitti
At the jubilee gala, President of the
Republic Tarja Halonen was presented
a medal commemorating SOK’s
centennial. Shown presenting the
medal: Otto Mikkonen, chairman of
SOK’s Supervisory Board.
At the jubilee gala on 20 March 2004, the hall of the Opera House was filled with guests.
7
Profile of the S Group
Responsibility
Responsibility is reflected in feeling care for members, the staff,
other stakeholders and the environment.
What is the S Group?
The S Group is a major group of retail and service businesses in
Finland. It provides services for the grocery, service station store,
fuel, department store, speciality goods, hotel and restaurant, and
motor trade as well as agricultural and hardware services. The
S Group has about 1,400 locations in Finland. In addition, the
Group carries on grocery sales, hotel operations and the motor
trade in the Baltic countries.
The S Group in 2004
Operationally, 2004 was one of the best years in the S Group’s
one hundred-year history. Retail sales totalled EUR 8,080 million,
of which grocery sales accounted for EUR 4,016 million.
Despite keener competition, the S Group’s share of Finland’s
grocery market grew in 2004 and is now 34.3 per cent. Sales by
the service station store and fuel units rose by 19.2 per cent on
2003, to EUR 594 million. In the department store and speciality
goods trade, sales rose to EUR 346 million. The S Group is the
market leader in the hotel and restaurant business, which generated sales of EUR 601 million in 2004.
The S Group’s sales in the motor trade were about EUR 719
million in 2004, an increase of a good 4 per cent on 2003. Within
the agricultural trade, the S Group remained the market leader,
with sales of EUR 997 million.
The cooperative societies’ share of the Group’s sales was 83.9 per
cent, with SOK Corporation accounting for 16.1 per cent.
The S Group’s capital expenditures in 2004 came to EUR 323
million.
The S Group’s core values
Excellence
Excellence means valuing good operational and financial performance along with pride of accomplishment.
S GROUP´S BONUS SALES
8
MEMBERSHIP
Renewal
Renewal means ensuring the competitiveness of the S Group’s
companies and seeing to it that services and benefits for members
are in step with the times.
Partnership
Partnership springs from a respect for and a grasp of far-reaching
and efficient co-operation.
The S Group’s vision and business idea
The S Group’s objective is to be the leading, ever-renewing Finnish
retail Group that promotes the well-being of its members and the
local environment. In line with its vision, the S Group seeks to be
a partner in Finland for its members. The cooperative companies
that make up the S Group are at the same time efficient businesses
that are controlled by their members. The S Group’s business idea
is to provide benefits and services for its committed customerowners.
A network of closely linked companies
The S Group is made up of 22 independent regional cooperative societies and Suomen Osuuskauppojen Keskuskunta (SOK),
which is owned by them. The cooperative societies produce the
services which their members require in their own area and take
part in promoting economic, cultural and social well-being in their
territory.
Of the 26,353 staff who are employed by the S Group, SOK
Corporation employs 4,790 people and the remainder, 21,563, are
employed by the cooperative societies.
The biggest changes in the cooperative society network in 2004
related to the decision of Helsinki Cooperative Society HOK and
S GROUP RETAIL TRADE
Profile of the S Group
Elanto Cooperative to combine their operations within a company
bearing the name Helsinki Cooperative Society Elanto. Salo District Cooperative Society and Cooperative Society Seutu combined
to form Suur-Seutu Cooperative Society SSO. Both HOK-Elanto
and SSO began operations on 1 January 2004.
Apart from the regional cooperative societies, the S Group
includes 20 local cooperative societies, which had sales in 2004
of about EUR 134 million, or about 1.7 per cent of the entire S
Group’s sales in Finland.
SOK, together with its subsidiaries and associated companies,
attends to the cooperative societies’ sourcing, expert and support
services and carries on the business operations that are its province.
Regional Cooperative Societies of the
S Group at 1 January 2005
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
The S Group’s nationwide chain brands
Prisma, S market, Sale, Alepa
ABC
Sokos, Emotion
Sokos Hotels, Radisson SAS Hotels
Rosso, Rosso Express, Fransmanni, Amarillo, Sevilla, Memphis,
Night, Corner, Coffee House, Presso
Agrimarket
Owned by our customers
S GROUP RETAIL TRADE BY BRANCH 2004
The S Group’s business idea is to provide services and benefits for
its committed customer-owners. In 2004 the number of customerowners increased by over 282,000 new members and the total
membership at the end of the year was 1,468,572.
Bonus purchases by members accounted for about 60 per cent
of the entire S Group’s retail sales in 2004. Members were paid
an aggregate bonus of EUR 167 million for their patronage of the
S Group’s locations.
Members receive services and benefits that vary monthly as well
as Yhteishyvä magazine. The S Group’s own services and those of
its bonus partners ensure that its members can find everything for
their daily needs as well as for festive occasions. When joining as
a member of a cooperative society, a person becomes an owner of
that society and can have a say in the entire Group’s operations
through his or her own cooperative society.
9
The S Group
S Group Key Figures 2000–2004
EUR million
2000
2001
2002
2003
2004
±%
2 754
32
57
-5
2 915
35
35
-3
2 998
35
55
-1
3 112
34
46
2
3 781
40
53
3
21.5
18.2
14.6
32.3
54
39
39
32
55
44
52
35
54
40
1 327
542
140
645
403
16
20
887
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
482
337
145
413
324
89
465
421
44
495
504
-9
555
659
-104
5 062
4 537
4 645
4 949
4 790
-3.2
1 230
1 118
1 494
1 399
1 669
1 579
1 693
1 597
2 194
2 086
29.6
30.6
10
15
-9
11
4
14
28
23
25
30
401
494
505
538
631
17.3
COOPERATIVE SOCIETIES + SUBSIDIARES
Sales
4 790
Number of societies
43
Membership
854 067
5 340
43
987 037
5 640
43
1 078 649
5 894
43
1 187 074
6 652
42
1 468 572
12.9
-2.3
23.7
16 817
18 078
18 169
18 488
21 563
16.6
6 083
1 177
6 554
1 216
6 858
1 222
7 149
1 252
7 929
1 371
10.9
9.5
21 879
22 615
22 814
23 437
26 353
12.4
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
Total 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 societies
Operating profit before extraordinary
items, appropriations and taxes
Profit/loss for the financial year
S GROUP
Retail sales
Outlets
CALCULATION OF KEY RATIOS
Liquid funds = Cash in hand and at banks + investments
Net interest-bearing creditors = Interest-bearing creditors - liquid funds
10
3 EUR million
5 EUR million
11.1
-10.5
1.4
24.7
2.6
2.0
-39.2
15.5
12.2
30.9
-95 EUR million
-3 EUR million
8 EUR million
The S Group
S Group Retail Locations at 31 December 2004
Number
Change
Retail Sales, EUR million
46
369
242
657
5
22
37
64
1 895.7
2 283.4
463.9
4 643.0
Other Market Outlets and Neighbourhood Stores
25
-2
16.9
Sokos Department Stores
Emotion Speciality Shops
Other Consumer Goods Outlets
Total Department Stores and Consumer Goods Outlets
20
7
12
39
1
-1
-
299.0
9.7
36.9
345.6
Sokos Hotels
Radisson SAS Hotels
Other Hotels
Total Hotels
36
6
6
48
1
2
3
260.9
57.0
18.4
336.3
68
100
2
19
108.4
83.3
7
-1
15.8
Other restaurants
Cafes
Separate restaurants
24
33
232
8
7
35
31.5
25.5
264.5
Total Hotels and Restaurants
280
38
600.8
Agrimarkets
132
-1
706.2
8
-
14
154
2
1
133.9
105.2
51.3
996.6
Car dealerships
45
2
719.3
ABC service station stores
Other service station stores
ABC unmanned stations
Other unmanned stations
Fuel oil service
Service-station stores and fuel sales 1)
62
37
60
3
20
-10
5
-5
162
10
331.8
147.8
96.4
6.0
12.4
594.4
9
6
12.6
1 371
1 252
7 929.3
Prisma Hypermarkets
S-markets
Sale and Alepa Stores
Market Chains
Restaurants catering to diners
Drinks and socialising restaurants
Restaurants providing entertainment
Machine Centres
Grain trade
Other farm supply and hardware stores
Farm supply and hardware locations
Other locations
S Group locations, total
1)
The number of locations does not include stores or stations located within 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
62
32
168
18
280
20
-13
28
-8
27
11
Pääjohtajan katsaus
12
SOK Corporation
SOK Corporation comprises Suomen Osuuskauppojen Keskuskunta (SOK) and the subsidiaries it owns: Sokotel Oy, which runs
the hotel and restaurant business; the Maan Auto vehicle sales
group; Hankkija Agriculture Ltd, which is engaged in the agricultural business; the Sokos companies, which are engaged in the
department store business; Intrade Partners Oy, which is responsible for consumer goods sourcing and logistics; Rainex Yrityspalvelu Oy, a wholesaler of hardware and building products; North
European Oil Trade Oy (NEOT), a fuel procurement company; as
well as Uudenmaan ABC Oy, which develops the fuel trade in the
Greater Helsinki area. In addition, the Corporation has subsidiaries in the Baltic countries: AS Prisma Peremarket, AS Sokotel and
the Kommest Auto Group.
The Inex Partners Oy Group, which produces assortment,
sourcing and logistics services, is an associated company of SOK.
SOK Corporation’s tasks
SOK’s task is to support and serve the cooperative societies and its
own operating subsidiaries so that together they are able to provide
competitive services and benefits to the S Group’s customer-owners as well as carry on business that supplements the S Group’s
service range.
Within the S Group, the areas of responsibility
assigned to SOK are:
Joint development, steering and support tasks
Strategic guidance
Chain management and development
Strengthening customer-ownership
Development of new business models
Human resources development and training for
administrative officers
– Monitoring the S Group’s operations and best interests
– The development and maintenance of support services by
producing business models that increase the competitiveness
of the entire S Group, thereby providing cost-effective
services for the S Group
– Financial and other asset management
–
–
–
–
–
Joint procurement and logistics services
– Producing and arranging procurement and logistics services
Profitable business operations that round out the
S Group’s offerings
– In Finland
– In nearby areas
– The design of new business models in co-operation with
the regional cooperative societies
The principal SOK-provided steering and support functions for
the entire S Group are financial, treasury, information technology,
real-estate, communications, training and human resources services. A detailed list of the support and service functions and their
organisation is given in SOK Corporation’s organisation chart on
page 15.
In the area of support functions, our aim is to develop operational
models and processes that generate the maximum value added
for the S Group’s businesses. The task of support functions is to
develop and maintain business models that increase the competitiveness of the entire S Group so as to produce cost-effective
services for the S Group. The role specified for support 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.
SOK is responsible for providing and arranging the procurement and logistics services required by the S Group’s businesses
by means of its subsidiaries or associated companies. A major part
of the purchasing responsibility for groceries is organised within
Inex Partners Oy, which is owned on a fifty-fifty basis by SOK and
Cooperative Tradeka Corporation. Inex Partners Oy is broadly
responsible for the logistics services of the S Group’s different business areas. Inex Partners’ subsidiary Meira-Nova is responsible for
the category, procurement and logistics services for the HoReCa
segment. Of SOK’s subsidiaries, North European Oil Trade Oy
(NEOT) attends to fuel procurements and Intrade Partners Oy to
the S Group’s consumer goods sourcing and logistics.
The S Group’s strategy guides the planning of the competition strategies of all the business areas. The S Group’s strategically
important business areas are: grocery sales, service station store
and fuel sales, the department store and speciality goods trade, the
hotel and restaurant business, the motor trade and the agricultural
trade.
SOK’s chain management and support functions ensure that
the entire S Group operates in accordance with joint objectives
and that all the Group’s different units carry out the Group-wide
strategy by implementing their own strategy. Individual chain
management units oversee the grocery trade, fuel and service
station store trade, hotel and restaurant business, agricultural and
hardware trade as well as the department stores. A development
group has been set up to enhance the S Group’s strategy within the
motor trade.
The S Group’s procurement and support strategies underpin the
competitive strategies of the business areas. The strategies of the
regional cooperative societies and SOK Corporation define their
role and tasks in carrying out the Group strategy.
SOK Corporation’s financial
performance in 2004
SOK Corporation reported operating profit in 2004 of EUR 53.2
million (46.4 million), up 14.7 per cent on the year-ago figure.
SOK Corporation’s operating profit before extraordinary items was
EUR 54.4 million (51.8 million). The figure includes other operating income, a share of the associated companies’ profits, writedowns on fixed and other 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 above-mentioned items, was higher than in the previous year.
SOK Corporation’s capital expenditures in 2004 totalled EUR 53
13
SOK Corporation
million (56 million). A more detailed discussion of SOK Corporation’s good performance in 2004 is given in the Executive Board
Report on Operations in the latter part of this Annual Report.
Important events in SOK’s management
and support functions in 2004
On the basis of a preliminary survey of the means of developing
the S Group’s accounting functions, a programme, named Talke,
has been set up to carry out this project. The objective of developing accounting functions is to support business decision making
more efficiently, to increase the cost-effectiveness of accounting
and economic processes, to support decision making at the business unit level and to realise concrete cost savings.
The development programme is in the implementation stage
and introduction of the revamped accounting systems that will
bring about the sought-after improvement got under way during
2004. As part of the project, it was decided to consolidate the
basic service processes of the accounting departments of Hankkija
Agriculture Ltd and Sokotel Oy within SOK’s Financial Services
Centre. All in all, the sought-after operational model for the
S Group’s accounting and financial functions will be in operation
on schedule in 2006.
The task of the customer-owner and marketing services provided
by SOK is to see to it that customer-ownership develops and
strengthens as a central driver of the S Group’s success. The largest
individual development project in 2004 was an upgrade of the information systems and data analysis tools (data mining). Towards
the end of 2004 the S Group introduced a new member information system, which is designed for managing centrally a customer
register of the cooperative societies, member-related matters as well
as processing and calculation of bonus transactions and the payment of bonuses, including related book-keeping entries.
The information system will make possible the processing of a
growing volume of increasingly diverse customer information and
it will be more cost-effective to operate than the previous system.
In addition, it will support business functions by providing an
enhanced management of the total customer relationship as well
as a means of making better use of customer information. The
browser-based user interface will guide the user, thereby supporting work processes in customer service situations.
During 2004 a number of system projects were carried out
within SOK’s finance function to enhance processes and improve
services. SAP’s In-House Cash module was introduced across the
S Group in the early autumn, and within Rekla Oy a cash services
management system was developed to step up money transfer service processes. In the autumn, a project was started for placing the
finance/accounting system in use. The system will make it possible
to provide new enterprise finance services for the S Group.
To support trading on the electric power market, a new system
for managing market risks and electricity contracts was placed in
use. During the financial year a number of electricity delivery contracts were concluded – so-called bulk electricity contracts – with
the S Group’s different units. SOK Finance procured just over a
third of the electricity consumed by the S Group during 2005.
Alternative future operational models for customer finance services were studied during the financial year, notably savings fund
activities. A renewed scoring application was introduced at S-Etuluotto Oy, an S Group company that provides consumer credit.
14
The activities and resources of SOK’s Real Estate Management
functions in 2004 were directed towards implementing the service
strategy for the Group’s properties and premises. The objective of
the support function is to produce added value for the business
through life cycle management of the network of business locations.
The S Group’s joint communications were developed in a
number of projects in 2004. The aim of coordinated communications activities is to harmonise the content and visual appearance
of the communications and the operational models underlying
them. The biggest projects in 2004 were the carrying out and
coordination of SOK’s centennial communications, publication
of the S Group’s first Social Accountability Report, realising a
new look for Yhteishyvä magazine and launching an Yhteishyvä for
HOK-Elanto.
SOK Corporation net turnover by business area
EUR million
1 Jan.–31 Dec.
2004
EUR million
1 Jan.–31 Dec.
2003
Change
%
770
7.4
168
341
134
53
425
1 212
0.7
4.4
-27.6
11.9
15.6
7.7
195
-186
3 112
4.7
-7.7
21.5
Agricultural and
hardware trade
827
Service stations and fuel sales 444
Hotels and restaurants
169
Car trade
356
Sokos department stores
97
Market trade
59
Consumer goods sourcing
492
EDI invoicing
1 304
Real-estate, property-leasing
and other services
204
Eliminations
-171
Total
3 781
SOK Corporation operating profit by business area
EUR million
1 Jan.–31 Dec.
2004
Agricultural and hardware trade
12.8
Service stations and fuel sales
-0.9
10.6
Car trade
9.1
4.2
Market trade
0.6
2.5
EDI invoicing
0.3
Real-estate, property-leasing and
other services
12.4
Share of associated companies’ profits
1.8
Eliminations
-0.3
Total
53.2
EUR million
1 Jan.–31 Dec.
2003
9.1
-0.2
9.9*
8.5
-0.5
0.1
-0.1
0.5
*) Does not include non-recurring amortisation of goodwill
within the Corporation in 2003.
18.0
2.1
-1.0
46.4
SOK Corporation
SOK Corporation organisation 2005
15
Business-by-Business Review
Supermarkets
The S Group carries on supermarket trade using three store
concepts: hypermarkets (Prisma), supermarkets (S Market) and
grocery stores (Sale and Alepa). In all, the supermarket chains
comprised 657 locations at the end of 2004. AS Prisma Peremarket, a subsidiary of SOK Corporation, is engaged in the supermarket trade in Estonia.
Operating environment in 2004
The competitive situation in the sector changed in 2004 when
Lidl, the first foreign competitor in the grocery trade, doubled
the number of its locations. The K Group stepped up its business
operations and was active in establishing new retail outlets, particularly in the Baltic region. In 2004 tighter competition in the
grocery trade was witnessed by a noticeable drop in price levels in
the sector. In addition to tightening competition, the Baltic States’
accession to the EU and increased sales of private label brands also
contributed to falling price levels in the grocery trade.
In the light of tightening competition, price became an everstronger factor determining the choice of where to make purchases. According to price comparison surveys, the S Group’s Market
chains still ranked the best.
2004 in the S Group’s supermarket trade
The S Group’s supermarket chains performed well in the face of
tighter competition and chalked up an increase in their market
share in the grocery trade. At the end of 2004, it stood at 34.3 per
cent. The largest single factor that contributed to the increased
market share in 2004 was the merger of the two cooperatives
Osuusliike Elanto and Helsingin Osuuskauppa HOK. The market
position of the supermarket chains in the Greater Helsinki area
strengthened considerably as a result. The new cooperative society,
Helsinki Cooperative Society Elanto, started its business operations on 1 January 2004. Altogether 40 Elanto Maxi hypermarkets, Valintatalo supermarkets and Siwa stores were brought in line
with the S Group’s chain concepts and systems by the early spring
of 2004. The growth in the market share was also affected by the
vigorous new establishment of retail outlets, the development of
process operations and value chain co-operation. The Pirkanmaa
Cooperative Society’s acquisitions of Etujätti stores also boosted
the national market share.
The S Group’s supermarkets had retail sales in 2004 of EUR
4,660 million, an increase of 12.2 per cent on the previous year.
