Year-end report January - December 2016

15 February 2017 07:30

1 October - 31 December 2016 1)
● Revenue increased 4 per cent to SEK 1,508 M (1,447). Adjusted for currency effects and calculated on the comparable number of workdays, revenue decreased 1 per cent. Sales in comparable units rose 1 per cent.
● EBITA amounted to SEK 103 M (138) and the EBITA margin amounted to 7 per cent (10).
● EBIT amounted to SEK 74 M (109) and the EBIT margin was 5 per cent (8). EBIT has been negatively affected by non-recurring effects totalling SEK 31 M (21), of which SEK 6 M (0) are related to recall of Volvo cars in which defective driving belts had been installed and SEK 25 M (0) are related to divestment of the Danish business.
● The gross margin amounted to 52.0 per cent (54.2), of which non-recurring effects have affected gross margin negatively by 2.3 percentage points (neg: 0.8) in the fourth quarter.
● Earnings per share, before and after dilution, amounted to SEK 1.83 (2.14).
● Cash flow from operating activities rose to SEK 208 M (195), of which discontinued operations comprised a negative SEK 9 M (pos: 13).

1 January - 31 December 2016 1)
● Revenue increased 3 per cent to SEK 5,937 M (5,761). Adjusted for currency effects and calculated on the comparable number of workdays, revenue rose 4 per cent. Sales in comparable units rose 4 per cent.
● EBITA amounted to SEK 594 M (726) and the EBITA margin amounted to 10 per cent (13).
● EBIT amounted to SEK 481 M (616) and the EBIT margin amounted to 8 per cent (11). EBIT was adversely affected by non-recurring effects of SEK 58 M (22).
● Earnings per share before and after dilution amounted to SEK 9.32 (11.77).
● Cash flow from operating activities rose to SEK 544 M (439), of which discontinued operations comprised a negative SEK 17 M (neg: 134).
● Net debt amounted to SEK 1,437 M (1,626).
● The Board of Directors proposes a dividend of SEK 7.00 (7.00).

CEO’s comments

Year 2016 – An eventful year overshadowed by weak development in Mekonomen Sweden
2016 was an eventful year for Mekonomen Group and for me who was entrusted to take over as acting CEO in October. During the year important decisions were taken and several initiatives were started in order to strengthen the Group for the future. We decided to establish a new automated central warehouse for our operations in Sweden, we divested the Danish operation and launched the booking service, "pris direkt". These are some examples of events during the year. However, the year has mostly been characterised by the weak development in Mekonomen Sweden.

Fourth quarter – the result heavily affected by non-recurring effects
In the fourth quarter, the sales in the Group increased by 4 per cent. The sales remained favourable in MECA and Sørensen og Balchen while the sales was weak in Mekonomen Sweden and Mekonomen Norway. The result in the Group was negatively impacted by the development in Mekonomen Sweden and by non-recurring costs related to divestment of the Danish operation and recall of Volvo cars in which defective driving belts had been installed. EBIT amounted to SEK 74 (109) M in the fourth quarter, including non-recurring effects totalling SEK 31 (21) M. Cash flow from operating activities increased to SEK 208 (195) M.

In the quarter we have seen a continued pressure on gross margin, especially in Norway, mainly driven by increased share of our sales to affiliated workshops and large customers, as well as price competition in Norway. We expect this trend will continue going forward.

Stable development in MECA and Sørensen og Balchen
MECA was negatively affected by Denmark and Opus Equipment in the quarter. Excluding these operations MECA reported an operating profit in line with same period last year.

As previously announced, the Danish operation was divested 28 December. MECA’s operating profit was impacted by the non-recurring cost of SEK 25 M related to the divestment and by the operating loss in Denmark until 28 December. Opus Equipment, included in MECA, has had a negative development in the quarter. Measures are taken to restore profitability in Opus Equipment.

Sørensen og Balchen has in 2016 generated its best result ever, with a favourable sales development of accessories and with good cost control.

Mekonomen Sweden – the challenges not yet solved
Focus during the quarter has been the efforts to re-generate sales growth in Mekonomen Sweden. During the quarter, a more decentralised sales organisation was reinstated in Mekonomen Sweden, where the store managers are given more opportunities to run their own local business. The measures have not yet been completed.

The store data system has been stabilised in the 30 stores where it has been installed and we estimate that the system has not affected the sales negatively from the end of the quarter. All initial issues are not yet solved and we will evaluate the next step during the first quarter. Continued implementation in 2017 will only occur if we over a longer period of time have at least the same growth and profit in these 30 stores, as in other stores in Mekonomen Sweden.

Strong sales growth to affiliated workshops
The sales to affiliated workshops presented a strong growth in the quarter, which is the part of our business that we regard as strategically most important for growth. Also, the sales of spare parts under our own ProMeister brand had a positive development in the quarter.

Market development remains stable
We assess that the market was stable during the fourth quarter. Provided that scrapping or export of cars do not increase, we see potential for an increasing overall market in 2017, mainly driven by a strong sales of new cars in recent years and a growing car fleet in Norway and Sweden. Compared to last year we have not seen same strong chill effect this January, with some negative effect on sales of cold related products.

Focus 2017
Focus in 2017 is to drive growth in all our Group companies, where turning the development in Mekonomen Sweden has the highest priority. During the year we will strengthen our customer offering, partly by launching new categories within ProMeister and launching of the next generation spare part catalogue and e-commerce platform. We also continue to focus on development of the offering to our affiliated workshops. The project to establish a new Swedish automated central warehouse is proceeding as planned.

Although the main focus is to increase sales, it is important that it is done with good cost control. As a consequence we will expand the previously communicated cost and efficiency program from SEK 25 M to SEK 45 M on an annual basis, with full effect from the third quarter 2017. We will also have more focus on streamlining and optimising our local inventories in the stores to further strengthen the cash flow.

With the strength of our different concepts and with the power of innovation and entrepreneurial spirit among our employees I look forward in 2017 to us continuing to be first choice for the workshops and the car owners.

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 EU Market 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 15 February 2017.