ICA Gruppen : year-end report 2021 Report

Fourth quarter

2021

Strong performance during volatile year

• Continued strong earnings performance for Apotek Hjärtat and higher market share
• Stable earnings for Rimi Baltic in challenging market
• ICA Bank launches home mortgages and improves earnings
• ICA Sweden - start-up of automated e-commerce warehouse in Stockholm
• ICA-handlarnasFörbund and AMF make public acquisition offer to ICA Gruppen's shareholders

Events after the end of the quarter

• ICA Gruppen shares delisted - last day of trading 13 January 2022
• Voluntary repurchase offer to holders of outstanding Notes
• Extra general meeting on 3 February 2022

Key data

		Fourth quarter			Jan-Dec
	Group, SEKm
	2021	2020	%		2021	2020	%
	Net sales	32,860	32,593	0.8		127,957	126,283	1.3
	Operating profit before depreciation/amortisation (EBITDA)	2,744	2,716	1.0		11,408	11,141	2.4
	Operating profit excluding items affecting comparability	1,298	1,371	-5.3		5,826	5,831	-0.1
	Operating profit	1,305	1,325	-1.5		5,876	5,774	1.8
	Operating margin excluding items affecting comparability, %	4.0	4.2	-		4.6	4.6	-
	Profit before tax	1,208	1,215	-0.6		5,478	5,308	3.2
	Profit for the period	1,043	919	13.5		4,554	4,173	9.1
	Cash flow from operating activities excluding ICA Bank	2,379	3,772	-36.9		9,654	10,444	-7.6
	Return on capital employed, %	-	-	-		9.2	9.2	-
	Return on equity, %	-	-	-		12.7	11.7	-
	Earnings per share, SEK	5.16	4.54	13.6		22.52	20.65	9.1

ICA GRUPPEN Year-end report 2021

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CEO's comments

We can now sum up the full year 2021 - a year characterised by continued volatile markets, but for which we can show favourable performance for our businesses. Important steps have been taken in our future-oriented projects, and given the conditions, sales and earnings performance were favourable for the various parts of the Group. In addition, we succeeded in maintaining the operating margin at the same high level as in 2020.

The Swedish grocery retail market grew by 0.5 % during the fourth quarter, with stronger growth for physical stores at the same time that online performance was negative. This development was expected given the very strong online growth during 2020. As expected, food price inflation increased gradually towards the end of the year. In the Baltic countries, renewed restrictions in Latvia and Lithuania unfortunately led to low market growth towards the end of the year. The pharmacy market in Sweden continued to show favourable growth. Here, too, online growth has slowed, although it continues to be higher than growth for physical pharmacies.

ICA Sweden - start-up of automated e-commerce warehouse in Stockholm

For ICA Sweden, considerable focus during the year was on completing the major e-commerce projects that have been in progress for several years. In December the first deliveries were made according to plan from our new, automated e-commerce warehouse in Stockholm. Volumes will now be increased, and the move from our existing warehouse is being completed. Much work remains to be done, but the journey to a large-scale and efficient e-commerce operation has definitely begun. Other important areas to focus on are price value - where our private label products are a key tool - continued efficiency improvement across the entire value chain, and perhaps most importantly, supporting the ICA stores, where a broad programme is in place to support them in their efficiency improvement work with the goal of further strengthening our joint competitiveness.

Rimi Baltic - strong performance. New CEO installed

Despite a challenging close to the year with new restrictions and with newly opened Lidl stores in Latvia, Rimi Baltic succeeded in delivering a full year with growth as well as strongly improved earnings and higher margins. During the year, work on building up the omnichannel capacity was intensified along with a continued focus on digitalisation and greater efficiency. I also want to mention that Giedrius Bandzevicius has now taken office as new CEO of Rimi Baltic, succeeding Edgar Sesemann, who retired after successfully leading operations since 2008. The appointment of Giedrius, who served previously as country manager for Lithuania, ensures that we have good continuity and favourable conditions to drive Rimi Baltic's continued development, where digitalisation, price value and development of the range are important components.

Apotek Hjärtat - higher market shares and strong earnings improvement

Following a strong conclusion to the year, we can confirm that Apotek Hjärtat strengthened its market-leading position in 2021 with higher market shares both online and for sales in physical pharmacies. On top of this came a strong earnings improvement. The work now continues on strengthening our omnichannel capacity, building an even more compelling online presence and at the same time utilising our strong pharmacy network, for example with respect to ensuring faster deliveries nationwide and competitive, local customer offerings.