The supermarket trade occupies a central position in serving the
S Group’s members. Seventy-four per cent of members’ purchases
are made at supermarket locations. Grocery sales grew by 11.6 per
cent and consumer goods sales by 13.7 per cent. Of the chains,
the S Market chain registered the biggest increase in sales. All the
supermarket chains reported a profit.
The S Market chain is both the S Group’s and the country’s largest chain of grocery markets. At the end of 2004 they numbered
369 locations, an increase of 22 locations on the previous year. The
chain’s retail sales amounted to EUR 2,283 million, an increase of
10.7 per cent on the previous year.
In 2004 the Prisma chain gained strength by a total of five
stores, making 46 units by the end of the year. In addition, four
16
Prismas were operating in Tallinn. The chain had sales of EUR
1,896 million, an increase of 12 per cent compared with the previous year.
The Sale and Alepa chains had aggregate sales of EUR 464 million, a rise of 21.6 per cent. The number of locations increased by
37 and totalled 242 at the end of the year.
Competition strategy and scaling up
processes
The competitive strategy for the supermarket trade was updated
in 2004. The new strategy aims to take into consideration the
development outlook up to 2007. The Prisma, S Market and Sale
concepts and business ideas were updated during 2004 to ensure
compatibility with the strategy. In the revised Prisma concept, the
home, recreation and home technology are product groups that
will be given additional space. This is a significant shift in emphasis. For customers, the revised concept will take on a clear visual
expression. In the updated S Market concept, perishable goods
were given prominence in line with the business idea. The revised
concept for Sale grocery stores also placed emphasis on the range
of perishable goods and paid attention to forthcoming EU norms
and removing barriers to competition, such as in liberalising
opening hours. The development plan for processes and IT were
updated to support the emphases of the competitive strategy.
The efficiency-boosting projects concerning the entire value
chain in the supermarket trade and its processes, which got started
in 2003, continued through the year, 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. As part of the intensification of processes,
partner operations with suppliers were developed and augmented
in both the grocery and the consumer goods trade.
THE S GROUP’S MARKET SHARE OF THE GROCERY TRADE
17
At the beginning of the year the approach to the layout and display of goods was revamped in S Markets and Sale grocery stores,
making it possible to expand product assortments. The revamp,
which primarily applied to industrial foods and hygiene products,
optimised the use of space. The management and division of
space were overhauled in order to better correspond to demand.
The objective was to take a more consumer-oriented approach to
locating products and to overhauling product layout and displays
more clearly according to the purpose for which the products are
manufactured and the use for which they are intended.
Pilot projects in ten stores of varying sizes tried out the technical
and fundamental functionality of the new data system intended
for space management in stores. The space management project
aims at implementing the precision management of space and
analysis 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 improve
availability.
Kodin Terra, the S Group’s superstore concept for home gardening, interior decorating and building, was ready in 2004. The first
pilot store will open in Renkomäki, Lahti, in spring 2005.
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 the strategy for the business and chain operations ideas as
well as to assist the regional cooperative societies and provide guidance in the development of the business area.
The S Group’s cooperative societies had a total of 280 fuel-selling
units at the end of 2004. Of these, 94 were service station stores
and the remaining 186 units consisted mainly of unmanned petrol
stations. The net increase on the previous year was 27 units.
The price of crude oil rose considerably in 2004. This kept retail
prices of fuel at relatively high levels. The strong shift in market
shares along with ABC’s entry on to the market led to regional
price competition in retail sales of fuels in different parts of Finland.
The requirements set by the Environmental Protection Act have
become more stringent, which has also presented new challenges
for the cooperative societies in finding new business locations and
in running operations. The business is responding to these challenges by means of even safer technical solutions for the fuel trade.
The amount of travel by Finns in Finland has continued to rise.
Equally, consumer behaviour in Finland has changed towards
attending to personal business quickly. The general improvement
in roadside services and the development of service station store
trade, including in urban areas, have contributed to this trend.
Now that people have learnt to make use of services, they have
come to expect more from those services than in previous years.
Motorists increasingly break their journeys for recreation and
relaxation and this has become a point to be noted. Increased demand has boosted the range of services provided by service station
stores. ABC’s competitors entered the markets in 2004 with their
own new service concepts.
A round-the-clock society places pressures on opening hours
for trading. The possible liberalisation of opening hours will bring
with it a new set of challenges and opportunities for the service
station trade as a whole.
Service station stores and fuel sales
The ABC chain comprises 62 service station stores located along
traffic arteries and in urban areas and 168 ABC unmanned stations
that operate primarily at the Prismas, S Markets and Sale grocery
stores. The main services offered by the chain of ABC service
station stores are versatile and moderately priced café, restaurant,
supermarket and convenience store services as well as fuels. Significant factors for customers are that ABCs are open for service every
day of the year and that 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, make handling personal business easy.
The ABC chain of unmanned stations focuses on selling fuels.
The ABC network is already operating in the areas of all the 22
regional cooperative societies and, in addition, 4 local cooperative
societies.
2004 was a year of considerable growth for the ABC chain. It
opened units in different parts of Finland – the northernmost
ABC service station store being in Kuusamo and the southernmost
in Helsinki. Nationwide accessibility for motoring customers
improved substantially when ABC service station stores were established along busy major roads and highways. During the year 21
ABC service station stores and 28 ABC unmanned petrol stations
were opened. The business’s strategy is to vigorously expand the
network still further. The number of units will go over the two
hundred and fifty mark during 2005.
18
THE S GROUP’S MARKET SHARE OF PETROL SALES
2004 in the S Group’s service station store
and fuel trade
The S Group’s outlays on the development of a network of service
station stores and fuel sales continued at an exceedingly vigorous
pace in 2004.
The service station stores and fuel stations reported retail sales
across the S Group of EUR 796million, up 19.6 per cent on
the previous year (the figure includes sales by unmanned petrol
pumps at supermarket units). The S Group’s market share within
petrol sales stood at 15.8 per cent, up 1.6 percentage points on the
previous year. The growth was mainly attributable to the nationwide expansion of the ABC network and the fact that members
made more of their fuel purchases than ever before through the
S Group’s fuel-selling units. Bonus sales in particular developed
considerably. The cafés and restaurants at ABC service station
stores have become popular, and this has translated into a smartly
rising trend in sales.
North European Oil Trade Oy (NEOT), a fuel procurement
company, started fuel deliveries to the cooperative societies on
1 February 2004.
Owned by SOK and HOK Elanto, Uudenmaan ABC Oy
started its business operations with the opening in June of an ABC
unmanned station in Nihtisilta, Espoo, and ABC service station
stores were opened in the Greater Helsinki area in Tuomarinkylä,
Helsinki, and in Järvenpää in November.
Uudenmaan ABC Oy’s net turnover for its first financial year
amounted to EUR 2.4 million and an operating loss of EUR 0.7
million was recorded due to start-up investments.
In the summer the ABC chain became the first company in the
service station sector in Finland to be awarded the right to use the
Key Flag standard by the Association for Finnish Work. The Key
Flag is Finland’s best-known symbol of origin and it may be used
for Finnish products and services that meet the criteria for being
granted the symbol.
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 societies 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
The S Group has 20 Sokos department stores and seven Emotion
stores that are specialised in cosmetics and ladies’ lingerie. In addition, six Pukumies men’s apparel stores and seven other speciality
stores rounded out the S Group’s speciality palette. Sokos department stores serve members and other customers in the area of 15
regional cooperative societies. There are also speciality stores in the
area of five regional cooperative societies.
Retail sales by the S Group’s department stores and speciality
stores totalled EUR 346 million, representing growth of 15.8 per
cent on the previous year. The new Hakaniemi Sokos and one new
speciality store accounted for close to half of the growth. Members
are by far the largest customer group of the Sokos department
stores and the S Group’s speciality stores. Purchases made by members accounted for approximately 80 per cent of Sokos department
store sales.
The regional cooperative societies own all of the S Group’s Emotion speciality stores. By the end of 2004, 16 of the Sokos department stores were under the full ownership of regional cooperative
societies. The business operations of the Porin Sokos Oy were
transferred to the Satakunta Cooperative Society at the beginning
of the year. The business operations of Helsingin Sokos Oy were
transferred to the ownership of HOK Elanto at the beginning of
May. In the same connection, an agreement was made with HOK
Elanto concerning the management of business operations at the
Sokos Tapiola department store, which remained in the ownership
of Helsingin Sokos Oy. The companies jointly owned by SOK and
the regional cooperative societies are Tampereen Sokos Oy and
Turun Sokos Oy. SOK has a 90 per cent holding in the abovementioned companies. Tampereen Sokos Oy’s business operations
were transferred to the Pirkanmaa Cooperative Society on 1 January 2005.
The profitability of department store trade and the speciality
stores, aggregated in terms of their business ideas, were at the levels
expected. Customer satisfaction concerning both the appropriateness of assortments and their price levels gained strength. The
stimulating attraction of displays and product layout in the department stores and the level of friendly service received by customers
were also considered to be on the up and up.
Changes in the operating environment nationwide were moderate
in 2004. However, there were noticeable changes in the competitive situation in each locality and product-specific changes such as
in technical solutions.
Consumer confidence held steady despite the wide media coverage of job losses. The trend in disposable income was more positive
than previous forecasts had indicated and the labour markets
remained calm. It was a year of good, steady development.
2005 will be more challenging for business operations than the
year before. Prices are expected to fall still further with the reduction of international regulations. However, strong demand has
pushed up prices of raw materials, among other things.
Within the speciality store bracket in Finland, the many large
shopping centre projects, mainly in the Greater Helsinki area but
also in several provincial towns, will mean the local regrouping
of markets. More and more players are competing for consumers’
interest, time and money. Likewise, customer service personnel
and profit-accountable supervisor labour markets will liven up
perceptibly.
2004 in the S Group’s department store
and speciality store trade
Sales of consumer goods by the Sokos department stores in 2004
totalled EUR 299 million, representing growth of 14.1 per cent
compared with the previous year. Around one-third of the growth
was attributable to the new Hakaniemi Sokos.
19
Like-for-like growth in the consumer goods trade in the Sokos
department stores was twice the rate of nationwide like-for-like
growth in trade by department stores. Trade in apparel by the
Sokos department stores was also double the nationwide trend in
the sector. The best sales trend was reported by the ladies’ apparel
and product areas in the world of beauty. Several product areas in
home world and footwear also performed well.
The revamp of the layout and display of products to stimulate
and attract customers and make it easier for them to shop at our
locations was carried out in all the Sokos department stores. The
Sokos chain posted an operating profit on sales of consumer goods,
noticeably improving on the previous year’s results. The Sokos
locations were in the black (consumer goods + grocery trade) and
their result improved markedly.
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. Aggregate sales by the
seven Emotion stores amounted to EUR 9.7 million, representing
an increase of 5.2 per cent on the previous year.
Trend in the operations of the Sokos
companies owned by SOK Corporation
The Sokos companies operated four Sokos department stores for
the full financial year 2004 and five Sokos department stores and
one Emotion speciality store for four months. Following the transfer of the Sokos department store in Tampere to the Pirkanmaa
Cooperative Society on 1 January 2005, the three remaining Sokos
department stores still operated by Sokos companies are Sokos
Wiklund in Turku, Sokos Mylly in Raisio and Sokos Tapiola in
Espoo.
Net turnover by the Sokos companies in 2004 amounted to
EUR 97 million, representing a decline of 27.6 per cent on the
previous year due to transfers in the ownership of units.
The Sokos companies posted an operating profit amounting to
EUR 4.2 million (operating loss of EUR 0.5 million in 2003).
In 2004 the companies had an average payroll of 371 employees
(588).
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 2004 Chain Management concentrated on developing and
mobilising the business ideas and concepts for various product
areas as well as on developing the composition of the range of
products and its management systems. The Sokos catalogue, which
is distributed to members who shop at Sokos department stores,
was revamped.
20
Hotel and restaurant business
The S Group’s hotel and restaurant business consists of a comprehensive network of 46 hotels located around Finland as well as
480 restaurants, 350 of which operate as stand-alone restaurants
and the remainder in hotels. Of the hotels, 36 belong to the Sokos
Hotels chain, and 6 to the Radisson SAS chain. SOK has an exclusive right to operate under the Radisson SAS emblem in Finland.
In addition to these, the Group has 6 hotels that do not operate
according to the chain concept. Of the restaurant units, a good
200 serve members in line with chain business concepts. Outside
Finland, the S Group carries on hotel and restaurant operations in
Estonia, where Sokos Hotel Viru with its restaurants and a restaurant world that operates in the Prisma hypermarket in the Sikupilli
Shopping Centre serve the S Group’s members.
About half of the net turnover from the S Group’s restaurant
business consists of sales by the chain restaurants. The major
national restaurant chains are Rosso, Fransmanni, the Night nightclubs, Amarillo, Memphis and Public Corner. Regionally operating restaurant chains include Chico’s, Mr. Pickwick and Ale-Pub.
The range of restaurants is rounded out by the café and fast food
chains Coffee House, Presso and Rosso Express and, in addition,
the Group co-operates 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
societies. SOK Corporation’s Hotel and Restaurant Division comprises SOK’s operating subsidiaries Sokotel Oy and the Estonianbased AS Sokotel as well as the S Group’s hotel and restaurant
management and support units that operate within SOK. The regional cooperative societies own hotel and restaurant operations in
several different companies. The hotel and restaurant units owned
by the regional cooperative societies account for about 70 per cent
of the S Group’s aggregate net turnover in the sector.
Objectives of the hotel and
restaurant business
In accordance with its competitive strategies, the purpose of the
S Group’s hotel and restaurant business is to produce services and
benefits for the S Group’s members and for its other committed
customers. 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 in neighbouring countries in the years ahead.
Within hotel operations, the S Group’s objective is to continue to
ensure its customers receive the highest quality products and services in the sector, to deliver offerings for the booming leisure segment and to maintain outstanding market leadership in Finland.
The objective for restaurant operations is to further augment the
spectrum of service through diverse product and chain concepts
and thereby boost market shares by region in selected segments in
the main markets.
In order to ensure that objectives are achieved, the business has
several projects under way to procure new business sites in urban
areas and leisure centres. New network services to assist customers in conducting their business and that will come alongside the
21
traditional channels are in the pipeline, and process development
has launched wide-ranging information system projects in several
different sub-areas. An extensive training programme for staff has
been initiated in order to develop the level of service.
The hotel sector in Finland is characterised by internationalisation:
offerings are on the increase, customer companies are internationalising and international business travel is 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 also demanding greater individuality. Alongside the development in technology, online purchasing is
burgeoning and technology is also adding a new slant to business
travel. The changes in the operating environment are setting huge
challenges for the players in the sector: the growth in offerings,
linking together in a chain and networking, will heighten price
competition. Professional buyer activities are gaining in importance, as is a command of the end-to-end process. The trend in
demand for hotel operations has been modest in recent years;
however, demand this year is expected to increase at a higher 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 in the future.
Within restaurant operations, changes are taking place in
legislation, consumer behaviour and the competitive situation. The
consumption of alcohol has shifted from restaurants to people’s
homes; alcohol consumed in restaurants accounts for only 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 per cent) puts pressure on prices. The possible complete ban
on smoking will bring pressure to bear on changes to the business
concepts for nightclubs and dance restaurants. Problems could
also arise through the spread of a grey economy. Competition is
tightening and demand is becoming increasingly fragmented; thus
actors in the sector need to either select their segments or operate
across an ever-broadening spectrum. Restaurant operations represent about 70 per cent of the total volume of the hotel and restaurant business area. Consequently, and also due to the size of the
markets, the S Group will be focusing increasingly on large units
in medium price-bracket markets in all four categories (beverages,
socialising, restaurant meals and fast foods). The objective 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, and the players who are able to
develop efficiency, work productivity and their capacity to respond
to changes are set to continue performing well.
2004 in the S Group’s hotel and
restaurant business
Sales by the S Group’s hotel and restaurant business locations in
2004 totalled EUR 601 million, an increase of 11.2 per cent on
the figure a year earlier. The growth is largely explained by the
merger of the two cooperatives, Osuusliike Elanto and Helsingin
Osuuskauppa HOK but in terms of like-for-like growth, the
increase represented 4 per cent. The S Group’s growth by far outstripped the average for the sector, which, according to statistics,
is at about the one-half of one per cent mark. The S Group’s hotel
22
and restaurant business result developed well, topping 7 per cent
of net turnover.
The S Group’s market share measured in terms of net turnover
by hotels was 23.5 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, the proportion of the sales of
leisure services to members increased noticeably over the previous
year at the S Group’s hotels. The occupancy rate of the S Group’s
hotels was up on the previous year at 63.1 per cent, whereas occupancy rates throughout Finland remained at slightly over 47 per
cent.
The market share of the restaurant business at 18.2 per cent
was also the largest in Finland. In its restaurant operations, the S
Group increased the market share steadily in the beverage, socialising, restaurant meal and fast food sectors, although in regional
and city-specific market shares, there is some degree of difference
between cooperative societies. The capacity utilisation of thr S
Group’s restaurants has not fallen despite the negative growth rate
in the sector. The development in the market share and the building of closer-knit network coverage has kept several cooperative
societies busy lining up business sites.
Three units, Tahkovuori, Koli and Viru became part of the
Sokos Hotels chain during 2004. These three hotels form the backbone of the chain’s leisure network. The Sokos Hotel Klaus Kurki
in Helsinki left the chain at the end of 2004. Furthermore, Sokotel
Oy, which is owned by SOK, entered into a preliminary agreement
at the start of 2005 on starting hotel and restaurant operations at
the Marina Palace site in Turku.
Within the S Group’s hotel network, considerable renovations
and were carried out on several units during 2004. The Sokos
Hotels Torni in Helsinki, Lahden Seurahuone in Lahti, Vantaa,
Kimmel and Vaakuna in Joensuu, Rikala in Salo, Vaakuna in Vaasa
and Alexandra in Jyväskylä were just some of the Sokos Hotels that
were renovated and given a new face and improved functionality.
Of the Radisson SAS Hotels, the Royal in Helsinki and Radisson SAS Hotel Oulu underwent a complete transformation. The
modifications in Oulu are continuing into spring 2005.
In 2004 the S Group opened about fifty new restaurants, of
which 26 were chain restaurants (25 in Finland and one in Estonia). In addition, several dozen old restaurants were refurbished.
The way forward to creating a strong function-specific and regional
increase in market share will be through large units and the combination of several concepts. 2004 saw the introduction of wider
ranging concepts in places such as Oulu and Kotka (Amarillo,
Night, Pub, Bepop and Fransmanni). The pilot unit for a new
Spanish steak house concept was opened in Lahti in September. In
addition to Lahti, units operating under the Torero concept were
opened in Kajaani and Oulu at the turn of the year. Various concept combinations were made in the fast food Food Court units in
the areas of several cooperative societies.
During 2004 Ässäravintolat launched two new restaurant
concepts and two product concepts. Furthermore, a new internal
chain business operating model structured around the food, drink
and nightclub businesses was launched within restaurant operations. The S Group allocated capital expenditure amounting to
approximately EUR 20 million to its restaurants. The restaurant
business in 2005 will be characterised by strong networking, closer-knit market coverage, the search for synergies and new concepts.
