Interim report January - September 2016

11 November 2016 07:30

SUMMARY OF THE THIRD QUARTER, 1 July - 30 September 2016 1)                                  

● Revenue increased 2 per cent to SEK 1,432 M (1,405). Adjusted for currency effects and calculated on the comparable number of workdays, revenue rose 2 per cent. Sales in comparable units rose 2 per cent.
● EBITA amounted to SEK 154 M (196) and the EBITA margin amounted to 11 per cent (14).
● EBIT amounted to SEK 125 M (168) and the EBIT margin was 9 per cent (12). EBIT was adversely affected by non-recurring effects of SEK 18 M (0), of which SEK 13 M (0) pertain to personnel-related non-recurring costs for persons who have been part of group management, mainly the former CEO in an amount of SEK 11 M (0).
● The gross margin amounted to 54.5 per cent (55.8).                                                
● Earnings per share, before and after dilution, amounted to SEK 2.20 (3.01).                                   
● Cash flow from operating activities amounted to SEK 78 M (155), of which discontinued operations amounted to SEK -3 M (-18).                                                  
● Net debt at the end of the period amounted to SEK 1,620 M (1,760), compared with SEK 1,626 M at year-end.
● After the end of the period Mekonomen Group has signed an agreement to divest the Danish business to T.Hansen Gruppen / AD Danmark. The transaction will be completed on 28 December 2016 and will result in a negative non-recurring EBIT effect of SEK 25 M in the fourth quarter 2016.

1) During the first quarter of 2015, the last two stores in Denmark were discontinued and the Danish store operation is presented in the 2015-2016 interim reports according to the rules on discontinued operations in IFRS 5. The Danish store operation was previously included in the MECA segment. All amounts pertain to continuing operations except cash flow and net debt.          

CEO’s comments

A result weighed down by Mekonomen Sweden and non-recurring effects
 
As acting President and CEO of Mekonomen Group since October 6, I note that we have a weak result in the third quarter. Together with the management team, I have taken measures aimed at reversing the trend in Mekonomen Sweden. After the end of the period an agreement has been signed to divest the Danish business.

In the third quarter, the sales growth in the Group remained favourable in MECA, Mekonomen Norway and Sørensen og Balchen and we believe that these units strengthened their market shares. Mekonomen Sweden had a continued weak quarter and lost market shares. Earnings in the Group were negatively impacted by the development in Mekonomen Sweden and by non-recurring costs related to changes in management and store closure. EBIT in the third quarter amounted to SEK 125 M (168), including non-recurring costs of SEK 18 M (0).

Mekonomen Sweden – further measures required
In Mekonomen Sweden, the focus during the quarter has been on correcting the implementation problems communicated earlier with the new sales organisation and new store data system. This had a negative impact on sales and earnings. Since I took up my position, I have seen that we must take further action and the sales organisation is decentralised so that the stores are regaining their traditional strong role, in order to strengthen entrepreneurship.

Regarding the store data system, which has taken a lot of strength from the stores, we have isolated the problem to the 30 stores where the system was implemented in order to successively regain growth and profitability in these. We are not there yet and there will be continued implementation in 2017 only if we have achieved success in the current 30 stores. In general, we will reduce the pace of change considerably in our business-critical IT systems, where the only implementation that is definite is an upgrade of the wholesaler system in Mekonomen during 2017, which is a necessary element of the preparations for a new central warehouse structure.

The cost and efficiency program, with anticipated savings of SEK 25 M from 2017, is proceeding according to plan with only a marginal effect on earnings in the third and fourth quarters. In the fourth quarter of 2016, Mekonomen Sweden and Mekonomen Norway will have a non-recurring cost totalling SEK 6 M related to the recall of Volvo cars in which defective driving belts were installed. The issue of responsibility for these defective driving belts is under investigation. Main focus in Mekonomen Sweden is now on further developing our customer offering, re-generating growth and advancing our positions.

Strong sales growth to affiliated workshops
It is gratifying that sales to affiliated workshops continued the strong growth in the third quarter, which is the part of the market that we regard as strategically most important for growth. Sales in comparable units in the Group rose 2 per cent during the quarter and sales of spare parts under our own ProMeister brand continued to develop well.

Divestment of the Danish operation
The loss in our export business to Denmark was SEK 6 M for the quarter, which is a reduced loss compared with the third quarter of 2015. Agreement was signed after the end of the period with T. Hansen Gruppen / AD Danmark for divestment of the Danish business. The transaction will generate a negative non-recurring effect of SEK 25 M in the fourth quarter, in addition to the ordinary result generated by the Danish operation in the fourth quarter. The transaction means that Mekonomen Group will have exited Denmark and will therefore not incur any losses related to Denmark from 2017.

Market development remains stable
The market was stable during the quarter. We see potential for an increasing overall market going forward, as a result of higher sales of new cars and a growing fleet of cars in our main markets Norway and Sweden in recent years. However, we expect no change in the market during the remainder of the year since the expanding fleet of cars reaches the aftermarket first when the cars are three years or older.

Growth and innovation
The project to establish a new Swedish automated central warehouse and our most important strategic project in digitalisation, our new catalogue, are proceeding according to plan.

Our focus ahead is on further strengthening our customer offering and driving sales growth in all of our Group companies. We will capitalise on the strong entrepreneurial spirit and our committed employees in the Group to strengthen our market position.

Pehr Oscarson

Acting President and CEO

For further information, please contact:
Pehr Oscarson, Acting President and CEO, Mekonomen AB, tel +46 (0)8-464 00 00
Per Hedblom, CFO Mekonomen AB, tel: +46 (0)8-464 00 00

This information is information that Mekonomen AB (publ) is obliged to make public persuant to the EUMarket Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 07:30 a.m CET on 11 November 2016.