ICA Bank - home mortgage offering launched. ICA Real Estate - favourable earnings performance

ICA Bank has now launched its home mortgage offering, which we have also tied together with our customer loyalty programme, Stammis. This is an example of how we as a group can create value for our customers and offer something extra - in this case interest rate reductions based on a customer's other purchases in the ICA system. ICA Insurance also had very favourable performance during the year.

Our real estate portfolio continues to show good value development, growing by more than SEK 4 billion in 2021. Currently we have strong focus on putting together the final details of the deal we announced during the autumn regarding Secore's properties.

Sustainability - the journey towards net zero has begun

We have now concluded our first year with our new climate targets, and our journey to net zero emissions by 2030 is under way. During 2021 we reduced our emissions of CO2 equivalents by 14% from 2020. I can also note that sustainability is becoming increasingly important in our real estate operations, and extensive work is in progress to reduce the environmental and climate impacts both from existing properties and from new construction. In this regard, several of our ongoing projects meet the highest standards for sustainability.

As we head in to 2022, the ownership change that began in November last year has essentially been completed, and ICA Gruppen's shares have been delisted. We have thereby entered 2022 with slightly different conditions but with intact plans and an unchanged strategy. We are moving forward to build a stronger and more exciting company in every way on the foundation of the ICA system, and we continue to drive our development projects with focus on growth, high efficiency and profitability, an omnichannel presence and a strong food ecosystem.

Per Strömberg

CEO ICA Gruppen

ICA GRUPPEN Year-end report 2021

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Group performance - fourth quarter

Net sales

Consolidated net sales increased by 0.8% compared with 2020. In local currencies the increase was 1.0%. This performance is explained by positive price effects for ICA Sweden and Rimi Baltic, and positive volume effects in other operations. Overall, Covid-19 is estimated to have had a continued slightly positive effect on sales growth, but to a considerably lower degree than during the same period in 2020.

Net sales per segment

		Fourth quarter				Jan-dec
	SEKm
	2021	2020	%		2021	2020	%
	ICA Sweden	23,600	23,722	-0.5		92,242	91,684	0.6
	Rimi Baltic	4,387	4,278	2.5		16,991	16,373	3.8
	Apotek Hjärtat	4,056	3,805	6.6		15,531	15,178	2.3
	ICA Real Estate	757	744	1.7		2,833	2,840	-0.2
	ICA Bank	510	440	15.9		1,931	1,699	13.6
	Other	332	318	4.5		1,334	1,282	4.1
	Internal sales	-782	-714	9.5		-2,904	-2,772	4.8
	Net sales	32,860	32,593	0.8		127,957	126,283	1.3

Operating profit

Operating profit excluding items affecting comparability was lower than a year ago. This is attributable to ICA Sweden's earnings performance, which was strongly affected by the start-up of new e-commerce warehouses and the higher costs this has entailed. ICA Real Estate was in line with last year while operating profit for other segments increased, where operating profit for Apotek Hjärtat and ICA Bank, in particular, was considerably higher than a year ago. In the preceding year, Apotek Hjärtat had strongly negative Covid-19 effects in operating profit, and ICA Bank's result included the effect of the acquisition of Forex's customer portfolios, by approximately SEK +29 million. For the Group as a whole, the price effect in particular was positive, while the volume effect was limited. Gross profit and the gross margin strengthened somewhat, while the operating margin excluding items affecting comparability was 4.0% (4.2%). Operating profit includes non-recurring costs of SEK -28 million attributable to the buyout of ICA Gruppen shares from the stock market. In other respects, the earnings effect between years was marginal with respect to non-recurring items. Profit for the period totalled SEK 1,043 million (919). Profit includes the result of divestments and impairment losses totalling SEK +6 million, net (-47). Earnings per share increased to SEK 5.16 (4.54), mainly owing to lower reported tax.

For the Group as a whole, Covid-19 is estimated to have had a marginally negative effect on operating profit. In the preceding year it was estimated to have had a slightly positive effect.

Operating profit excluding items affecting comparability per segment

		Fourth quarter				Jan-dec
	SEKm
	2021	2020	%		2021	2020	%
	ICA Sweden	872	1,003	-13.1		4,019	4,240	-5.2
	Rimi Baltic	179	176	1.7		784	703	11.6
	Apotek Hjärtat	133	85	55.6		444	383	15.9
	ICA Real Estate	158	165	-3.7		650	603	7.7
	ICA Bank	86	59	44.4		181	174	4.4
	Other	-179	-163	10.1		-446	-446	0.1
	Operating profit excluding items affecting comparability, excl. IFRS 16	1,249	1,326	-5.8		5,632	5,657	-0.4
	Leases
	IFRS 16 Leases	49	45	8.5		194	175	11.3
	Operating profit excluding items affecting comparability, incl. IFRS 16	1,298	1,371	-5.3		5,826	5,831	-0.1
	Leases

IFRS 16

The segments are reported excluding IFRS 16. The total effect of IFRS 16 is reported only on a consolidated basis at the ICA Gruppen level.