Hotel and restaurant Chain Management
The Sokos Hotels Chain Management unit manages and develops
the operations of the Sokos Hotels chain. Chain Management attends to the development of the competitive strategy, the business
idea and hotel concepts. 2004 saw the continued development of
projects relating to the leisure network and the introduction of
a programme spanning several years focused on developing the
service competence of staff.
Chain management of the Radisson SAS hotels is handled from
the chain’s headquarters in Brussels.
Ässäravintolat oversees and develops the S Group’s chain
restaurants, is responsible for updating the chain brands, monitors the profitability and competitiveness of the restaurant chains
and ensures the implementation of the competitive strategy and
development of the logistics and competitiveness of the standalone restaurants.
Chain Management in 2004 concentrated on the expansion of
the chain network and the number of concepts, the development
of profitability and quality as well as on the launch of a new chain
operating model. The development of the hotel and restaurant
system continued with the launch of the TUHTI DW pilot unit
in Cooperative Society Keskimaa Osk.
Sokotel Oy
Sokotel Oy is SOK’s wholly-owned subsidiary that is responsible
for SOK Corporation’s hotel and restaurant business in Finland. In
2004 Sokotel Oy’s business operations developed favourably even
though there was a slight decline in the company’s net turnover
on the previous year. The company had net turnover of EUR 152
million (EUR 164 million). However, when the effect of discontinued units is eliminated, the trend in like-for-like net turnover
was nevertheless slightly up on the previous year. The company
employed an average of 1,280 people in 2004.
MARKET SHARE OF THE S GROUP’S
HOTEL ROOM SALES
Motor trade
Within the S Group, SOK Corporation and 12 regional cooperative societies are engaged in vehicle sales. The services provided by
the regional cooperative societies are supplemented by SOK Corporation’s Maan Auto Group in Finland and AS Kommest Auto
Group, which operates in the Baltic countries. At the end of the
year, the S Group had a total of 45 (43) car dealerships in Finland.
S Group’s dealerships represented 13 (18) different makes of car, of
which Peugeot is the S Group’s own imported marque.
The reduction in car tax implemented during 2003 kept the volume of car sales at a high level during 2004 but at the same time,
it posed challenges due to the increased inventories of trade-in
vehicles, and the prices for used vehicles declined throughout the
year.
The largest growth in the import of trade-in vehicles has already
been achieved and at the same time, their quality has improved
and the vehicles are newer. Dozens of importers and sellers of
trade-in vehicles have entered the market recently, but faced with
a fall-off in import volumes and a more discriminating clientele, it
will henceforth be harder for them to stay in business.
The EU Block Exemption that came into force on 1 October
2003 brought about no great changes in the operating environment for the motor trade during 2004, but changes can be
expected with respect to new cars and the sales of repair services
and spare parts. The abolition of the location clause, which will
come into force on 1 October 2005, will probably bring about the
most changes. The aim of this change by the EU Commission is
to make it possible for car dealerships to represent different makes
of car and to allow them to establish new sales points anywhere
within the EU. However, the abolition of the location clause does
not completely deregulate the sale of new cars because several
other regulations and criteria further restrict the possibilities for
dealerships. The objective in deregulating competition would
mean a structural change in dealerships and a new assessment of
the status of importers and dealers.
2004 in the S Group’s motor trade
The total motor trade market declined slightly from the previous
year, when the reduction in car tax speeded up the sale of new
vehicles. A total of 142,642 new passenger cars were sold in 2004,
down 3.2 per cent on the previous year. Despite the small drop
in the volume of sales, the sale of new cars remained high because
2004 was the sixth best sales year in the motor trade. A total of
31,381 used cars were imported into Finland during 2004, down
1.8 per cent from the year before. The S Group’s motor trade retail
sales in Finland amounted to EUR 719 million, which represents a
growth of 4.2 per cent on the previous year.
SOK Corporation’s net turnover from vehicle sales was EUR
356 million (EUR 341 million), up 4.4 per cent on the figure
the year before. Operating profit was EUR 9.1 million (EUR 8.5
million. The average number of employees in the motor trade was
614 (523).
23
24
The Maan Auto Group
Maan Auto Oy is SOK’s subsidiary that imports into Finland and
markets Peugeot vehicles, spare parts and accessories through its
own network, its subsidiaries Automaa Oy and Hämeen Leijona
Auto Oy and the rest of the nationwide dealer network. 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 societies and 14 were owned
by private enterprises.
On 1 January 2004, Maan Auto Oy incorporated its own retail
subsidiary named Automaa Oy, which operates Peugeot dealerships in Helsinki, Espoo, Vantaa, Raisio and Tampere. Hämeen
Leijona Auto Oy has dealerships in Lahti and Hämeenlinna.
Oy Motortrans Ab is also a subsidiary of Maan Auto Oy. The
company operates in Hanko as an import vehicle repair workshop,
with Peugeot vehicles forming the bulk of the imported vehicles
for repair. In 2004 the company repaired a total of 11,496 vehicles, 94.3 per cent of which were Peugeots.
A total of 9,996 Peugeot passenger cars were registered, an
increase of 1.6 per cent on the previous year. The market share for
Peugeot cars grew from 6.7 per cent to 7.0 per cent, the highest-ever market share for Peugeot in Finland. The growth in the
market share can primarily be attributed to the good success of the
Peugeot 206 and 307 models and to the 407 range that came on
to the market towards the end of the year.
Registration of Peugeot vans rose by 8.2 per cent and amounted
to 964 vehicles. The market share for vans fell from 4.9 per cent to
4.5 per cent.
The total market for Automaa’s business area declined 1.1 per
cent; Automaa handed over 4,504 Peugeot cars, which was an
increase of 0.7 per cent. 4,958 trade-in vehicles were sold.
Maan Auto concluded the motor trade quality programme
started in 2003 and in September 2004, the company was the first
importer to be given a quality certificate by The Finnish Central
Organisation for Motor Trades and Repairs.
The financial performance of the Maan Auto Group has shown
a positive trend. Earnings have been lifted by the increased volume
of new vehicles and the expansion of operations to include the
repair of imported vehicles.
Members get a Bonus from vehicle sales, service and spare
parts operations. Members account for about 85 per cent of the
individuals buying new vehicles and 80 per cent of those buying
trade-in vehicles.
Agricultural, hardware and
gardening 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, plant protection substances, preservatives, feeds,
farm imptements, fuels and lubricants as well as seeds and grain.
Machinery sales include tractors, combine harvesters, professional
groundscare equipment, golf course maintenance machines, spare
parts, machine accessories and contract maintenance. Besides
services for farm building, an important area for the development
of hardware sales is hardware store services for the consumer. 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 carried on by 132 Agrimarkets, 7 Agrimarket Machine Centres and one 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 31,000 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 also at the level of 6 per cent.
Demand for the production inputs used on farms remained nearly
unchanged. The overall market for tractors dropped 5 per cent.
Sales of farm implements remained at the level of previous years
but there was a growth in particular in the demand for direct seeding machines and different disc cultivators. The grain harvest in
Finland amounted to 3.6 billion kilos, which was about 5 per cent
lower than the previous year’s harvest. Due to the rainy summer,
there were many problems in the quality of the harvest.
2004 in the S Group’s agricultural,
hardware and gardening trade
In 2004 the S Group retained its market leader position within the
agricultural trade, with a share of 42 per cent of the market. The
hardware and gardening/horticultural range and ways of working
were developed to become more customer-minded and in particular to meet the needs of the S Group’s members.
In 2004 the S Group’s hardware and agricultural retail sales totalled EUR 997 million, a change of 3.8 per cent on the previous
year. The Agrimarket chain had retail sales of EUR 971 million, an
increase of 5 per cent on the year before. The Agrimarket chain’s
hardware and interior decoration sales grew by about 9 per cent
and gardening/horticultural sales increased by 7 per cent when
compared with the previous year.
Hankkija-Maatalous Oy
SOK’s wholly-owned subsidiary Hankkija-Maatalous Oy provides
farming, machine, hardware and gardening/horticultural services
and benefits for committed loyal customers and members. Hankkija-Maatalous Oy had net turnover in 2004 of EUR 720 million
(686 million), up 5 per cent on the previous year. HankkijaMaatalous Oy had a share of about 90 per cent of the Agrimarket
chain’s net turnover.
The overall market for tractors dropped 5 per cent from the previous year to 5,046 tractors. The position of Hankkija-Maatalous
Oy’s exclusive sales brand, John Deere, strengthened during the
year and its market share at the end of the year was 18.6 per cent.
Nearly 450 combine harvesters were sold in Finland during
2004; 2/3 were Finnish Sampo Rosenlew combine harvesters supplied by the Agrimarket chain. The sales targets set for professional
groundscare equipment and golf course machine business achieved
their objectives.
25
Procurements and
Logistics
Many retail outlets were renovated during 2004. The Keminmaa
Agrimarket was extended and the Laitila Agrimarket was relocated
in new premises. A new Agrimarket Konekeskus machine centre
was opened in Kokkola and a completely new full-service Agrimarket was built in Hämeenlinna.
The Cooperative Society Osla Handelslag’s agricultural and
hardware business operations were transferred to Hankkija-Maatalous on 1 January 2004, which also resulted in the transfer of the
Agrimarkets in Hardom, Porvoo and Vakkola (in Askola) to the
company. The grain warehouse in Vakkola and the grain plant in
Porvoo also transferred to the use of Hankkija-Maatalous.
The Kälviä and Sipoo Agrimarkets were closed during the year.
Kälviä’s business operations where combined with the Kokkola
Agrimarket and Sipoo with the Porvoo Agrimarket.
The hardware and gardening trade 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’ business operations in the Baltic, the AS
Agribalt and SIA Agribalt companies were sold to AS Mecro in
Estonia.
A total of EUR 3.4 million was spent on the service network
and information systems during the year.
The operating profit for Hankkija-Maatalous Oy was EUR 10.1
million (EUR 7.7 million). In 2004 the company employed an
average of 874 people (869).
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 Hakkila and Maantiekylä in Vantaa and in Jyväskylä, Oulu and Turku.
In 2004 Rainex Yrityspalvelu Oy made large outlays on the
development of the company. All locations were refurbished, the
Kuopio office moved to new premises, and new warehouses and
offices were built in Jyväskylä. In 2004 the company continued its
investment in electronic invoicing, particularly in online billing,
which has aroused wide interest.
The company had net turnover of EUR 91.4 million. Growth
over the previous year amounted to 8.8 per cent. Operating profit
was EUR 1.6 million (EUR 1.5 million).
In 2004 the company employed an average of 44 people (43).
26
Intrade Partners
Intrade Partners Oy is the S Group chains’ procurement and
logistics company whose primary responsibility is the apparel, cosmetics, leisure and household product areas. The company’s largest
customer chains are the Prisma, Sokos, S Market and Agrimarket
chains. Other customers include Sale, Alepa, Emotion and ABC.
In addition to consumer goods, Intrade Partners supplies store
furnishings and fittings to the S Group’s sites. Intrade Partners Oy
is a wholly-owned subsidiary of SOK.
Intrade Partners Oy had net turnover of EUR 491.5 million
(425.1 million), representing growth of 15.6 per cent on the
previous year. Operating profit was EUR 2.5 million (a loss of
0.1 million in 2003). The company employed an average of 235
people in 2004 (234).
The task of Intrade Partners is to bring added value to its customer chains through an appropriate product range in line with
their business idea by means of an efficient operational process that
is integrated into the customer chains and backed up by information systems and by achieving high-volume advantages through
centralised purchases. Intrade Partners Oy’s volume of procurements grew during 2004 and its cost efficiency improved noticeably. The sales of consumer goods in all customer chains developed
favourably.
During 2004 business and support services developed through
close co-operation with customer chains and new, more efficient
ways of operating were put in place. The objective is improved
cost-effectiveness, shorter stock turnover times and speeding up
the decision-making process.
The focus in the co-operation between suppliers was on improving availability and operational quality and on increasing machine
language connections. During the year under review, Intrade
Partners Oy joined the international Business Social Compliance
Initiative system (BSCI) that aims at ensuring and developing the
social accountability of foreign goods suppliers.
The outlook for 2005 is positive and it is expected that Intrade
Partners Oy’s procurement volume will continue to grow.
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. NEOT
started fuel deliveries on 1 February 2004. Net turnover during its
first year of operations amounted to EUR 442 million, of which
the company recorded losses amounting to 0.2 million when taking into consideration its start-up investments.
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 the joint venture will raise the market share
of the fuels NEOT delivers to service stations to approximately
25 per cent of the entire Finnish retail fuel market. This will give
the company a strong position when negotiating procurement
prices for fuels. The centralisation of procurements will result in
significant logistical advantages for customer chains and keep the
percentage of fixed costs for procurement and deliveries at highly
competitive levels.
Agreements were made during 2004 that guarantee import readiness at all the oil terminals used by NEOT. Maintaining import
readiness is one of the most central strategic tasks of the company.
Building NEOT’s organisational structure went ahead at a good
pace during 2004. 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 central objectives. This
objective will be achieved through constant training and recruitment. At the end of the financial year, the company employed 5
people.
Inex Group
At the close of 2004 the Inex Group comprised the parent company Inex Partners Oy and its wholly-owned subsidiary Meira
Nova Oy. Inex Partners Oy is owned on a 50-50 basis by SOK and
Tradeka (Cooperative Tradeka Corporation). Frozen foods logistics
is 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, 2004 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 Group grew by 5 per cent on the previous year,
amounting to EUR 1,928 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 purchasing and logistics position has strengthened.
In 2004 the activities of Inex were revamped into an operational
model based on functions and processes that also support facility
management. Inex’s company operations as well as functions
related to the range of perishables, procurement and logistics will
be located near one another in Kilo, Espoo, at the beginning of
2005. Strengthening the processes of business operations ensures
that Inex will be able to respond to the expectations and challenges
of retail chains in the near term.
The development of business operations also focused on product
assortments – especially on the shop’s own brands – international
procurement co-operation, operating processes, information technology, equipment and personnel. Co-operation with the Nordic
Coop Norde procurement organisation stepped up from January
2005.
Last year saw continuing 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 1,734 million, up 5 per cent on the previous year. Development projects were carried out 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, procurement and logistics
services for the hotel, restaurant and catering sector. Sales totalled
EUR 200 million, an increase of 2 per cent on the previous year.
Warehouse deliveries grew by 5 per cent. Meira Nova’s share of the
delivery wholesale trade in the hotel, restaurant and catering sector
is about 30 per cent. A project was launched to start the construction of a new logistics centre that will be ready in 2007.
Finnfrost Oy, the associated company that provides purchasing and logistics services for frozen foods, reported excellent sales
figures of EUR 182 million, up 10 per cent. The capacity of its
logistics centre improved markedly when its expanded facilities
became operational.
The good trend of the Inex Group and its client chains will
continue for the most part in 2005. The competitive factors of
primary importance are price competitiveness, cost effectiveness,
delivery reliability – especially the store’s own brands – as well as
the efficiency of the value chain extending from the consumer to
the production operation.
Inex Group had a payroll of 2,376 employees at the end of the
year, an increase of 162 people over the previous year.
Risto Pyykönen M.Sc. (Econ.) has served as Chairman and
CEO of the Parent company and Group since 1 May 2004. He
took over for his predecessor Martti Haaman titular Industrial
Counsellor.
27
28
Neighbouring Countries
The S Group operates in the Baltic countries within the supermarket trade, the hotel and restaurant business and the motor trade.
SOK’s Supervisory Board confirmed the neighbouring country
strategy for the S Croup. Accordingly, SOK is responsible for the
S Group’s business operations in nearby areas. In 2004 responsibility for sales and profit in the Baltic are will rest with the country
manager.
In 2004, the Baltic region saw the continuance of the investment plan in supermarket, motor, and hotel and restaurant
operations as well as the development of management models in
accordance with the new strategy.
Business operations in the Baltic countries achieved the objectives set for them in the financial year and showed a profitable
result. In 2004 total sales from business operations amounted to
EUR 151 million.
AS Prisma Peremarket
AS Prisma Peremarket, a wholly owned subsidiary of SOK, is
engaged in the retail trade in Tallinn at Prisma hypermarkets located in three different shopping centres in the Sikupilli, Kristiine
and Mustamäe town districts. In addition, the chain comprises
the Prisma which is owned by ETK’s subsidiary AS Ramare and
operates in the Rocca al Mare Shopping Centre in Tallinn under
a chain and management agreement. The effect of the Viru
Shopping Centre and the Ülemiste Centre on sales by the Prisma
chain was clearly less than expected. The Prisma chain succeeded
in maintaining its position as the market leader in Tallinn, with a
good 20 per cent market share of the chain supermarket and hypermarket trade. In 2004 a lease agreement was signed for opening
the fifth Prisma in the Lasnamäe town district of Tallinn.
The company also carries on restaurant operations in line with
the Rosso, Rosso Express, Coffee House and Hesburger concepts
in a food court-type restaurant that operates within the Prisma in
the Sikupilli Shopping Centre.
In 2004 the net turnover for AS Prisma Peremarket came to
EUR 59 million (EUR 52.7 million) and it reported operating
profit of EUR 0.6 million (EUR 0.07 million).
At the end of 2004 the company employed an average of 433
people.
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. With the accession of the Baltic countries
to the EU, the import and retail sales of vehicles was split into
different companies: 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 Autocenters is the
sales company. In 2004 the shares in ZAO Kom Motors, which
operated on the St. Petersburg market, were sold in connection
with the reorganisation of Peugeot in Russia.
The overall market for vehicles in Estonia in 2004 was 18,574
new cars and vans, representing growth of 3.5 per cent on the
previous year. Latvia’s total market was 12,623 cars and vans, an
increase of 29.1 per cent compared with the previous year.
Kommest Auto sold a total of 1,581 Peugeot vehicles in Estonia
and 907 in Latvia. The market share of Peugeot passenger cars in
Estonia was 8.5 per cent and in Latvia 7.2 per cent.
The Kommest Auto Group had net turnover in 2004 of EUR
59.7 million (EUR 73.7 million) and posted operating profit of
EUR 1.0 million (EUR 1.5 million).
At the end of 2004, the company employed an average of 210
people.
Agribalt Oy
In 2004 Agribalt Oy sold its ownership in the agricultural supplies
and machine trade of its subsidiaries AS Agribalt and SIA Agribalt
Latvia to AS Mecro of Estonia.
AS Sokotel
AS Sokotel is SOK’s wholly-owned subsidiary that operates the
Sokos Hotel Viru in Tallinn. The year 2004 was the company’s
first full year in business after it was handed over to AS Sokotel
on 1 September 2003. Sokos Hotel Viru and its restaurants serve
the S Group’s members, business travellers and other customers in
Estonia’s largest hotel; in spring 2004 following completion of an
extension, the hotel has 516 rooms, five restaurants and completely refurbished conference facilities. Alongside new facilities, the
emphasis during the year was on the Sokos Hotel concept remake.
AS Sokotel’s net turnover in 2004 amounted to EUR 16.9
million (EUR 4.2 million) and its operating result was EUR 1.7
million (a loss of EUR 0.4 million).
At the end of 2004 the company employed an average of 242
people.
29
Corporate Governance within SOK Corporation
Applicable regulations
SOK is a Finnish cooperative whose decision-making and administration comply 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
sound business principles.
The Corporation’s administration seeks to comply with the
recently adopted recommendation on the corporate governance of
publicly traded companies. Owing to the form of the cooperative
society 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 society 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 society.
