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Annual report 2013

Store sites

For Kesko, the store site network is a strategic competitive factor which provides opportunities for developing business operations and increasing sales and customer satisfaction. The importance of a multi-channel approach is growing in the retail trade, and the increase in e-commerce and e-services combined with a comprehensive store site network is Kesko’s key competitive factor.

Kesko Group’s strategic store sites are properties that are or can be developed into large retail units. They involve important business interests related to the continuity of management, the flexibility of change and the financial value of the premises. In order to protect such interests, Kesko usually prefers to own these properties.

Standard properties are premises owned by Kesko Group, including large properties, without a significant development need, which can be sold and leased back for the Group's business operations. In 2014, a total of 54% store sites were classified as strategic.

Capital expenditure

In view of Kesko’s growth, key capital expenditure comprises grocery trade properties in the largest growth centres in Finland as well as accurately targeted capital expenditure in food store sites and building and home improvement store sites in Russia. Kesko makes capital expenditure only in properties needed in its own or supporting business operations.

The needs of multi-channel business are taken into account when planning new premises and refurbishing the existing ones. As a result of Kesko's internationalisation, capital expenditure outside Finland has become increasingly important.

Kesko's real estate arrangement

Kesko's objective is to set up a limited liability company (joint venture) to own and manage mainly Kesko-owned store sites and shopping centres with Kesko as one of its significant investors. If the joint venture is set up, Kesko Group would continue operating on the store sites under long-term leases signed in connection with their sale. The fair value of store sites planned to be sold to the joint venture from Finland and Sweden has been specified at a maximum of around €670 million. The arrangement is expected to be implemented during the first part of 2015. Launching the joint venture depends, in addition to investor interest, on whether it is possible for Kesko to achieve such terms and conditions in the arrangement that are economically justifiable for it, taking the Group's strong financial position into account.


 

 

Did you know?

When planning K-supermarket Hollola, which was opened in early 2015, the facilities required by e-commerce were taken into account from the very beginning. Store staff will bring customers’ shopping bags directly to their cars. Separate spaces are reserved in the yard for online customers who come to collect and pay for their groceries. The store will have a separate storage and packing area for groceries ordered online. This will ensure the efficiency of service from the perspective of customers and store staff alike.
 
Kesko is committed to improving energy consumption

Kesko participates in the national energy efficiency agreement, in which we are committed to improving our annual energy consumption by 65 GWh by the end of 2016 through various actions. This amount corresponds to the annual energy consumption of some 3,200 one-family houses. During 2014, Kesko improved its energy consumption by 59 GWh and achieved 90% of the objective.

We are constantly developing new energy efficient solutions for construction and real estate use and briefing retail store staff. To enable improvement in energy efficiency, we use a comprehensive monitoring system of energy consumption and remote monitoring of building automation as a part of our daily maintenance.

In 2014, the combined electricity consumption of all properties was calculated to be 754 GWh, compared with 764 GWh in 2013. Despite the slight increase (0.9%) in the property area, total electricity consumption decreased by 1.3%.

Read more in the Environmental impacts section.

Energy efficient construction and property maintenance

When a new store site or shopping centre is being planned and built, the starting point is sustainable development and energy efficiency. In the construction of new buildings and the refurbishment of existing ones solutions that decrease the consumption of materials and energy during the life cycle of the property are introduced. Kesko’s aim is to achieve the lowest life-cycle costs in the trading sector while also ensuring that optimum conditions are maintained for customers, employees and products. Optimum conditions must be taken into account from planning and construction onwards.

Retail stores' energy efficient solutions, such as lids and doors on refrigeration equipment, recovery of condensation heat, refrigeration equipment that uses carbon dioxide, and adjustable and directional lighting provide considerable energy savings.

All new K-food stores have refrigeration equipment with lids and doors. Chest freezers covered with lids help save 40% more energy than uncovered ones.

The new signs of all K-Group stores use LED lighting. This results in savings of 60–70% compared to traditional neon and fluorescent tube solutions.

K-supermarket Postitalo in the centre of Helsinki

Energy efficiency and environmental issues have been taken into account in K-supermarket Postitalo, which opened in central Helsinki in May 2014. When building the retail store, the regulations were stricter than usual, including those concerning illuminated signs on the front, because the building is listed. The store uses energy-saving LED lighting. Refrigerated equipment is based on carbon dioxide technology and energy-efficient options were chosen for refrigerated counters.

K-supermarket Postitalo, which is open every day of the year, has won praise during its first year in business. In the ranking by the UK-based Kantar Retail research company, K-supermarket Postitalo shared third place out of all retail stores evaluated in 2014. The assessment praised the store’s wide range service counters, clean shopping environment and inspirational positioning.

New projects in Itäkeskus and Kivistö

Kesko will build a modern shopping centre on the site of the current K-citymarket in Itäkeskus, eastern Helsinki. In the planning of the new shopping centre special emphasis will be on good accessibility and pleasant outdoor areas. The town plan of the area also enables housing construction.

The new shopping centre will provide customers with a unique shopping experience and companies with new opportunities for multi-channel business. Thanks to technology, enterprises will be able to operate and customers to shop both physically and virtually in the centre.

The first phase of the shopping centre will be completed at the end of 2017. The floor area will be 26,000 square metres and the capital expenditure will be about €100 million.

The urban centre being planned to Kivistö in Vantaa will be the first one in Finland to apply the British ‘One Planet Living’ concept, which relies on the principles of resource wisdom and sustainable development. Kesko is participating in the initiative and is planning to build a new K-citymarket in the urban centre. 

Owned store sites and properties

 

Book value by region, € million

2014

2013

Finland

988

1,004

Other Nordic countries

82

89

Baltic countries and Belarus

43

39

Russia

317

291

Total

1,430

1,423

     

Area by region, 1,000 m²

2014

2013

Finland

770

758

Other Nordic countries

117

121

Baltic countries and Belarus

113

112

Russia

164

143

Total

1,164

1,135

     

Book value by division, € million

2014

2013

Grocery trade

880

849

Home improvement and speciality goods trade

430

432

Car and machinery trade

68

67

Others

52

75

Total

1,430

1,423

     

Area by division, 1,000 m²

2014

2013

Grocery trade

586

556

Home improvement and speciality goods trade

450

448

Car and machinery trade

71

68

Others

57

63

Total

1,164

1,135

     

   

Leased store sites and properties

 

Area by region, 1,000 m²

2014

2013

Finland

2,328

2,317

Other Nordic countries

146

161

Baltic countries and Belarus

459

456

Russia

25

30

Total

2,958

2,963

     

Lease liabilities by region, € million

2014

2013

Finland

2,038

2,154

Other Nordic countries

42

49

Baltic countries and Belarus

175

132

Russia

20

32

Total

2,276

2,368

     

Lease liabilities, € million

2014

2013

No later than one year

343

360

Later than one year and no later than five years

1,065

1,088

Later than five years

868

920

Total

2,276

2,368