ICA GRUPPEN Year-end report 2021

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					Net sales, SEK bn
30													120
25													105
20													90
15													75
														60
	Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
19	20	20	20	20	21	21	21	21
				Net Sales					Net Sales, R12

Operating profit and operating

margin

1600								5.0%
1400								4.0%
1200
1000								3.0%
800
600								2.0%
400								1.0%
200
0								0.0%
Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
19	20	20	20	20	21	21	21	21

EBIT excl. items affecting comparability, SEKm

EBIT margin excl. items affecting comparability %, R12

Net financial items and tax

Net financial items improved by SEK 13 million during the quarter, mainly owing to lower interest expenses related to refinancing of loans at lower interest rates, and lower interest on the pension liability.

The effective tax rate was lower than in 2020, mainly owing to changed reporting of tax on dividends received from Rimi Baltic. Starting with December 2020, these are booked through monthly provisions, and during the fourth quarter of 2020, deferred tax was booked in lump sum, which basically explains the difference between the two years. Paid tax was slightly higher than in 2020.

Net financial items and tax

		Fourth quarter				Jan-dec
		2021	2020	%		2021	2020	%
	Net financial items, SEKm	-97	-110	-12.0		-399	-466	-14.5
	Of which, interest expenses, SEKm	-97	-116	-16.5		-404	-483	-16.4
	Tax cost, SEKm	-165	-296	-44.2		-924	-1,135	-18.6
	Effective tax rate, %	13.7	24.3	-		16.9	21.4	-
	Paid tax, SEKm	-182	-166	9.4		-976	-1,078	-9.5

Financing

In connection with the buyout of ICA Gruppen shares from the stock market and subsequent delisting of the shares, with 13 January 2022 as the last day of trading, an offer was made to holders of ICA Gruppen's outstanding Notes to repurchase these. The Repurchase Offer was announced on 13 January 2022, and it expires at 5 p.m. CET on 14 February 2022. See also the ICA Gruppen press release of 13 January 2022 at www.icagruppen.se.

To finance the repurchase, bridge financing at market terms has been contracted with the offering company, Murgröna Holding AB. See also Note 9 in this report.

Cash flow (excluding ICA Bank)

Cash flow from operating activities during the quarter (excluding ICA Bank) decreased by SEK 1,393 million compared with a year ago. The decrease is mainly attributable to a calendar-related change in working capital and effects of new rules governing payments of accounts payable.

Cash flow from investing activities was affected by a lower level of investment particularly in ICA Real Estate and Rimi Baltic.

Effect of IFRS 16 on cash flow

During the fourth quarter of 2021, lease payments (interest and principal) amounted to SEK -881 million (-854).

ICA GRUPPEN Year-end report 2021

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Cash flow, Group excl. ICA Bank

		Fourth quarter				Jan-dec
	SEKm
	2021	2020	%		2021	2020	%
	From operating activities before change in working capital	2,549	2,631	-3.1		10,301	10,133	1.7
	Change in working capital	-170	1,140			-647	310
	From operating activities	2,379	3,772	-36.9		9,654	10,444	-7.6
	Investing activities, net	-743	-1,413			-2,382	-5,184
	Before financing activities	1,636	2,359	-30.7		7,272	5,259	38.3
	Financing activities, net	-863	-1,872			-7,282	-4,802
	Cash flow for the period	773	487	58.8		-10	457	-102.2

Investments (cash flow), SEKm

2,100

1,800

1,500

1,200

900

600

300

0

Q4	Q1	Q2	Q3	Q4	Q1	Q2	Q3	Q4
19	20	20	20	20	21	21	21	21

Investments

The Group's investments were lower than in the same period in 2020, mainly owing to a lower level of investment in ICA Real Estate due to postponed projects and a lower level of investment in land and future locations. Rimi Baltic also had a lower level of investment, as construction of the new warehouse in Riga has now been completed. At the same time, the investment level in ICA Sweden was slightly higher, mainly owing to several projects in online logistics and IT.

Major capex projects include purchases of logistics properties, future store locations, new establishments, investments in the Group's e-commerce and IT investments.

On 8 December 2021 it was announced that ICA Gruppen will invest in a new freezer warehouse in Västerås. The investment is worth SEK 1.8 billion, and the warehouse is planned to be commissioned in 2025.