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 society’s Executive Board and line management.
The Supervisory Board oversees that the administration of
the cooperative society 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
society’s best interests. The Supervisory Board accepts and expels
members of the cooperative society 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 society.
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
meetings of the Committee of Presiding Officers. In addition,
the Committee of Presiding Officers decides on such matters as
30
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 societies.
The Supervisory Board has 12–25 members. A person elected to
the Supervisory Board must be a Finnish citizen, a member of a
cooperative society 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 as well as two personnel representatives in 2004. The Supervisory Board met 6 times.
The special remuneration for the chairman of the Supervisory
Board in 2004 came to EUR 1,350 per month and the monthly
remuneration for the vice chairmen amounted to EUR 420.
In 2004 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
Selection 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
society’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 2005 has seven members, five of whom are
managing directors of cooperative societies 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.
Tasks of the Executive Board
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 the SOK Corporation and the S Group.
The Executive Board also monitors the savings fund activities of
the cooperative societies.
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 the
cooperative society or exercises a position of trust within it does
not participate in the preparation of decisions concerning the
audit and auditors of cooperative societies or in decision-making
or monitoring the cooperative societies’ savings fund activities.
Meetings of the Executive Board
The Executive Board met 16 times during 2004 and the rate
of attendance by its members was 95.3 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 2004. 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 society in accordance
with the relevant Act, 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 Board
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 ten times in 2004. In 2004
the members of the SOK Management Team were paid salaries
and profit-related bonuses amounting to EUR 2,262,000. The
sum includes remuneration in kind.
Executive Board 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
societies 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 societies 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 societies 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 society 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 societies 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.
2004
The Cooperative Meeting held on 24 April 2004 elected as SOK’s
regular auditors for 2005 Tomi Englund M.Sc. (Econ.), LL.M.,
Authorised Public Accountant (APA), of Helsinki, Tapani Rotola-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.),
31
APA, of Kajaani. The Management Auditors elected to the Audit
Committee for 2005 were Matti Suokas, Finance Director, Approved Auditor, of Kotka, Marja Pappila, lawyer, of Laitila and
their deputies, Risto Tuori, lawyer, of Vammala and Seppo Ehanti,
corporate lawyer, of Porvoo.
Auditing fees for SOK Corporation companies amounting to
EUR 645,000 and fees for consultancy services amounting to
EUR 61,000 were paid in Finland and the Baltic countries in
2004. The management auditors received payment totalling EUR
17,700 for their work.
Internal control, internal audit and
risk management
SOK’s Executive Board is responsible for organising operations in
an appropriate manner, corporate management 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 of SOK Corporation report regularly
to the CEO, the Executive Board and to the Committee of Presiding Officers of the Supervisory Board on matters concerning risk
management. In 2004 the Corporation 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 as a whole 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.
SOK Supervisory Board 2004
Otto Mikkonen (born 1949)
Joensuu
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
Håkan Smeds (born 1948)
Vaasa
Titular Commercial Counsellor
First Vice Chairman 2001–24 April
2004
Managing Director,
Cooperative Society Varuboden until
30 June 2004
1991–24 April 2004
Jouko Vehmas (born 1956)
Kouvola
M.Sc. (Econ.)
First Vice Chairman
from 24 April 2004
Managing Director,
Cooperative Society Ympäristö
Member of SOK’s Executive Board
2001–2003
1994–2000, 24 April 2004–
Retiring in 2007
Max van der Pals (born 1945)
Lohja
Farmer
Second Vice Chairman 2003–
Suur-Seutu Cooperative Society SSO
2001–
Retiring in 2007
Marcus H. Borgström (born 1946)
Sipoo
Titular Agricultural Counsellor
Cooperative Society Varuboden
from 24 April 2004
Retiring in 2007
Information
SOK Communications and Publications ensures that customers and stakeholders have sufficient correct information at their
disposal concerning the company and its operations. Information
is available upon written request as well as through SOK’s website.
32
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 2005
Pekka Kangasmäki (born 1945)
Porvoo
B.Sc. (Econ.)
Managing Director,
Cooperative Society Osla
1994–
Retiring in 2006
Kimmo Koivisto (born 1956)
Pertteli
Farmer
Suur-Seutu Cooperative Society SSO
until 31 December 2003
2003–24 April 2004
Simo Kutinlahti (born 1957)
Keuruu
Farmer
Cooperative Society Keskimaa Osk
1998–
Retiring in 2007
Eino Laaksonen (born 1936)
Oulu
Counsellor of Education
Principal, Pohjankartano Upper
Secondary School
Cooperative Society Arina
1995–24 April 2004
Leo Laukkanen (born 1947)
Mikkeli
Managing Director,
Cooperative Society Suur-Savo
Member of SOK’s Executive Board
1998–2002
1987–97, 2003–
Retiring in 2006
Jouko K. Leskinen (born 1943)
Helsinki
LL.M.
Helsinki Cooperative Society Elanto
Member of the Supervisory Board 2002–
Retiring in 2005
Jorma Sieviläinen (born 1954)
Rauma
M.Sc.
Managing Director,
Cooperative Society Keula
Retiring in 2005
Maija-Liisa Lindqvist (born 1951)
Lahti
Member of Parliament
Cooperative Society Hämeenmaa
Retiring in 2005
Kimmo Simberg (born 1959)
Seinäjoki
Bachelor of Hospitality Management
Managing Director,
Southern Ostrobothnia Cooperative
Society
Member of the Supervisory Board from
24 April 2004
Retiring in 2007
Seppo Linjakumpu (born 1958)
Kuusamo
Agronomist
Koillismaa Cooperative Society
Retiring in 2006
Ahti Manninen (born 1950)
Lappeenranta
Managing Director,
South Karelia Cooperative Society
Member of the Supervisory Board 1989–91,
2000–
Retiring in 2006
Jorma Niiniaho (born 1945)
Hamina
M.Sc. (Econ.)
Managing Director,
Cooperative Society Ympyrä
Member of the Supervisory Board 1991–97,
2002–
Retiring in 2006
Matti Ojanperä (born 1941)
Pori
Managing Director,
Satakunta Cooperative Society
Member of the Supervisory Board 1995–24
April 2004
Matti Pikkarainen (s. 1953)
Oulu
Dean
Director of Christian Education
Oulu Evangelical Lutheran Parishes
Cooperative Society Arina
Member of the Supervisory Board 24 April
2004–
Retiring in 2007
Timo Sonninen (born 1948)
Iisalmi
Entrepreneur
Cooperative Society PeeÄssä
Retiring in 2005
Antero Taanila (born 1941)
Kokkola
Provincial Counsellor
Administrative Director,
Boliden Kokkola Oy
Cooperative Society KPO
Retiring in 2005
Matti Vanto (born 1945)
Raisio
LL.M.
Lawyer, City of Naantali
Turku Cooperative Society
Retiring in 2007
Juha Vuorenhela (born 1944)
Pori
LL.M.
Juha Vuorenhela Ky, Law Office
Satakunta Cooperative Society
Member of the Supervisory Board 24 April 2004–
Retiring in 2006
PERSONNEL
REPRESENTATIVES
Tapani Tikkala (born 1947)
Helsinki
Project Manager, SOK Member Services
Retiring in 2005
Annikki Heikkinen (born 1942)
Helsinki
Secretary, SOK Real Estate Maintenance
Retiring in 2005
Ulla-Maija Tolonen (born 1951)
Tampere
B.Sc. (Econ.)
Managing Director,
Pirkanmaa Cooperative Society
2002–31 December 2004
Eeva Ukkola (born 1941)
Anjalankoski
Farmer
Cooperative Society Ympäristö
2001–24 April 2004
Hanna Valtari (born 1948)
Seinäjoki
Training Director,
Seinäjoki Vocational Training Institution
Southern Ostrobothnia Cooperative
Society
2001–24 April 2004
33
SOK Executive Board 2004–2005
Kari Neilimo (born 1944)
Chief Executive Officer as
from 1 August 2002
D.Sc. (Econ.)
University of Tampere
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 SOK’s
Supervisory Board,
1991–2002
In the S Group 1988–
34
Esko Hakala (born 1952)
Managing Director,
Cooperative Society
Maakunta
Member of the
Executive Board 2003–
Arto Hiltunen (born 1958)
M.Sc. (Econ.)
Managing Director, Helsinki
Cooperative Society Elanto
Board 2000–2001, 2003–
Kalle Lähdesmäki (born 1952)
M.Sc. (Econ.)
Senior Vice President
SOK Field Division 2003–2004
Board 2001–2004
In the S Group 1975–2004
Kuisma Niemelä (born 1958)
M.A.
Managing Director, Cooperative
Society Keskimaa Osk
Board 2002–
Veli-Matti Puutio (born 1961)
MBA
Managing Director, Cooperative
Society Arina
Board 2004–
Jukka Salminen (born 1947),
M.Sc. (Econ.)
Titular Commercial
Counsellor
Executive Vice President,
SOK Administrative
Division 1993–
Board 1988–
Eero Saukkonen (born 1947)
M.Sc. (Econ.)
Managing Director,
Cooperative Society PeeÄssä
Board 2002–2004
Ulla-Maija Tolonen (born 1951)
B.Sc. (Econ.)
Managing Director, Pirkanmaa
Cooperative Society
Board 2005–
SOK Management Team 2004
Kari Neilimo ((born 1944)
Chairman and CEO
D.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–,
chairman 2005–
University of Tampere,
member of the University
Governing Board 2004–
Taavi Heikkilä (born 1962)
Senior Vice President,
SOK Strategic and Business
Development Division
M.Sc. (Econ.)
Team 2000–31 May 2004
Ensio Hytönen (born 1952)
Managing Director,
Hankkija-Maatalous Oy
Licentiate in Agriculture and
Forestry
Team 2003–
Reijo Kaltea (born 1946)
SOK Customer-ownership
and Specialty Store Division
B.Sc. (Econ.)
Team 2002–
Suso Kolesnik (born 1961)
SOK Communications and
Publications
M.Soc.Sc
Member of the
Management Team 2003–
Kalle Lähdesmäki (born 1952)
SOK Field Division
M.Sc. (Econ.)
Member of SOK’s Executive
Board 2001–2004
Team 2003–2004
Harri Miettinen (born 1962)
SOK Strategic Development
and Human Resources
M.Sc. (Econ.)
Team from 1st June 2004–
Matti Pulkki (born 1947)
SOK Hotel and Restaurant
Division
B.Sc. (Econ.), MBA
Team 2002–
Jukka Salminen (born 1947)
Executive Vice President,
SOK Administrative Division
M.Sc. (Econ.)
Titular Commercial
Counsellor
Member of SOK’s
Executive Board 1988–
Member of the
Management Team 1998
Deputy CEO
Antti Sippola (born 1955)
SOK Market Chain
Management
M.Sc. (Econ.)
Team 2003–
Heikki Strandén (born
1954)
SOK ABC Chain
Management
Team 2003–
Aino Toikka (born 1947)
SOK Human Resources
and Training
M.A.
Team 1998–31 August 2004
35
Accountability
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 based on the Group’s business idea,
vision and values. 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 human resources and the S Group’s common ways of
working.
The S Group’s development and Human Resources functions
were combined in September 2004. The objective of the new
organisational model is to heighten and more actively apply the
link between the strategic development and management of the
S Group and Human Resources functions. The new organisation
will make it possible to apply in practice the S Group’s strategies more flexibly than ever through each individual S Group
employee.
SOK Corporation’s personnel
In all, 5,065 people (including absentees) were in the employ of
SOK Corporation at the end of 2004. Of the staff working in
Finland, 141 were on family leave, 30 on study leave and 91 were
on extended sick leave of more than 3 days.
Permanently employed personnel remained at the same level as
the previous year (93%). Full-time staff represented the majority of
all employment contracts (74%). Women in SOK Corporation accounted for over half the personnel (59%). The average age of 39
years was the same as in the previous year. Employees in the hotel
and restaurant business comprised the largest personnel group.
Organisation of the HR function
The principles of the chain management model are applied to organising personnel matters. The S Group’s HR functions are guided and overseen by an HR Board and Steering Group, which are
SOK CORPORATION’S PERSONNEL PER BUSINESS UNIT
36
made up of representatives from the regional cooperative societies
and SOK Corporation. The actual steering unit for HR processes
is SOK’s Human Resources Administration and Development
Unit. The objective of the Chain Management Unit is to speed up
and make the work of the people who handle HR matters at the
local level more effective by making joint tools and operational
models available to them. The SOKTA association is the S Group
employers’ organisation, which acts on labour market issues.
Well-being
One of the S Group’s overriding objectives concerning personnel
is to foster and sustain well-being at work. Workplace healthcare
across the S Group is arranged primarily by means of its own
occupational health units and units operated jointly by Group
companies. In addition to Job Verve activities that serve a preventative purpose and develop job well-being, activities comprise
general practitioner-level medical treatment and treatment with an
occupational healthcare emphasis.
SOK’s Helsinki occupational healthcare reached its 80th year in
the autumn 2004. Over the years, the emphasis has shifted from
treating accidents and illnesses and preventative care to fostering
and sustaining health and occupational well-being.
Job Verve activities in the workplace are developed and supported in co-operation with HR functions and the Jollas Institute. Created as a result of co-operation, the coaching programme which
started in 2000 attained a new wave of development in 2004 in
the form of two seminars and a Job Verve Diploma competition
as well as through articles in internal media. Along with these, a
profusion of different new activities got under way in the units.
When gauging job satisfaction, SOK Corporation uses the
Group-wide “Good S Group Workplace” questionnaire. Results
are divided into four subcategories: SOK Corporation as an
employer; goal-orientation in the workplace; supervisor work; personal development and learning. The results of personnel surveys
are part of the S Group’s Balanced Scorecard.
DISTRIBUTION OF MALE AND FEMALE EMPLOYEES
Accountability
Corporate security
The goal of corporate security within the SOK Corporation is to
support the unhindered continuity of the Corporation’s central
operations and processes by using corporate security 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, with
the assistance of preventive and cost-effective security work.
A decision was made in 2004 to implement the control of
corporate security at S Group level in line with the chain operations model. The S Group’s corporate security policy as well as
the model for managing corporate security steer SOK’s corporate
security activities. SOK’s Corporate Security unit develops and
defines the principles, rules of the game and objectives of corporate
security activities as well as supports, manages and monitors their
application and implementation within the S Group.
Key development projects in the area of security management
were the development of management readiness in crisis situations,
the identification and prioritisation of the S Group’s principal risks
of loss, the development of the S Group’s corporate security data
system, the development of benchmarking activities and agreeing
on a comparison of the level of security activities between Rezidor
SAS and Sokotel Oy. The safety management audit in the security
partnership agreement with the City of Helsinki Rescue Department was carried out from the perspective of rescue operations.
The annual field exercise of SOK’s Crisis Management organisation was organised in co-operation with Cooperative Society
Hämeenmaa. The theme of the exercise was an accident in a
service station store. As part of risk management, a considerable
number of security audits commissioned by the Corporate Security unit and the Tapiola insurance company were carried out at
the regional cooperative societies and SOK’s subsidiaries and units
as well as in planning new business operations.
Personal security within the S Group was augmented through
security coaching which was implemented as part of the training
and store opening courses arranged by the Jollas Institute. Security
training was modulised and broadened to include long new coaching programmes, thereby raising the coverage of security training
to 65 per cent. The Corporate Security unit’s personnel arranged
security training totalling 292 hours for S Group staff. Moreover,
staff within the organisation used their initiative to arrange additional security courses. A total of 1,210 students completed the
E-jollas online induction security module.
Anti-crime security was developed through continuing inspections of safety levels at locations as part of the Safety-Protected
campaign being run by the Federation of Finnish Commerce and
Trade. The growth target of 20 per cent over the previous year
was achieved and towards the end of the year, 252 locations had
been approved. The security of property and business premises
was developed by updating the S Group’s technical and structural
internal control standards for security.
Within rescue operations, safety plan models were updated into
rescue plans in compliance with the requirements set by the new
Rescue Act and Decree on rescue operations. Training in manual
fire extinguishing and first aid as well as evacuation exercises were
arranged at the locations.
Within data security, the emphasis was on developing data
systems. Mapping out data systems and determining critical
classification requirements as well as starting classification and
assessing threats were set as particular priorities. Workstation
operating systems and anti-virus software were updated and junk
mail filtering was implemented. User and user rights management
were developed. The Public Key Infrastructure (PKI), which facilitates confirmed user identification, was introduced and it is being
implemented in stages. With respect to risk management, a data
security audit was carried out at AS Prisma Peremarket in Tallinn
in order to identify and prevent primary data risks.
To promote occupational safety, a Safety Passport course aimed
at S Group personnel was modelled in order to maintain and
develop a safe working environment. The Safety Passport courses
are conducted in collaboration between the Finnish Red Cross, the
LENGTH OF EMPLOYMENT
(permanent employees in Finland)
PERMANENT EMPLOYEES / TEMPORARY EMPLOYEES
37
Accountability
Jollas Institute, the Corporate Security unit and the fire and police
authorities.
Operational security was developed by updating the safety
instructions for personnel within the S Group as well as through
furthering the continuity planning of the S Group’s core business
operations that are located in the Ässäkeskus (SOK’s Headquarters) by mapping out the processes, data systems and people essential to business operations. Across the ABC chain, an extensive
development project into the safety of service and petrol station
forecourts was carried out in co-operation with VTT - Technical
Research Centre of Finland.
The security work of functions abroad moved ahead with the
modelling of crisis management activities at the Sokos Hotel Viru
and by conducting annual crisis management exercises as well as
security management audits in operating companies.
Environmental safety was developed by inspecting the protection systems for environmentally hazardous substances as part of
the safety audits carried out at locations of the ABC chain, Hankkija-Maatalous Oy and Automaa Oy.
in co-operation with SOK’s chain-managed stores and customer
companies. The Institute also arranges apprenticeship-training
courses which lead to professional and vocational qualifications.
In 2004 the Jollas Institute racked up 1,200 training days, which
were attended by more than 16,000 students.
The aim of the For You, Our Customer/On-the-Ball in 2004
training programme, which started in autumn 2004 and is aimed
widely at S Group personnel, is to support supervisors in running
efficient operations and in service quality management. New training programmes included courses for financial management and
HR professionals, service coaching for the Sokos chain and courses
related to the communications strategy of the S Group.
Among the aims of the refurbishment of the Jollas Institute in
2004 was to make the premises easily modifiable and to improve
the technology, so as to make the institute better able to cope with
the demands of modern day training and learning.
Electronic tools to support HR functions were further developed, and study of a new key development project for the HR
system got under way during 2004. In addition, HR competence
profiles were outlined during the year with the aim of identifying
the development needs of the HR staff.
Training and development
The competence of personnel within the S Group is ensured
through continual development and training. Challenging but
clear-cut goals have been set to assist staff maintain their motivation.
S Group training and coaching activities within the S Group are
centred at the Jollas Institute where SOK Corporation staff receive
the bulk of their training. Training activities continued at a vigorous pace throughout 2004. The Jollas Institute is a special vocational institute that provides training for all personnel groups and
chains across the S Group. The goal of its activities is to augment
competence, which supports the fulfilment of business strategies.
The priorities are the development of supervisors’ capabilities,
strengthening operations in line with our core concepts and the
implantation of best practices. Training programmes are planned
Employer image and recruitment
Employer image has been determined as one benchmark for
fulfilling the S Group-wide HR strategy; it is monitored by, for
example, Universum and employer image studies.
The Universum study measures college and university students’
perceptions of employers.
According to the results of the 2004 study, the S Group’s
strengths included success in business, financial soundness, a
strong corporate culture and a reputation as a solid employer. As
an employer, the S Group was considered to offer a variety of challenging tasks and good internal prospects for development.
A study was conducted during 2003–2004 in 11 regional cooperative societies in order to determine the external employer image
DISTRIBUTION OF EMPLOYEES PER BUSINESS UNIT
FULL TIME EMPLOYEES / PART TIME EMPLOYEES
38
Accountability
profile. By and large, the survey showed that regional cooperative
societies were considered reliable, fair and approachable and as
having a good working atmosphere and good working conditions.
SOK’s Human Resources Administration and Development
unit recruited two field training groups in collaboration with the
regional cooperative societies. Twelve trainees, four of whom work
for SOK Corporation, were recruited for the university-level commercial field training group that started out in February. Fifteen
trainees were recruited for the vocational polytechnic group
launched in June. Field training groups are used to ensure a supply
of key employees and the necessary supervisor and expert skills in
the S Group’s different business areas and localities.
The sound development in our ABC business operations is also
witnessed by the widening range of courses at the Jollas Institute
for staff in the service station store business. The S Group aims
to step up the utilisation of technology through new courses in
systems and the further development of online learning.
Within corporate safety, particular emphasis will be placed next
year on the development of a comprehensive risk management
model as well as on planning risk management measures.
Compensation and incentives
Bonus schemes were extended to apply to all staff across SOK Corporation. The objective of bonus schemes is to support the implementation of operational plans, whilst encouraging and rewarding
staff for good performance and developing their competence.
Furthermore, SOK Corporation paid profit-related and incentive bonuses based on operations in 2004 amounting to EUR
4,614,504.
Outlook for the future
The continued development of an HR chain management
operational model, which includes clarifying HR processes and
responsibilities, will be one of the priority areas within HR functions in 2005. The project for the HR system will find concrete
expression through a pilot study. In the coming year, a development project on the theme of reward practices will also get under
way and models of co-operation with colleges and universities will
be studied. The operational model for appraisal discussions will be
standardised and ever-greater emphasis will be placed on the quality of the matters discussed. The competence of HR professionals
will be developed on the basis of competence profiles.
TURNOVER (permanent employees in Finland)
NUMBER OF ACCIDENTS (in Finland)
39
40
Accountability
Environment
Fundamentals
The S Group’s development work and reporting on environmental
compliance broadened in 2004 to embrace development work and
reporting on indicators of the economic and social aspects of social
accountability in addition to environmental responsibility.
This report focuses on SOK Corporation’s development work in
environmental compliance in 2004.
Environmental management
The most important aspect of environmental management is to
put into practice the S Group’s environmental policy. The main
principles of environmental policy are continuous improvement together with maintenance and development of the staff’s
environmental knowledge. The overriding objective is to develop
the S Group’s operations according to the principles of sustainable
development.
Within the S Group, attending to environmental compliance
and implementing environmental policy in the field is the responsibility of both the units of SOK Corporation and the cooperative
societies. SOK’s Strategic and Business Development Division
and the Human Resources function are responsible for making
environmental policy an integral part of the day-to-day operations
of the various business units.
Environmental policy has been distilled into quidelines enabling
each unit to set clear-cut goals and objectives. To achieve the environmental objectives, schedules have been provided, including the
designated responsible persons and the measures that have been
decided. This systematic operating model integrates environmental
compliance into the daily decision-making process.
Indicators and comparative data are indispensable as the basis
of decision-making; consequently, the S Group has drawn up
standardised environmental indicators in order to report on
environmental actions in the field. The use of indicators is a step
along the path towards environmental auditing, which is a system
of producing environmental data for measuring the company’s
environmental impacts. In 2004 development work on environmental auditing at S Group level concentrated on the introduction
of indicators of environmental responsibility and the 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, seminars,
communications, reporting, pilot projects and co-operation with
the authorities. Training in environmental compliance has been
carried out in co-operation between the Jollas Institute and the S
Group’s units. At the Jollas Institute, environmental compliance
has been included in store opening training, management training
days, commercial field training and vocational degrees in sales and
service station store sales. The main emphasis in 2004 was on store
opening training for service station stores in the strongly growing
ABC chain.
In addition, the units have carried out their own internal training
by means such as co-operating with goods suppliers and other
interest groups. Environmental compliance has been marketed 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 have also served
as important sources of information. The “Good Administrative
Practices within Co-ops”, a manual for administrative staff, was
updated in 2004 to include a review of such matters as environmental responsibility and indicators.
Real estate
SOK’s Real-Estate Management is actively involved in pioneering
programmes in the property and construction field. The ProGresS
environmental programme worked out definitions for sectoral and
company-specific indicators for existing properties. The PromisE
system, which is used for classifying and comparing the environmental characteristics of properties, has been in pilot use since
2002. SOK’s Real-Estate Management has taken part in the work
of the Project Steering Group as an expert in the area of retail
properties.
The S Group has adopted life cycle targets for developer construction that serve as a design tool in developer building. The
targets are defined for the construction site, the building and the
construction process. In 2004 the life cycle objectives were central
in constructing service station stores in the ABC chain.
The REM project on the theme of eco-efficiency and life cycle
benchmarks for the construction and property field and headed by
the Confederation of Finnish Construction Industries drew to an
close in autumn 2004. Construction will get under way in 2005
on the pilot project, Suur-Seutu Cooperative Society SSO’s Prisma
hypermarket, which is to be built in the centre of Lohja.
The energy efficiency of the Viitasaari ABC service station store
that opened in December 2004 is a breakthrough in Finnish commercial building. The service station store runs almost entirely on
renewable energy. Cooperative Society Keskimaa pulled off the
environmental technology solutions for the multi-service centre
in co-operation with the University of Jyväskylä, the City of Viitasaari and the Ministry of Trade and Industry.
SOK is taking part in the TISSUE project for monitoring the
sustainable development of the urban environment, which draws
up the benchmarks of sustainable development for locations such
as retail premises.
Energy and water consumption
SOK Real Estate is a party to the voluntary energy conservation
agreement of the property and construction industry (KRESS).
Using energy more efficiently has made it possible to cut energy
costs and reduce environmental loading substantially.
Extending joint electricity procurement or bulk electricity for
the entire retail group calls for the monitoring of consumption
readings at individual sites. In 2004 a study was made of the feasibility of centrally providing information on electricity consumption directly from the S Group’s locations. Providing electricity
consumption information on a centralised basis will serve not only
joint procurement objectives but also the use and maintenance
of real estate, accountability reporting and especially some of the
41
Accountability
mandatory requirements of the energy efficiency directive which
will come into force in 2006. SOK, SOK’s subsidiaries in Finland
and Cooperative Society Varuboden used bulk electricity in 2004.
SOK’s Real-Estate Management is taking part in the RET
project on auditing eco-efficiency in buildings, which sets minimum requirements for the construction of new buildings and
renovations. Auditing alternatives are a means to facilitate assessing
the energy efficiency of alternative plans.
Sourcing and logistics
Over half of the daily consumer goods sold by the S Group’s
chains are transported to the stores by means of the sourcing, storage 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. Co-operation in
environmental compliance and the provision of information were
stepped up in 2004 from the perspective of Inex Partners’ revised
operational models.
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. Intrade Partners Oy
is responsible for ensuring that sourced goods and the information provided on them comply with environmental legislation and
requirements.
In 2004 Intrade Partners Oy became a member of the Business
Social Compliance Initiative (BSCI) co-operation model that seeks
to streamline and standardise monitoring of the working conditions of goods suppliers.
Environmental labelling and Fair Trade
products in product ranges
Environmentally labelled and organic products have consolidated
their position in the assortments. At the end of 2004, the product
range of the nationwide chains featured about 500 organic products. Product sourcing from local organic producers by regional
cooperative societies serves to further boost the volume of organic
products offered. SOK and HOK-Elanto from the S Group participated in the Organic Products research project funded by the
Ministry of Agriculture and Forestry, which was launched towards
the end of 2004.
Environmentally labelled non-food consumer goods comprise
products marked with the Nordic Swan, the EU flower and the
FSC Forest Certificate. In 2004 approximately 650 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 become common practice for
building materials to display the relevant environmental specifications.
Fair Trade products have been available on the markets for over
five years. The best-known criterion of a Fair Trade product is the
prohibition against using child labour. There are also stringent
42
environmental criteria for products bearing the Fair Trade mark.
The use of pesticides must be kept to a minimum, and water
systems and the soil are to be protected in accordance with strict
regulations. Some Fair trade products also meet the criteria set
for organic products, for which farmers are paid more. Market
stores stock Fair Trade 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 one of the leading retailers of Fair Trade products
in Finland.
Waste management
Wastes generated by the retail sector primarily comprise packaging
waste, which falls within the sphere of responsibility of the manufacturer. Packaging wastes have been prevented from arising and
their amount has been reduced by means such as developing and
placing in use reusable transport conveyances. Packaging wastes are
consigned for recycling or other types of reuse whenever possible.
Well-run waste management entails reducing the amount of waste
destined for landfills to under 10 per cent of the entire volume of
waste generated. The sorting of wastes generated by the grocery
sector focuses on four main types: biowaste, cardboard, energy
waste and landfill waste. The best utilisation rate has been achieved
with corrugated cardboard, which accounts for approximately 35
weight per cent of the overall volume of wastes generated by the
Prisma hypermarkets and S Markets.
At the Mylly Shopping Centre that was opened in Raisio in
October 2001, a pilot project was run to explore a new type of
centralised waste management system in which all waste management services are purchased from a single operator. Based on the
experiences at Mylly, the new operational model spread in 2003
to about 60 of Cooperative Society Arina’s outlets and in 2004, to
over 100 of Hankkija-Maatalous Oy’s Agrimarkets and to around
60 of Suur-Seutu Cooperative Society SSO’s locations.
New technology has also been adopted at the Arabia Shopping
Centre in Helsinki where the collection of weight and code data
on wastes is based on the use of bar codes. Due to the new system
at S Market Arabia, it is now possible to accurately monitor developments in waste volumes and costs.
A centralised process of setting out products for sale is another
way of preventing wastes from arising, reducing waste volumes
and stepping up the rate of utilisation. In the Greater Helsinki
area, setting out consumer goods for sale has been handled at Inex
Partners Oy’s logistics centre in Hakkila, Vantaa.
A Government Decree on End-of-life Vehicles came into force
in autumn 2004 as part of waste disposal legislation. During
2004 the S Group’s different business areas prepared to assess the
impacts from the obligations arising from the Animal By-products
regulation and the decision concerning waste from electrical and
electronics equipment.
Recycling services for customers
The best-known recycling service for customers is the bottle and
can recycling system. Collection is mainly handled using automated bottle and can collection machines. Over 95 per cent of
glass and plastic deposit bottles are returned, while over 90 per
cent of aluminium cans are returned. The recovery of waste from
Accountability
electrical and electronic equipment will become mandatory in
August 2005. Within SOK Corporation, Hankkija-Maatalous Oy
and Maan Auto Oy have entered into an agreement with Finnish
Tyre Recycling Ltd. Used tyre recycling is funded by way of a recycling charge that is collected when the customer buys new tyres.
Furthermore, in 2004 Maan Auto Oy entered into an agreement
with Finnish Car Recycling Ltd concerning the application of the
EU Directive on End-of-life Vehicles.
Communications
Environmental information targeted at interest groups has been
disseminated through the S Group’s accountability report, the
environmental pages of the Annual Report and the S Group’s website. The option for ordering the report via the Internet has proved
to be very popular.
Environmental information has been provided to households
through the Yhteishyvä magazine. The regional cooperatives have
disseminated information using brochures, ecological experts,
bulletin boards and various events such as S Bonus Card cruises.
The internal communications tools of the S Group are the Ässä
magazine and the S Intranet.
Interest groups
SOK has continued actively to contribute to dialogue relating
to international environmental co-operation within Euro Coop’s
Environmental Working Group. Central themes have been the
EU’s sustainable development strategy, the recycling of waste from
electrical and electronic equipment, issues relating to environmental labelling. the utilisation of packaging, as well as 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 the Logistics and Purchasing
Division of the Finnish Food Marketing Association. SOK has also
been represented in the following working groups: the Ministry of
the Environment’s Waste Management Committee; the Ministry of the Environment’s Waste Management Practices Working
Group, which establishes the rules of the game; the environmental
management system working group of the Ministry of Agriculture
and Forestry’s foodstuffs quality strategy group; the Ministry of
Trade and Industry’s environmental labelling steering group and
the project management group of the Recycling Technologies and
Waste Management Project (Streams) initiated by TEKES, the
National Technology Agency of Finland.
The S Group’s Social Accountability Report is available at
www.s-kanava.net
Sponsorship and international contacts
Sponsorship
Sponsorship and co-operation with interest groups are carried on
according to uniform guidelines throughout SOK Corporation
and the S Group. Ground rules ensure that sponsorship investments are made in line with objectives and that they are allocated
to targets that in one way or another touch on the life of each and
every member.
The priorities of SOK’s sponsorship have shifted in recent years.
The traditionally considerable investments in top sports are on
the decrease and allocations for sponsored events that represent
more varied fields of high culture have been diversified. Across the
S Group, the emphasis is increasingly going over to supporting
activities for children and young people.
SOK Corporation’s sponsorship co-operation work during 2004
was given a strong emphasis on social responsibility. The major
agreements concluded with the Finnish Red Cross and the Mannerheim League for Child Welfare serve as good illustrations of the
new sponsorship policies. Co-operation also continued with Pori
Jazz, Svenska Teatern, Art Centre Salmela, Neste Rally Finland,
Circus Finlandia and the Finnish Freestyle national team. The S
Group’s financial support made it possible for 18 freestyle schools
in different parts of Finland to operate all winter long. Co-operation with the Finnish National Opera reached conclusion and the
Helsinki Festival and the Raumanmeri Midsummer Festival came
on board as new partners in co-operation.
In addition to focused Group-wide activities, regional cooperative societies have actively engaged in co-operation with local
organisations, associations and events.
National partners – the Finnish Red Cross and
the Mannerheim League for Child Welfare
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 societies 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,
the regional cooperative societies, grocery markets and department
stores, hotels and restaurants, service station stores, car dealerships
and hardware and agricultural outlets. Through the 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 co-operation agreement between the Red Cross and the
S Group is in force during 2003–2005. The S Group supports the
Red Cross in drumming up membership 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 wide local co-operation between
Red Cross districts and local branches and the S Group’s regional
cooperative societies.
43
Accountability
The S Group’s nationwide co-operation with the Mannerheim
League for Child Welfare got under way in 2000. Prior to this, the
regional cooperative societies 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 an
Internet service to support parents and for arranging regional
“Parents Together” events.
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.
ICA has 236 member societies in over 100 countries and the
member societies have a total membership of over 760 million.
It is the world’s second largest such body immediately after the
United Nations. The consumer cooperative businesses of 15 European countries are members of Euro Coop. Euro Coop represents
a total of more than 3,200 cooperative societies and their 21 million members.
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. Euro Coop’s working groups, who
act 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 the EU level to ensure the
interests of consumers and consumer cooperatives are taken into
due consideration and safeguarded from as early as when new
legislation is being drafted.
Euro Coop has EU status, and its prestige as a body that issues
statements and exercises influence in Brussels is growing strongly.
Anne Santamäki, SOK’s director for contacts with organisations,
is the vice chairman of both ICA Europe and Euro Coop.
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 business
idea, values and vision of the S Group, and 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.
SOKL is the S Group’s representative in international cooperative activities, especially in the International Cooperative Alliance
(ICA) and Euro Coop.
SOK’s Field Consulting unit is responsible for the practical
activities of SOKL. The Union has no clerical staff of its own. The
44
members of the Union, as in prior years, are all of the S Group’s
cooperative societies and SOK. SOKL’s Executive Board in 2004
comprised representatives of regional cooperatives with Jukka
Huiskonen, LL.M., Senior Judge, as chairman; Tytti IsohookanaAsunmaa, lecturer, vice chairman (until 24 April); Raili Palmi, office manager, vice chairman (as from 4 May); and members Tuula
Entelä, Business Area Director (until 24 April), Ulla Karvo, LL.M.
(as from 24 April), Pekka Kangasmäki, Managing Director, Simo
Kutinlahti, farmer, Professor Kauko Mikkonen, Leena Pelkonen,
Chief Financial Officer (as from 24 April) Håkan Smeds, Titular
Commercial Counsellor (until 24 April), Heikki Taimi, Municipal
Manager (until 24 April), Hanna Valtari, Training Director, (as
from 24 April), Juha Vuorenhela, LL.M., as well as SOK representatives Taavi Heikkilä, Senior Vice President, SOK Strategic and
Business Development Division (until 24 April), Jorma Koistinen,
Director of Field Management and Cooperative Relations (as from
24 April) and Kari Neilimo, Chairman and CEO.
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, Managing Director, and Professor Kauko
Mikkonen serve on the Advisory Board as representatives of the
S Group.
45
Financial Statements
Executive Board Report on Operations
Retail operating environment in 2004
The growth in the world economy was just under five per cent in
2004. Though growth picked up towards the end of 2003, it has
evened out since spring 2004. Region by region, growth has been
spotty. It has been brisk in the United States, China and Russia as
well. This robustness has been offset by the weakening in economic
growth in the eurozone and Japan over last summer and the autumn. The appreciation of the euro against the United States dollar
weakened the outlook for the eurozone export industry. The high
price of oil exerted a drag on growth in the latter part of the year.
The growth in Finland’s gross domestic product strengthened
during 2004. The value of total output in January-October increased by 3.2 per cent on the previous year. The full-year growth
of just over three per cent was quite good compared with the EU
area as a whole, where growth is likely to come in below 2.5 per
cent. In Finland, however, there was no customary export-led
upswing, accompanied by both an increase in export volumes and
rising export prices and thus spurring industrial capital spending.
Finland’s export growth was modest compared with the trend in
world trade in both value and volume terms. Growth was supported by electronics manufacturing, housing investments and
private consumption. Household consumption has bolstered and
lifted the national economy’s output.
Consumer confidence has held up at a good level and has been
clearly better than overall confidence in the Finnish economy’s
growth prospects. The slight rise in employment that got under
way in the latter part of the year strengthened consumer confidence markedly. Industry and the services are fairly confident
about the future, and their outlook is considerably more upbeat
than a year ago.
The average rate of inflation in 2004 was only 0.2 per cent. The
biggest factor keeping the rise in consumer prices in check was
the decrease in the alcohol tax, which came into effect in March.
The lowering of telephone charges also reduced inflation. Higher
fuel prices raised consumer prices the most. Inflation was also
affected by the rising costs of cultural and leisure services, rents
and housing. The slight rise in the price level has contributed to an
increase in consumers’ purchasing power. The rise in households’
real income is estimated to have been more than five per cent last
year. Low inflation in the eurozone coupled with modest economic
growth have kept interest rates at a low level. Households’ smaller
interest expenses have raised disposable income by nearly 0.3
percentage point.
The growth in private consumption remained at a good level
in 2004. The breakdown of goods consumption became more
balanced as the effects of tax changes leading to robust care sales
died down. Over the whole year, the increase in sales of consumer
durables is estimated at 4 per cent compared with the value of sales
a year earlier. Sales of semidurables and short-lived goods grew by
4.5 and 3.5 per cent, respectively, whereas the growth in services
was only two and a half per cent.
The value of retail sales, excluding the motor trade, grew by 4.2
per cent by the end of November, according to Statistics Finland.
Vehicle sales were up 7.3 per cent. In the motor trade, registrations
of new cars were nevertheless down 3.2 per cent. The growth in
46
sales of home appliances and furniture was at around 9 per cent by
the end of October. The hardware trade reported growth of 7.3 per
cent. The increase in sales in the department store trade was 4.8
per cent by the end of November. According to the Finnish Food
Marketing Association, retail sales by its member companies in
2004 grew by 0.3 per cent, and Statistics Finland reported that according to retail statistics, grocery sales grew by 1.7 per cent by the
end of November. The change in the taxation of alcoholic beverages and keener competition depressed the level of grocery prices.
The agritrade in Finland grew somewhat in value terms and
was about EUR 1.9 billion. Trade in the production inputs used
on farms remained largely unchanged. Total unit sales of tractors
declined by 5 per cent, though agricultural work machine volumes
remained at least at the previous year’s level. Finland’s grain harvest
of 3.6 billion kilograms was about 5 per cent smaller than the
harvest a year earlier. Owing to the rainy summer, there were a lot
of quality problems with the grain harvest.
Guests at Finland’s hotels, motels and inns stayed the night 12.4
million times by the end of November. The number of overnight
stays was two per cent higher than a year ago. The hotel occupancy
ratio rose slightly and was 48.4 per cent. Restaurant sales were
down a bit compared with the previous year.
Changes in the Group structure
Changes during the report period
In a transaction concluded at the beginning of 2004, the Porin
Sokos Oy business was sold to Satakunta Cooperative Society and
the Sokos Hotel Vaasan Vaakuna business that was carried on by
Sokotel Oy was sold to Cooperative Society KPO. Netista.com,
an online portal for consumer goods, was wound up at the turn
of March-April and online sales will be carried on as part of the
operations of each business area.
With the entry into force of the new Block Exemption, Automobiles Peugeot stipulated that the importation and retail sales of
Peugeot vehicles in all European Union member states be carried
on through separate companies. During 2004 the dealership operations of Maan Auto Oy, Estonia-based AS Kommest Auto and
Latvia-based A/S Lauva Auto were transferred to subsidiaries that
were established by the companies for this purpose.
SOK and HOK-Elanto engaged in mutual transactions that
also involved sales of properties and business premises. At the end
of March, HOK-Elanto purchased the business premises of the
Prisma hypermarkets in Malmi and Tikkurila from SOK. The
business operations of the Sokos department store in the centre
of Helsinki and of the Emotion store in Järvenpää were sold to
HOK-Elanto at the beginning of May.
The objective of SOK’s subsidiary Uudenmaan ABC Oy is to
develop a comprehensive network of ABC service station stores in
the Greater Helsinki area. In June the company opened an ABC
unmanned station in the Nihtisilta district of Espoo and in November ABC service station stores were opened in Järvenpää and
in Helsinki’s Tuomarinkylä district. In November SOK established
two property companies that own the Järvenpää and Tuomarinkylä
properties. Uudenmaan ABC Oy will continue developing its
network of locations in 2005 by opening new ABC service station
stores.
SOK has decided to focus its operations in the Baltic countries
on grocery sales, the hotel business and the motor trade. In the
early part of 2005, SOK’s subsidiary AS Prisma Peremarket will
purchase the Tallinn-based Prisma Rocca al Mare business from
ETK, a local company. In addition, the company has made an
agreement on building a fifth Prisma in Tallinn’s Lasnamäe district.
The unit will open its doors in time for the Christmas market in
2005. In the farm goods sector, the shares in Agribalt AS Viro and
SIA Agribalt Latvia were sold to AS Mecro of Estonia in November.
The ZAO Kom-Motors retail vehicle business in St. Petersburg
was divested in October when AS Kommest Auto sold the shares
to OÜ Baltic Business Associates.
At the end of August, Porin Sokos Oy and Netista Oy as well
as four property companies merged into SOK. The operations of
these companies have been wound up.
In November, SOK purchased the entire shares outstanding in
Olarin Autokiinteistö Oy from Oy Realinvest Ab. Automaa Oy
operates a car dealership in the premises. In December, SOK sold
all the shares in the property company Chydenia Center Oy to
the construction companies Kokkolan NSA-Rakennus Oy and
Forsström Rakennus Oy.
SOK’s Sokotel Oy subsidiary discontinued the Sokos Hotel
Klaus Kurki business at the end of 2004 when the lease agreement
on the property expired.
Changes after the close of the report period
In a deal made at the beginning of the year, the Tampereen Sokos
Oy business was sold to Pirkanmaa Cooperative Society. In the
same connection, SOK sold the shares in KOy Kauppahalli Piha to
Pirkanmaa Cooperative Society, and KOy Tampereen Valtakulma
sold the property it owned to Sampo Pankki plc, a bank.
In transactions between SOK and HOK-Elanto, SOK’s subsidiary Sokotel Oy sold the Ravintola Memphis and Coffee House
businesses that operate in the Helsingin Sokos property to HOKElanto on 1 January 2005. In the above premises, Sokotel Oy will
continue to run the Sokos Hotel Vaakuna and the Ravintola Loiste
restaurant business. Sokotel Oy in turn purchased the Hotelli
Presidentti business from HOK-Elanto on 1 January 2005.
In a transaction completed in January, SOK sold the shares in
a company that owns the Joensuun Sokos property to Northern
Karelia Cooperative Society.
In January, SOK’s Sokotel Oy subsidiary entered into a preliminary agreement on starting up the Turun Marina Palace Hotel
business in Turku.
SOK has decided to build an Agrimarket centre and an ABC
service station store in Hyvinkää. Hankkija-Maatalous Oy will
transfer its premises from the Vallila district in Helsinki to Hyvinkää. The new centre will start operations in 2006.
Net turnover
SOK Corporation had net turnover of EUR 3,781 million, up
21.5 per cent on the previous year. The bulk of the growth in
turnover is attributable to fuel deliveries by the fuel procurement
company North European Oil Trade Oy to its customers, who are
the cooperative societies and Greeni Oy. SOK’s net turnover does
not include the EDI-based invoicing that was sent via SOK by the
associated company Inex Partners Oy.
Aggregate net turnover generated by the agricultural and hardware trade grew by 7.4 per cent. Hankkija-Maatalous Oy had net
turnover in 2004 of EUR 720.0 million, representing growth of
5.0 per cent on the previous year. The sales trend was favourable
in all product groups, except for the grain trade, where sales were
slightly lower due to the poor year for crops. Sales of fuel, seed,
work machines and hardware products showed an especially good
trend.
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 down 7.0 per cent on the figure a year ago. The drop in net
turnover was attributable to the winding up of the operations of
the Radisson SAS Hesperia hotel towards the end of 2003 and
the sale of Sokos Hotel Vaasan Vaakuna to Cooperative Society
KPO at the beginning of 2004. Like-for-like net turnover grew
by 2.9 per cent. The company’s operational efficiency held steady
at roughly the previous year’s level despite the large investments
that disturbed operations at several Sokos Hotels and Radisson
SAS Hotels. Average prices of the company’s hotel rooms declined
slightly, but this was offset by a rise in the occupancy rate, leading to an increase in the yield per room at the company’s hotels
compared with the previous year and enabling them to exceed the
national averages by a clear margin.
AS Sokotel operated for its first full year at the Sokos Hotelli
Viru in Tallinn in 2004. The company had net turnover of EUR
16.9 million, coming in markedly ahead of the target set. The
good trend in net turnover was attributable to buoyant sales in the
summer, but also to good weather conditions, helping express ferries to run during a clearly longer season in 2004 than a year ago.
Net turnover derived from the Corporation’s motor trade
increased by 4.4 per cent compared with the level in 2003, rising
to EUR 356.0 million. Net turnover generated by the Maan Auto
Group in Finland rose by 10.2 per cent to EUR 294.3 million,
whereas it contracted by 15.9 per cent within the Kommest Auto
Group in the Baltic countries, coming in at EUR 61.7 million.
The market share of Peugeot cars increased from 6.7 per cent to
7.0 per cent, the highest-ever market share for Peugeot in Finland.
The market share of Peugeot vans declined from 4.9 per cent to
4.5 per cent. The market share of Peugeot cars in Estonia dropped
from 12.2 per cent to 8.5 per cent and in Latvia from 8.8 per cent
to 7.2 per cent.
SOK Corporation ran Sokos operations through the companies
which it owns jointly with the regional cooperative societies, these
being located in Tampere, Helsinki, Espoo, Järvenpää as well as in
Turku and Raisio. The business of the Helsinki department store
operated by Helsingin Sokos Oy (currently Tapiolan Sokos Oy)
and its Emotion beauty shop in Järvenpää were sold to HOKElanto on 1 May 2004. The company retained ownership of the
Tapiolan Sokos department store. In addition, a decision was
taken during the year on selling the Tampereen Sokos Oy business
to Pirkanmaa Cooperative Society on 1 January 2005. The companies had net turnover of EUR 97.0 million, down 27.6 per cent
compared with the previous year owing to the disposals of the Pori
and Helsinki department store businesses. On a like-for-like basis,
47
net turnover rose by 7.9 per cent, ahead of budget and better than
the overall trend in the sector.
Financial performance
SOK Corporation’s profit before extraordinary items was EUR
54.4 million, compared with EUR 51.8 million a year earlier. The
figure includes other operating income, a share of the associated
companies’ profits, write-downs on fixed and other 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 listed above, improved on the
previous year’s earnings. SOK Corporation’s return on investment
was 7.2 per cent (6.9 per cent in 2003). The return on investment
within ordinary business operations, stripping out SOK’s support
and service functions, was 19.6 per cent.
Write-downs of EUR 6.2 million were made on non-current
assets and were booked primarily for goodwill and other long-term
expenditure.
SOK Corporation’s net financial income and expenses were in
the black, as in the previous year, but were EUR 4.2 million less
than the figure a year earlier owing to the write-downs on non-current investments.
The agricultural and hardware trade posted operating profit at a
higher level than both the budget and the year-ago figure. Operating profit generated by Sokotel Oy, which is engaged in the hotel
and restaurant business in Finland, fell slightly short of budget but
exceeded the previous year’s level. 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 less-than-12 month financial year. Operating profit from SOK
Corporation’s motor trade as well as the aggregate operating profit
of the Sokos companies were ahead of budget and better than the
figures a year earlier. The property business and other service units
reported operating profit that was above budget but weaker than a
year ago.
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 societies 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 guidance. Its tasks
are to provide the S Group 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 customer-owners a wider spectrum of services in accordance
48
with the decisions taken within the S Group. In addition, in the
Baltic area SOK engages in the grocery and vehicle trade as well as
the hotel business via its subsidiaries.
SOK’s net turnover totalled EUR 2,187 million, increasing by
29.2 per cent on the figure a year earlier. The growth in net turnover was attributable primarily to the increase in EDI invoicing via
SOK. The factors behind the higher EDI volume were the invoicing by North European Oil Trade Oy, which began operations in
February 2004, the higher sales owing to the HOK-Elanto merger
and the transfer of Hankkija-Maatalous Oy’s EDI invoicing,
which is now handled via SOK’s EDI system. SOK’s profit before
extraordinary items was EUR 25 million, compared with the
previous year’s profit of EUR 28 million.
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 53 million
in 2004. The main capital expenditure items were information
system projects for the various functions as well as investments in
the hotel and restaurant business.
By contrast, disposals of non-current assets and businesses
totalled EUR 52 million. The largest disposals were the business
premises in Malmi and Tikkurila as well as the sale of the Helsingin Sokos business to HOK-Elanto.
Financing
Short interest rates in the eurozone remained low all year long.
Longer rates rose during the first half of the year but headed
downward after June, ending at a lower level than a year ago.
Cash flow before financial items according to SOK Corporation’s cash flow statement was EUR 95.8 million in the black.
SOK Corporation’s liquidity remained good throughout 2004.
Liquid cash assets and money market investments totalled EUR
659.1 million at the end of the year. In addition, SOK Corporation had EUR 246.8 million of undrawn binding credit facilities,
of which EUR 164.1 million were long-term.
SOK Corporation’s equity ratio remained good and the net
amount of interest-bearing liabilities and financial assets was EUR
103.8 million in the black, an improvement on the previous year
of EUR 94.9 million.
The SOK Group’s financial income and expenses, not counting
in write-downs on investments held in non-current assets, contributed EUR 3.2 million to earnings, representing an improvement
on the previous year of EUR 0.8 million.
Personnel
The average number of SOK Corporation employees, converted to
full-time staff, was 4,494 during the financial year. SOK Corporation’s number of personnel at the end of 2004 was 4,790 employees, of whom 631 (13.2%) were SOK staff and 4,159 (86.8%)
employees of the subsidiaries. The number of personnel decreased
by 159 from the previous year (minus 3.2%). A total of 877 employees worked at sites abroad at the end of the year.
The number of staff was reduced by the sale of the Porin Sokos
business to Satakunta Cooperative Society on 1 January 2004 as
well as by the sale of the Helsingin Sokos department store business to HOK-Elanto on 1 May 2004. The disposals of the Agribalt
AS Viro and SIA Agribalt Latvia businesses on 1 November 2004
likewise reduced the number of staff from the previous year.
Offsetting this were the increases in personnel due to the transfer of the Oy Motortrans Ab business to SOK Corporation as well
as the opening of the Uudenmaan ABC Oy service station stores
in Tuomarinkylä and Järvenpää in November 2004.
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 2004 were Managing Director Esko Hakala,
Managing Director Arto Hiltunen, Kalle Lähdesmäki, Senior
Vice President, SOK Field Division, Managing Director Kuisma
Niemelä, Managing Director Veli-Matti Puutio, Jukka Salminen,
Executive Vice President, SOK Administrative Division and Managing Director Eero Saukkonen.
The Corporation’s auditors in 2004 were the Authorised Public
Accountants Tomi Englund, Juhani Heiskanen and Tapani RotolaPukkila.
SOK’s Supervisory Board has appointed the following persons
to a one-year term on SOK’s Executive Board beginning on 1
January 2005: CEO Kari Neilimo, Chairman, Managing Director
Esko Hakala, Managing Director Arto Hiltunen, Managing Director Kuisma Niemelä, Managing Director Veli-Matti Puutio, Jukka
Salminen, Executive Vice President, SOK Administrative Division,
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 2004 were Taavi Heikkilä,
Senior Vice President, SOK Strategic and Business Development Division (up to 31 May 2004), Managing Director Ensio
Hytönen, Reijo Kaltea, Senior Vice President, SOK Customerownership and Speciality Stores Division, Suso Kolesnik, Senior
Vice President, SOK Communications and Publications, Kalle
Lähdesmäki, Senior Vice President, SOK Field Division, Harri
Miettinen, Senior Vice President, SOK Strategic Development
and Human Resources (as from 1 June 2004), Matti Pulkki,
Senior Vice President, SOK Hotel and Restaurant Division, Jukka
Salminen, Executive Vice President, SOK Administrative Division,
Antti Sippola, Senior Vice President, SOK Market Chain Management, Heikki Strandén, Senior Vice President, SOK ABC Chain
Management and Aino Toikka, Senior Vice President (up to 31
August 2004).
whereas private consumption is beginning to flag. Major factors of
uncertainty for stable economic growth are still the price of oil and
possible sharp fluctuations in foreign exchange rates. The United
States’ huge current account deficit increases the risk of swings in
foreign exchange rates, which impact the world economy.
The outlook for retail sales growth this year is somewhat lower
than last year. Households’ real income will probably grow more
slowly than in the two previous years. A factor contributing to
slowing down the growth in real income is the estimated rise in
consumer prices of about one and a half per cent. The growth in
private consumption is forecast to come in below three per cent.
Interest rates are forecast to hold steady and at a low level at least
up to autumn of this year. The stable economy and continuing
strong consumer confidence offer a reasonably good basis for a
healthy trend in retail sales.
SOK Corporation is estimated to post a lower operational result
than in 2004.
Net turnover generated by SOK Corporation’s business units is
estimated to outpace the overall growth in the retail trade this year.
The biggest growth expectations are for SOK Corporation’s motor
trade, Baltic operations and the hotel business. Growth expectations for the agritrade are in line with the market trend. Net
turnover derived from SOK Corporation’s department store trade
will fall sharply owing to the sales of business operations that were
carried out within the S Group last year. Despite the prospects for
good growth, SOK Corporation’s business units are estimated to
report slightly lower earnings than in 2004. The main factors affecting the earnings trend are the divestments of department store
businesses and capital expenditures in the Baltic countries.
The volume of the S Group’s chain management and service
operations, for which SOK is responsible, will grow and this
year SOK will continue making strong inputs into development projects aiming at boosting the efficiency of the S Group’s
processes. Investments in systems and new operating models will
weaken the earnings level of the chain management and service
functions in the current year.
Outlook for the current financial year
Finland’s gross domestic product is estimated to grow in 2005
at nearly the same rate as last year. The components of GDP
growth are nevertheless changing, with exports on the increase,
49
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
50
3 781.1
13.1
3 111.5
11.0
3 362.2
2 620.2
88.2
2 708.4
155.1
119.9
29.0
149.0
40.5
65.7
119.5
185.1
1.8
34.2
66.8
119.8
186.6
2.1
53.2
46.4
(8)
-0.0
1.2
-0.0
5.4
54.4
51.8
54.4
51.8
-14.1
-0.1
-16.7
0.2
40.2
35.3
(9)
Profit before taxes
Direct taxes (+/-)
Minority interest (+/-)
125.5
29.6
1.1.–31.12.2003
(1)
Profit before extraordinary items
Extraordinary items (+/-)
3 266.7
95.5
1.1.–31.12.2004
(11)
Consolidated Balance Sheet
31.12.2004
ASSETS EUR million
Ref.
NON-CURRENT ASSETS
Intangible assets
Group goodwill
Tangible assets
Shares in associated companies
Other investments
(12)
(12)
(12)
(13)
(13)
57.8
0.7
272.7
56.0
35.9
(15)
(16)
(17)
(18)
(19)
136.7
3.9
2.9
383.0
573.1
86.1
CURRENT ASSETS
Stocks
Long-term debtors
Deferred tax assets
Short-term debtors
Securities
Cash in hand and at bank
LIABILITIES EUR million
CAPITAL AND RESERVES
Cooperative capital
Supplementary cooperative capital
Revaluation reserve
Legal reserve
Supervisory Board’s disposal fund
Profit brought forward
31.12.2003
423.1
59.7
1.2
302.9
72.5
36.6
472.9
1 185.6
134.8
3.8
4.4
329.0
478.1
25.7
975.8
1 608.8
1 448.7
31.12.2004
31.12.2003
(20)
71.1
16.8
25.4
14.8
0.0
287.7
40.2
MINORITY INTEREST
PROVISIONS
(22)
CREDITORS
Long-term creditors
Deferred tax liability
Short-term creditors
(23)
(24)
(25)
456.0
68.6
14.8
51.5
12.8
0.2
261.4
35.3
17.3
5.6
30.2
9.8
1 089.9
1 129.9
1 608.8
444.6
17.0
9.2
32.0
10.4
935.5
978.0
1 448.7
51
Consolidated Cash Flow Statement
1.1.–31.12.2004
1.1.–31.12.2003
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
53.2
23.2
20.5
96.8
-16.1
17.3
5.1
-6.0
97.0
46.4
21.7
21.3
89.3
-13.9
15.1
3.5
-13.0
81.0
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
-5.2
-47.3
5.4
46.2
-0.9
0.1
-0.5
1.0
-1.2
-1.5
-54.9
6.1
18.4
5.1
0.2
0.4
0.9
-25.3
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
4.0
-0.9
59.2
-0.6
-14.5
0.5
4.5
-6.4
-0.7
45.1
1.5
-39.8
66.5
0.1
-10.0
0.1
5.0
-5.9
-0.4
17.1
Increase (+) / decrease (-) in liquid funds
140.9
72.9
Liquid funds at the beginning of the year
Liquid funds at the end of the year
493.7
634.6
420.9
493.7
-11.4
40.5
-5.9
23.2
-8.6
34.2
-4.0
21.7
-61.5
-9.8
91.8
20.5
-15.2
0.0
36.5
21.3
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
52
SOK CORPORATION NET TURNOVER
2000–2004
PROFIT BEFORE EXTRAORDINARY ITEMS
RETURN ON INVESTMENT %
PERSONNEL AT 31.12.
2000–2004
OPERATING PROFIT
2000–2004
NET INTEREST PAYABLE 2000–2004
(% of net turnover)
GROSS INVESTMENT IN FIXED
ASSETS 2000–2004
INTEREST-BEARING NET LIABILITIES
AT 31.12., 2000–2004
CAPITAL AND RESERVES* AT 31.12.
2000–2004 (equity ratio, %)
GEARING, %
2000–2004
* Excluding capital loan
53
SOK Income Statement
EUR million
Ref.
Net turnover
(1)
(2)
Materials and services
Raw materials and consumables
External services
(3)
2 026.3
42.7
26.4
6.3
1.1.–31.12.2004
1.1.–31.12.2003
2 187.4
4.5
1 693.0
3.8
2 068.9
1 533.6
36.9
1 570.5
32.6
21.9
6.4
28.3
Staff costs
Wages and salaries
Social security costs
(4)
(5)
Rents
Other expenses
(6)
Operating profit (loss)
(1)
-4.3
6.5
Financial income and expenses (+/-)
(8)
29.5
21.3
25.2
27.8
17.7
5.2
42.8
33.0
-2.0
-10.7
-0.5
-10.0
30.2
22.5
Profit before extraordinary items
Extraordinary items (+/-)
(9)
Profit before appropriations and taxes
Appropriations (+/-)
Direct taxes (+/-)
54
(10)
(11)
6.5
54.9
33.1
88.0
4.8
58.1
28.5
86.7
SOK Balance Sheet
31.12.2004
ASSETS EUR million
Ref.
NON-CURRENT ASSETS
Intangible assets
Tangible assets
Shares in Group companies
Other investments
(12)
(12)
(13)
(13)
29.5
9.6
273.4
206.3
(15)
(16)
(18)
(19)
2.5
3.1
312.4
582.9
70.5
CURRENT ASSETS
Stocks
Long-term debtors
Short-term debtors
Securities
Cash in hand and at bank
31.12.2003
518.8
22.4
9.5
256.9
245.4
534.2
971.4
14.1
2.4
258.2
496.6
8.1
779.4
1 490.2
1 313.6
31.12.2004
LIABILITIES EUR million
CAPITAL AND RESERVES
Cooperative capital
Legal reserve
Supervisory Board’s disposal fund
(20)
ACCUMULATED APPROPRIATIONS
PROVISIONS
(21)
(22)
CREDITORS
Long-term creditors
Short-term creditors
(23)
(25)
71.1
16.8
14.8
0.0
317.4
30.2
450.3
31.12.2003
68.6
14.8
12.8
0.2
303.8
22.5
5.3
3.5
6.8
1 024.3
1 031.1
1 490.2
422.7
3.4
6.1
9.6
871.9
881.5
1 313.6
55
SOK Cash Flow Statement
1.1.–31.12.2004
1.1.–31.12.2003
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
-4.3
-0.4
8.9
4.2
-14.5
23.0
5.0
-1.0
16.8
0.1
16.8
6.5
-0.6
1.1
7.0
-12.8
20.9
3.5
-11.6
7.0
-0.7
6.3
INVESTMENTS
Acquisition of fixed assets
Sale of fixed assets
Change in other long-term investments
Dividends received from investments
Cash flow from investments
-26.6
20.9
24.0
2.1
20.4
-20.6
12.7
-14.5
3.7
-18.7
FINANCING
Decrease in long-term creditors
Increase (+) / decrease (-) in short-term creditors
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
0.0
106.0
-14.5
4.5
-6.4
-0.7
13.8
-5.9
0.1
97.0
-31.4
104.9
-10.0
5.0
-5.9
-0.4
29.1
-13.3
Increase (+) / decrease (-) in liquid funds
134.2
65.7
Liquid funds at the beginning of the year
Liquid funds at the end of the year
494.7
628.9
429.0
494.7
-4.4
6.5
-2.6
-0.4
-2.6
4.8
-2.8
-0.6
-43.0
0.0
51.9
8.9
-10.2
-5.8
17.1
1.1
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
78.1
Notes to the Financial Statements
Accounting Policy
In accordance with SOK’s statutes, the name SOK Corporation
is used for the SOK Group. SOK Corporation comprises SOK
(Suomen Osuuskauppojen Keskuskunta) 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.
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, two dormant companies have been omitted
from the consolidated financial statements. In addition, excluded
from the consolidation are five housing corporations, four of which
are subject to State Housing Board regulations. The exclusion of the
above-mentioned subsidiaries 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 2004.
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 as well as 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 goodwill on
consolidation in the balance sheet.
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 intra-
Group income and expenses, distribution of profits, receivables and
debts as well as unrealised profit margins from intra-Group transactions have been eliminated.
Minority interests
Minority interests in the profit for the financial year is 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 shareholder’s 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 after 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 and 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.
Derivative contracts taken out for
hedging purposes
Forward exchange contracts
Interest gains and losses on forward exchange contracts have been
periodised over the contract period as interest income or expenses or
adjustments thereto. Exchange rate differences on forward contracts
57
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 entered. 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 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
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 trad58
ing. Realised and unrealised changes in the value of futures taken
out for hedging purposes are booked as a credit or charge to income
under purchases. Premiums on options written for hedging purposes
are booked to the balance sheet and changes in them are recognised
as a credit or charge to income under 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 as a credit or charge
to income under sales 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 at 31 December 2004. The fair value
of outstanding contracts made for purposes other than hedging at
31 December 2004 was EUR 61,000 negative.
Fixed assets and depreciation
In the balance sheet, fixed assets have been valued at cost less accumulated planned depreciation. Furthermore, certain land areas and
buildings include undepreciated revaluations made in previous years.
In preparing the financial statements, revaluations of EUR 26.1 million have been reversed in line with the depreciation schedule. The
revaluation reserve in the consolidated balance sheet at 31 December 2004 amounts to EUR 25.4 million.
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 acquisition cost or repurchase price or probable market price, whichever is
the lowest.
Financial assets
Securities held as financial assets are valued at acquisition cost or the
market price, whichever is the lower.
Leasing
Leasing 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.”
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 above-mentioned
deferred tax liability. Deferred tax assets arising from Group companies’ compulsory provisions and confirmed losses are shown in the
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 for 2005, which is 26%.
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 2004
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.
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 659.1 million
and undrawn long-term binding credit facilities amounted to EUR
164.1 million, for a total of 46%. 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
1.16.
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. During the year SOK’s loans
taken out in foreign currency were used solely to finance equity
investments in Baltic subsidiaries. SOK’s Finnish subsidiaries did
not have loans denominated in foreign currency. 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.
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 threeyear period. The minimum hedging degrees for each succeeding
year 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, 40% for the year after that and 20% 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, North European
Oil Trade Oy 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 began trading oats-related derivatives during the
report year.
59
Notes to the Accounts
EUR million
SOK CORPORATION
2004
2003
SOK
2004
2003
2 031.6
155.8
1 539.2
153.8
2 187.4
1 693.0
0.3
-4.6
0.5
6.1
-4.3
6.5
NOTES CONCERNING THE INCOME STATEMENTS
1a. Net turnover by business group
Service stations and fuel sale
Car trade
Market trade
EDI invoicing *)
Real estate and property leasing and other services
Eliminations *)
Total
826.8
444.5
169.2
356.0
97.0
59.0
491.5
2 031.6
204.4
-898.9
3 781.1
769.8
167.9
341.0
134.0
52.7
425.1
1 539.2
195.2
-513.4
3 111.5
*) includes EUR 727 million of intra-Group EDI invoicing (prev. yr. EUR 328 million)
Domestic business operations constitute 95.3 % of the turnover.
1b. Operating profit by business group
Hotels and restaurants *)
Car trade
Market trade
EDI invoicing
Share of associated companies’ profits
Eliminations
Total
12.8
-0.9
10.6
9.1
4.2
0.6
2.5
0.3
12.4
1.8
-0.3
53.2
9.1
-0.2
9.9
8.5
-0.5
0.1
-0.1
0.5
18.0
2.1
-1.0
46.4
*) does not include non-recurring amortisation of goodwill within the Corporation in 2003
2. Other operating income
Profits on sale of fixed assets
Goodwill income
Total
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
8.9
3.1
1.2
13.1
10.0
4.4
1.0
11.0
0.1
4.5
2.5
1.2
0.1
3.8
3 269.9
-3.2
3 266.7
2 622.1
-1.9
2 620.2
2 014.7
11.6
2 026.3
1 539.4
-5.8
1 533.6
125.5
20.5
9.1
155.1
119.9
19.6
9.5
149.0
26.4
4.1
2.1
32.6
21.9
4.6
1.8
28.3
Information concerning the staff and members of the boards is contained under item 26.
60
EUR million
SOK CORPORATION
2004
2003
5. Depreciation and value adjustments
Depreciation according to plan
Value adjustments on non-current assets
Total
34.3
6.2
40.5
33.8
0.4
34.2
SOK
2004
2003
5.1
1.4
6.5
4.8
4.8
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
Buildings
30–35
Light constructions and building equipment
10–15
Office and warehouse fixtures
10
Warehouse, servicing and processing machinery
7
Restaurant and hotel furnishings
5–10
Shop furnishings
5–7
Motor vehicles and computer hardware (other than PCs)
5
Goodwill
5–10
Other tangible and intangible assets
as permitted by taxation laws
6. Other operating expenses
Losses on sale of fixed assets
Total
0.6
118.9
119.5
1.5
118.3
119.8
33.1
33.1
1.0
27.5
28.5
Rents are presented as a separate item in the income statement.
7. Increase (-) / decrease (+) in provisions for liabilities and charges
-0.1
Increases related to partially vacant premises
2.6
Decreases related to partially vacant premises
-0.6
Increase in other future expenses and losses
1.6
Decrease in other future expenses and losses
3.6
Total
-1.5
2.8
-2.3
3.6
2.6
-0.1
2.4
0.2
2.6
-1.4
2.8
-0.0
1.4
2.8
3.9
4.9
1.2
10.0
8. Financial income and expenses
Dividend income from group companies
Dividend income from participating interest companies
Dividend income from others
1.4
Total dividend income from investments in non-current assets 1.4
1.3
1.3
1.5
7.0
1.4
9.9
Interest income from other non-current assets
From group companies
From others
0.8
0.9
9.9
0.8
9.9
0.8
16.7
17.4
16.4
17.3
1.3
11.5
23.5
1.9
10.5
23.2
2.0
1.4
-3.0
-13.0
-4.0
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
-0.0
0.0
-0.0
0.0
Interest and other financial expenses
To group companies
To others
Total interest and other financial expenses
15.6
15.6
16.1
16.1
1.2
13.6
14.8
1.2
13.4
14.6
1.2
5.4
29.5
21.3
Total financial income and expenses
2.0
61
SOK CORPORATION
2004
2003
EUR million
SOK
9. Extraordinary items
Extraordinary income
Group contributions received
Merger profit
Other
Total
Extraordinary expenses
Group contributions given
Merger loss
Total
2004
2003
28.7
6.0
0.1
34.9
13.8
0.1
13.8
17.2
17.2
7.9
0.7
8.6
Total extraordinary items
17.7
5.2
10. Appropriations
Increase (-) / decrease (+) in accelerated depreciation
-2.0
-0.5
6.1
1.3
3.4
4.1
4.4
1.5
10.7
10.0
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
14.3
1.4
0.0
-2.4
0.9
14.1
10.1
4.8
-0.4
-2.5
4.7
16.7
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
53.8
4.2
-2.7
11.4
66.7
22.1
0.9
-0.0
11.9
12.2
-0.4
-15.7
7.9
124.0
18.0
-7.9
0.0
134.2
19.7
0.2
2.3
0.0
-0.7
23.0
36.3
0.8
-4.8
4.2
36.6
19.9
1.6
Accumulated depreciation at 1.1.2004
31.0
Companies acquired
0.0
Accumulated depreciation on decreases and transfers -2.5
Depreciation for the financial year
7.7
Value adjustments
0.0
36.2
11.3
0.0
-0.0
2.7
3.2
17.2
22.0
0.1
-4.3
3.6
1.5
22.9
64.4
0.1
-6.8
14.0
4.7
76.4
18.4
Acquisition cost at 1.1.2004
Increase
Decrease
Transfers
0.6
0.2
19.2
Accumulated income entries at 1.1.2004
Accumulated income entries on decreases and transfers
Accumulated income entries for the financial year
Accumulated income entries at 31.12.2004
2.3
-0.7
0.0
1.6
Book value at 31.12.2004
30.5
5.7
13.6
7.9
57.8
0.7
0.0
22.8
10.8
14.3
11.9
59.7
1.2
0.0
62
Tangible assets
Land
Buildings
and
and
water constructions
Increase
Decrease
Transfers
Machinery
and
equipment
Other
Advance
tangible payments and
assets construction
in progress
30.7
1.9
-3.6
1.2
30.1
289.4
9.2
-27.3
8.0
279.2
75.5
6.4
-8.7
5.0
78.2
3.7
0.3
-0.3
0.2
3.9
1.9
111.0
1.3
38.5
0.0
1.2
0.1
152.7
1.4
-0.0
0.5
2.4
-19.1
9.5
0.5
103.3
-5.1
9.8
0.4
43.7
-0.2
0.3
0.0
1.4
-24.4
19.7
1.3
150.7
25.1
-13.5
11.6
27.1
-12.6
14.5
39.3
190.5
34.5
2.4
6.0
272.7
53.9
205.4
36.9
2.5
4.1
302.9
Accumulated depreciation and
value adjustments at 1.1.2004
Companies acquired
Accumulated depreciation
on decreases and transfers
Value adjustments
Revaluations at 1.1.2004
Decrease
Revaluations at 31.12.2004
4.1
19.2
-2.9
-14.4
6.0
Total
tangible
assets
403.3
36.9
-42.9
0.0
397.3
52.2
-26.1
26.1
Share of machinery in the book value of machinery and equipment EUR 0.3 million (2003 EUR 0.4 million)
13. SOK Corporation’s financial assets, EUR million
Increase
Decrease
Accumulated value adjustments at 1.1.2004
Accumulated value adjustments on decreases
and transfers
Value adjustments
Shares in
participating
interest
companies
Other
shares and
memberships
Total
shares
73.8
0.9
-15.3
59.4
8.7
0.1
-0.0
8.8
82.5
0.9
-15.3
68.2
1.3
0.2
1.5
-0.0
2.0
3.3
0.2
0.0
2.0
3.5
56.0
8.6
64.7
72.5
8.5
81.0
Undepreciated part of group goodwill due to associated companies EUR 1.1 million (2003 EUR 1.7 million)
Unentered part of group reserves due to associated companies EUR 0.0 million (2003 EUR 0.0 million)
63
Capital loan
debtors from
participating
interest
companies
Debtors
from
participating
interest
companies
Capital loan
deptors
from others
Other
debtors
from
others
Total other
financial
assets
1.6
1.5
2.6
-0.8
0.8
-0.2
1.3
22.5
24.5
-21.8
-0.7
24.4
28.1
24.5
-23.5
-1.7
27.3
Amount at 1.1.2004
Increase
Decrease
Transfers
Amount at 31.12.2004
-1.7
0.9
0.0
0.0
0.0
0.0
0.0
0.0
0.8
1.3
0.9
24.4
27.3
1.6
1.5
2.6
22.5
28.1
Total financial assets of SOK Corporation 31.12.2004
Total financial assets of SOK Corporation 31.12.2003
92.0
109.1
12. SOK’s intangible and tangible assets, EUR million
Intangible assets
Intangible
rights
Other
capitalised
expenditure
Advance
payments
Total
intangible
assets
22.4
3.6
-0.1
10.6
36.5
5.8
0.0
9.5
9.1
-0.2
-10.9
7.4
37.7
12.6
-0.3
0.0
50.0
12.2
Accumulated depreciation on decreases and transfers -0.1
3.7
Value adjustments
0.0
15.8
3.1
20.7
1.4
7.4
29.5
10.2
2.7
9.5
22.4
Land
Buildings
and
and
water constructions
Machinery
and
equipment
Increase
Decrease
Transfers
0.3
6.1
15.3
-0.1
3.9
1.4
20.5
0.2
1.3
4.7
Tangible assets
Increase
Decrease
Transfers
Accumulated depreciation and
value adjustments at 1.1.2004
Accumulated depreciation on decreases and transfers
Value adjustments
2.5
0.0
-0.0
0.1
2.6
10.6
0.1
7.0
-0.1
10.5
Other
Advance
tangible payments and
assets construction
in progress
11.9
1.1
-0.3
0.0
12.7
0.3
0.1
0.0
0.4
0.0
3.1
-2.9
-0.0
0.2
Total
tangible
assets
25.4
4.2
-3.2
0.0
26.4
0.1
7.3
8.8
-0.3
0.9
0.1
9.4
2.6
3.2
3.3
0.4
0.2
9.6
2.4
3.6
3.2
0.3
0.0
9.5
64
0.3
15.8
-0.3
1.1
0.1
16.7
0.0
13. SOK’s financial assets, EUR million
Increase
Decrease
Accumulated value adjustments on decreases
and transfers
Value adjustments
Reversed value adjustments
Shares
in group
companies
Shares in
participating
interest
companies
Other
shares and
memberships
Total
shares
249.4
8.8
-6.2
252.1
60.2
0.9
-12.5
48.6
10.2
0.0
-0.0
10.2
319.8
9.7
-18.6
310.8
20.9
7.8
0.0
28.7
-0.0
-1.0
0.0
-2.1
17.9
9.8
0.0
-1.0
2.0
-2.1
27.7
234.2
38.8
10.2
283.2
228.5
52.4
10.2
291.1
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
41.1
0.7
-0.9
155.7
38.4
-62.4
0.8
1.3
2.6
41.0
131.7
0.8
22.5
22.7
-21.7
-0.7
22.7
223.9
61.8
-86.7
-0.7
198.3
Amount at 1.1.2004
Increase
Decrease
Transfers
Amount at 31.12.2004
Value adjustments
Reversed value adjustments
2.0
12.6
0.0
-10.9
1.8
-1.7
1.3
0.9
0.0
0.0
0.0
0.0
12.7
0.0
-10.9
1.8
39.2
131.7
0.8
1.3
0.9
22.7
196.5
28.4
155.7
0.8
1.3
2.6
22.5
211.2
Total financial assets of SOK 31.12.2004
Total financial assets of SOK 31.12.2003
479.7
502.3
Liabilities to secure group companies loans EUR 31.3 million
65
14. Companies owned by SOK Corporation and SOK 31.12.2004
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
SOK-Business Oy
SOK-Invest Oy
Sokotel Oy Group
SOK-Takaus Oy
Tampereen Sokos Oy
Tapiolan Sokos Oy
Turun Sokos Oy
Uudenmaan ABC Oy
Real estate companies (24 pcs)
Real estate companies under stock (10 pcs)
Total Group companies 61 pcs
Registered
office
Estonia
Estonia
Helsinki
Helsinki
Helsinki
Helsinki
Helsinki
Estonia
Helsinki
Helsinki
Helsinki
Helsinki
Helsinki
Helsinki
Helsinki
Tampere
Helsinki
Turku
Helsinki
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
99.9
90.0
100.0
90.0
96.67
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
99.9
90.0
100.0
90.0
96.67
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
99.9
90.0
100.0
90.0
96.67
38.6
22.2
33.0
33.3
50.0
50.0
31.5
42.5
49.7
40.0
50.0
38.6
50.0
33.3
21.9
45.1
38.6
22.2
33.0
33.3
50.0
50.0
31.5
42.5
40.2
40.0
50.0
38.6
50.0
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 Asematie 8
Kiinteistö Oy Pysäköintiveturi
Kiinteistö Oy Rytilahden Maja
Kiinteistö Oy Turun Brahenkatu 8
Kiinteistö Oy Turun Toripaikoitus
Kiinteistö Oy Vainihaka
Movere Oy
Oy Realinvest Ab Group
Tullin Parkki Oy
Total Associated Companies 16 pcs
Kauniainen
Helsinki
Joensuu
Helsinki
Helsinki
Turku
Vaasa
Vantaa
Tampere
Helsinki
Turku
Turku
Rauma
Lahti
Helsinki
Tampere
50.0
50.0
31.5
42.5
49.7
40.0
50.0
28.6
50.0
21.9
45.1
Other shares owned by the Parent company
Sato-Yhtymä Oyj
66
Helsinki
8.7
8.7
EUR million
SOK CORPORATION
2004
2003
15. Stocks
Goods
Other stocks
Advance payments
Total
135.6
0.4
0.7
136.7
133.3
0.4
1.1
134.8
16. Long-term debtors
Trade debtors
Loan receivables
Other receivables
Prepayments and accrued income
Total long-term debtors
3.1
0.7
0.0
0.1
3.9
3.8
17. Deferred tax assets
Temporary differences
From consolidation
Total
2.1
0.8
2.9
3.6
0.8
4.4
0.1
3.8
SOK
2004
2003
2.5
14.1
2.5
14.1
2.4
0.7
2.4
3.1
2.4
225.0
188.3
7.9
3.3
28.8
7.7
47.7
4.0
2.5
18.8
25.3
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
291.2
242.6
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
Other securities from group companies
Money market securities
Total
0.6
0.0
27.2
27.7
0.7
2.8
25.0
28.5
0.4
0.5
27.1
27.5
25.0
25.4
16.8
9.0
38.3
383.0
20.2
12.6
25.2
329.0
0.5
11.8
312.4
4.0
0.0
15.1
258.2
6.1
59.5
65.6
6.3
44.0
50.2
6.1
40.5
46.5
5.9
52.9
58.8
24.5
10.0
548.6
573.1
468.1
478.1
24.5
9.9
548.6
582.9
10.0
18.5
468.1
496.6
67
NOTES CONCERNING LIABILITIES IN THE BALANCE SHEETS
EUR million
SOK CORPORATION
2004
2003
2004
2003
20. Capital and reserves
Cooperative capital at 1 Jan.
Increase
Cooperative capital at 31 Dec.
68.6
2.5
71.1
68.6
2.5
71.1
65.8
2.8
68.6
65.8
2.8
68.6
SOK
Cooperative capital consists of the cooperative payments which the cooperative societies make to Suomen Osuuskauppojen Keskusosuuskunta
(SOK) for cooperative shares. The number of a cooperative society’s shares is determined on the basis of the cooperative society’s total membership
and annual purchases.
Supplementary cooperative capital at 1 Jan.
Increase
Supplementary cooperative capital at 31 Dec.
14.8
2.0
16.8
12.6
2.2
14.8
14.8
2.0
16.8
12.6
2.2
14.8
The supplementary cooperative capital consists of voluntary investments which the cooperative societies make to Suomen Osuuskauppojen
Keskusosuuskunta (SOK). The cooperative societies 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.
51.5
-26.1
25.4
77.6
-26.1
51.5
The hotel and department store buildings that have been revalued are located in the centre of Helsinki, and the logistics centre is located in Espoo.
All the above-mentioned buildings have been rented for use that serves the operations of SOK Corporation or the S Group directly or indirectly. In
accordance with a decision that has been taken, the revaluations will be reversed in their entirety when going over to the acquisition cost principle
of valuation of fixed assets. Revaluations have been reversed in these financial statements to the amount of EUR 26.1 million.
Legal reserve at 1 Jan.
Increase
Legal reserve at 31 Dec.
12.8
2.0
14.8
11.8
1.0
12.8
12.8
2.0
14.8
11.8
1.0
12.8
Supervisory Board’s disposal fund at 1 Jan.
Increase
Decrease
Supervisory Board’s disposal fund at 31 Dec.
0.2
0.5
-0.7
0.0
0.4
0.2
-0.4
0.2
0.2
0.5
-0.7
0.0
0.4
0.2
-0.4
0.2
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
Translation difference
Profit brought forward at 31 Dec.
296.7
-2.0
-0.5
268.4
-1.0
-0.2
326.3
-2.0
-0.5
310.8
-1.0
-0.2
-6.4
-0.0
287.7
-5.9
-0.0
261.4
-6.4
-5.9
317.4
303.8
Total capital and reserves
40.2
456.0
35.3
444.6
30.2
450.3
22.5
422.7
287.7
40.2
261.4
35.3
317.4
30.2
303.8
22.5
-0.1
-0.4
-0.1
-0.4
-33.2
294.5
-30.9
265.4
347.4
326.0
4.2
0.4
0.3
0.4
5.3
1.8
0.7
0.4
0.4
3.4
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
21. Accumulated appropriations
Accelerated depreciation
Intangible rights
Other capitalised expenditure
Buildings and constructions
Machinery and equipment
Total
68
EUR million
22. Provisions
Partially vacant premises
Other future expenses
Total
23. Long-term creditors
Bonds
Loans from financial institutions
Pension loans
Trade creditors
Other long-term creditors
Total long-term creditors
SOK CORPORATION
2004
2003
3.3
2.3
5.6
5.8
3.4
9.2
5.8
16.9
0.4
0.3
6.8
30.2
5.8
18.6
0.4
0.3
6.9
32.0
10.4
-0.6
9.8
11.1
-0.7
10.4
2.9
0.0
42.2
300.9
2.7
0.0
44.5
254.9
SOK
2004
2003
3.3
0.3
3.5
5.6
0.5
6.1
2.7
0.0
6.8
6.8
6.9
9.6
Bond issued by Prisma Peremarket AS:
Main terms and conditions of the bond:
• Capital: EEK (Estonian kroons) 90 million
• Drawdown date: 27 September 2002
• Date of maturity: 27 September 2005
• Interest fixed at 4.75%
• Secured by an SOK guarantee
24. Deferred tax liability
Appropriations
Temporary differences
Included in group companies’ own balance sheets
Total
25. Short-term creditors
Pension loans
Advances received
Trade creditors
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
2.7
6.9
132.2
6.3
121.3
50.0
184.0
5.8
239.8
26.1
146.2
7.7
180.1
65.9
2.7
0.0
68.7
55.4
7.7
0.0
63.1
63.5
2.7
0.0
66.3
53.5
7.7
0.0
61.1
553.8
121.4
1 089.9
480.2
90.0
935.5
523.4
53.0
1 024.3
454.9
48.2
871.9
29.7
9.6
82.2
121.5
26.3
10.2
53.6
90.0
7.6
7.2
43.9
58.8
5.3
6.9
43.8
55.9
69
NOTES CONCERNING INCOME TAXES
See 11 above.
NOTES CONCERNING THE STAFF AND BOARD MEMBERS
EUR million
SOK CORPORATION
2004
2003
SOK
2004
2003
26a. Average staff numbers by group
Car trade
Market trade
Total
953
12
1 232
614
371
433
235
644
4 494
950
1 309
523
588
372
234
581
4 557
SOK
Subsidiaries
Total
558
3 936
4 494
496
4 061
4 557
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. 2004 was 877.
26b.
Salaries and remuneration:
CEO and members of the Executive Board
Members of the Supervisory Board
3.0
0.1
3.0
0.1
0.9
0.1
1.1
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
7.8
7.8
Pledged hire purchase agreements
0.0
0.7
0.1
3.0
Other creditors
Book value of pledged shares
Total pledges given as security
1.7
1.9
2.7
1.7
1.9
4.9
Mortgages
Total mortgages given as security
Loans secured by pledges
70
EUR million
SOK CORPORATION
2004
2003
SOK
2004
2003
2.6
0.4
2.6
0.4
113.8
56.9
0.2
0.2
0.2
0.2
Loans secured by guarantees
Guarantees given
Guarantees given, total
26.8
26.8
26.8
16.7
16.7
16.7
General security for liabilities
Mortgages
19.5
37.9
2.6
13.5
101.3
117.4
0.4
13.5
55.2
69.0
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 societies’ liabilities
Guarantees given on behalf of others’ liabilities
Total
0.8
7.2
0.2
8.2
5.2
6.1
0.2
11.5
Security given on behalf of others
Guarantees for liabilities of the cooperative societies
0.2
0.2
104.3
71.2
175.5
97.4
71.2
168.6
37.0
37.0
37.0
37.0
5.0
11.2
16.2
5.1
11.6
16.7
1.4
1.3
2.7
1.8
1.5
3.3
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.
71
SOK CORPORATION
Liability under derivative contracts,
value of underlying assets, EUR million
Interest rate derivatives
Forward contracts
Option contracts
Purchased
Written
Interest rate swaps
Currency derivatives
Forward contracts
Option contracts
Purchased
Forward contracts
Oil product derivatives
Future contracts
Option contracts
Purchased
Written
Oat derivatives
Future contracts
Value of
underlying
assets
31.12.2004
Of which value
of underlying
instruments of
open agreements
31.12.2004
Value of
underlying
assets
31.12.2003
Of which value
of underlying
instruments of
open agreements
31.12.2003
0.8
0.8
80.8
20.8
75.2
75.2
268.5
133.4
42.0
42.0
221.3
149.5
19.1
14.9
29.4
24.4
2.0
2.0
13.4
4.3
20.8
7.9
2.2
2.2
0.6
3.9
3.3
0.4
0.4
Fair value
31.12.2004
Fair value
of open
agreements
31.12.2004
Fair value
31.12.2003
Fair value
of open
agreements
31.12.2003
0.0
0.0
-0.0
-0.0
0.2
-0.2
-1.3
-1.3
0.0
-0.0
-0.6
-0.6
-0.5
-0.5
-0.3
-0.3
0.0
0.0
0.6
0.4
fair value, EUR million
Forward contracts
Option contracts
Purchased
Written
Interest rate swaps
Forward contracts
Option contracts
Purchased
Forward contracts
Oil product derivatives
Future contracts
Option contracts
Purchased
Written
Oat derivatives
Future contracts
72
-0.7
-0.8
0.0
0.0
-0.0
0.1
0.1
0.0
0.0
SOK
value of underlying assets, EUR million
Forward contracts
Option contracts
Purchased
Written
Interest rate swaps
Forward contracts
Option contracts
Purchased
Forward contracts
Value of
underlying
assets
31.12.2004
Of which value
of underlying
instruments of
open agreements
31.12.2004
Value of
underlying
assets
31.12.2003
Of which value
of underlying
instruments of
open agreements
31.12.2003
45.8
45.8
80.8
20.8
75.2
75.2
268.5
133.4
42.0
42.0
221.3
149.5
31.5
3.9
49.3
8.1
2.0
2.0
13.4
4.3
20.8
7.9
Fair value
31.12.2004
Fair value
of open
agreements
31.12.2004
Fair value
31.12.2003
Fair value
of open
agreements
31.12.2003
0.1
0.1
-0.0
-0.0
0.2
-0.2
-1.3
-1.3
0.0
-0.0
-0.6
-0.6
0.1
0.0
-0.1
-0.1
0.0
0.0
0.6
0.4
fair value, EUR million
Forward contracts
Option contracts
Purchased
Written
Interest rate swaps
Forward contracts
Option contracts
Purchased
Forward contracts
-0.7
-0.8
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 managethe Group’s foreign exchange, interest rate and price risks.
The open interest rate swaps are from one month to ten years in length.
Open electricity forwards will fall due within the next 3 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.
73
SOK Corporation Key Ratios 2000–2004
2000
2001
2002
2003
2004
2 754
2 915
2 998
3 112
3 781
Operating profit
EUR million
% of net turnover
57
2.1
35
1.2
55
1.8
46
1.5
53
1.4
Profit/loss before extraordinary items
EUR million
% of net turnover
54
2.0
39
1.3
55
1.8
52
1.7
54
1.4
Profit/loss before appropriations and taxes
EUR million
% of net turnover
52
1.9
33
1.1
55
1.8
52
1.7
54
1.4
10.2
7.5
9.9
7.0
9.0
9.2
6.4
8.4
6.9
7.2
30.9
33.2
34.1
32.9
30.2
Gross investment in fixed assets
EUR million
% of net turnover
61
2.2
31
1.1
43
1.4
56
1.8
53
1.4
Gearing, %
36
21
10
-2
-22
4 500
4 203
4 126
4 557
4 494
Net turnover
Return on equity, %
Return on investment, %
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
2000
425
2001
472
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
74
2002
442
2003
483
2004
575
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 30,188,282.05
EUR 317,364,959.81
EUR 347,553,241.86
The Executive Board proposes that the profit for the financial
year of EUR 30,188,282.05 be used as follows:
– to be transferred to the reserve fund in
accordance with the company status
EUR
500,000.00
– paid as interest on the suplementary cooperative capital
EUR
584,008.59
– distributed as interest on cooperative contributions
paid by the cooperative societies by the beginning
of the financial period
EUR
10,175,395.00
– transferred to the supervisory board’s disposal fund
EUR
120,000.00
– left in the profit account
EUR
18,808,878.46
Providing that the Meeting of the Cooperative Society
approves the above proposal SOK’s capital and reserves
will be:
Cooperative capital
Legal reserve
Supervisory board’s disposal fund
Profit account
Total
EUR 71,092,500.00
EUR 16,830,000.00
EUR 15,273,154.85
EUR
141,634.97
EUR 336,173,838.27
EUR 439,511,128.09
Helsinki, 17 February 2005
Kari Neilimo
Jukka Salminen
Esko Hakala
Arto Hiltunen
Kuisma Niemelä
Veli-Matti Puutio
Ulla-Maija Tolonen
75
Pääjohtajan
Financial
Statements
katsaus
Auditor’s Report
To the members of Suomen
Osuuskauppojen Keskuskunta SOK
We have audited the accounting records, the financial statements,
and the administration of Suomen Osuuskauppojen Keskuskunta
SOK for the period of 1 January – 31 December 2004. The
financial statement drafted by the Executive Board includes the
report on operations, the income statement, balance sheet, cash
flow statement, and notes to the financial statements both for the
Corporation and the Cooperative. Based on our audit we submit
a statement on the financial statement and administration.
The audit has been conducted in accordance with sound auditing procedure. The accounting records as well as the accounting principles and the content and presentation of the financial
statement have been examined to an extent sufficient to determine that there are no relevant errors or defects. In auditing the
administration, we have examined the lawfulness of the activities
of the Supervisory Board and the Members of the Executive board
in accordance with the regulations provided by the Cooperative
Societies’ Act.
We express as our opinion that the financial statements have
been prepared in accordance with the Finnish Accounting Act and
other rules and regulations concerning the drafting of financial
statements. The financial statements provide correct and sufficient
information, as intended in the Accounting Act, on the results
of the Corporation’s and the Cooperative’s activities and their
financial standing. The financial statements and the consolidated
financial statements may be approved and the Members of the
Supervisory Board and the Executive Board can be discharged
from liability for the period audited by us. The proposal made by
the Executive Board on accumulated profit is in compliance with
the Cooperative Societies’ Act and the Cooperative’s Rules.
Helsinki, 9 March 2005
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 SOK, the Supervisory Board has today examined the financial statements and
consolidated financial statements prepared by the Executive Board
for the 2004 financial year and acquainted itself with the Auditors’
Report.
The Supervisory Board presents as its statement to the Annual
Cooperative Meeting that the financial statements and consolidated financial statements be confirmed and that the Executive
Board’s proposal concerning the profit for the financial year and
shareholders’ equity be approved.
The members of the Supervisory Board due to resign are Timo
Sonninen, Heikki Ikonen, Antero Taanila, Jorma Sieviläinen,
Maija-Liisa Lindqvist and Jouko K. Leskinen. Ulla-Maija Tolonen’s
membership of the Supervisory Board ended on 1 January 2005
following her election as a member of SOK’s Executive Board. 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.
Helsinki, 17 March 2005
SUOMEN OSUUSKAUPPOJEN
KESKUSKUNTA
For the Supervisory Board
Otto Mikkonen
Chairman
Markku Viljanen
Secretary
76
Photos: Lauri Mannermaa. Image processing: Lauri Mannermaa and Petri Clusius. Printed by F.G.Lönnberg 2005
Suomen Osuuskauppojen Keskuskunta (SOK)
Fleminginkatu 34, P.O.Box 171, FIN-00511 Helsinki, Finland
Tel. +358 9 1881, telefax +358 9 188 2332
www.s-kanava.net

Suomen Osuuskauppojen Keskuskunta SOK Corporation - S

Transcription

Similar documents

Financial Tips for Newlyweds

An open letter to Jim Ratcliffe, Ineos` owner

Registration Form COFRET ` 10

Business Zone Brinje – Križpolje

kechene women`s pottery cooperative

OPENINGS - Minetti S.p.A.

View Report - Financial Center Credit Union

Circular No 1

Suomen Osuuskauppojen Keskuskunta SOK Corporation - S