Interim report January - March 2018

09 May 2018 07:30

1 January-31 March 2018

● Revenue amounted to SEK 1,469 M (1,518). Adjusted for currency effects and calculated on the comparable number of workdays, revenue rose 1 per cent. Sales in comparable units declined 4 per cent in local currency.
● EBITA amounted to SEK 89 M (155) and the EBITA margin was 6 per cent (10).
● EBIT totalled SEK 60 M (126) and the EBIT margin was 4 per cent (8). EBIT was negatively impacted by items affecting comparability of SEK 20 M (0) attributable to impairment of DAB product stocks for the Norwegian market.
● EBIT adjusted for items affecting comparability was SEK 80 M (126).
● The gross margin was 53.0 per cent (53.6).
● Earnings per share, before and after dilution, amounted to SEK 1.15 (2.33).
● Cash flow from operating activities amounted to SEK 6 M (37).
● Net debt was SEK 1,529 M (1,457) at the end of the period, compared with SEK 1,444 M at year-end.

CEO comments

Stable sales in the core business, but poor EBIT due to fewer workdays, DAB and a weakened Swedish krona
The first quarter was challenging for Mekonomen Group. As previously communicated on 9 April 2018, we were adversely impacted by significantly lower sales of DAB products in Norway, fewer workdays due to the timing of Easter and a weak Swedish krona.

Mekonomen Group’s total revenue fell 3 per cent in the first quarter compared with the year-on-year period. Adjusted for the number of workdays and currency effects, revenue rose 1 per cent.

In the first quarter, all segments reported lower net sales compared with the year-on-year quarter. Adjusted for the number of workdays and currency effects, the sales development for MECA was positive and sales were unchanged for Mekonomen, while sales in Sørensen og Balchen fell 9 per cent due to lower sales of DAB products.

Sales to affiliated workshops rose 5 per cent in the first quarter, and sales of spare parts and accessories in our proprietary brand ProMeister were in line with our other sales.

EBIT was adversely impacted by lower sales, a weak Swedish krona and impairment
EBIT for the Group amounted to SEK 60 M (126) in the first quarter, negatively impacted by items affecting comparability of SEK 20 M (0), due to impairment of DAB product stocks. EBIT adjusted for items affecting comparability decreased to SEK 80 M (126). The majority of the remaining decline of SEK 46 M is attributable to lower sales of DAB products with an estimated impact on EBIT by SEK -10 M, fewer workdays with an impact of approximately SEK -20 M, and exchange losses in the operating result from revaluation of balance sheet items of SEK -9 M.

In the first quarter, the weakening of SEK against EUR affected our purchasing costs upwards, which we partly compensated by raising our selling prices. However, our adjustments of selling prices get a slight time lag, which resulted in a negative effect on gross margin in the first quarter.

Mekonomen’s Swedish operations continued to show stability
In the quarter, the Swedish operations within segment Mekonomen reported a maintained stable development, which is a confirmation that our initiatives to regain sales growth remain effective. However, there still requires considerable work to gradually increase our market share and further improve profitability.

DAB sales trend in Norway
Due to Norway’s transition to digital radio in 2017, demand and sales of DAB-related products increased in the preceding year, with a subsequent positive effect on net sales and EBIT in our Norwegian operations. However, demand for DAB products was lower than both we and the rest of the market expected and already in the fourth quarter we reported sales drop of DAB products. These sales declined significantly in the first quarter of this year, which had negative impact of approx. SEK 50 M on net sales compared with the first quarter of 2017. The negative deviation against 2017 will continue in the second quarter but in the third quarter we see the gaap closing. A review of DAB inventories identified impairment loss of SEK 20 M, which affected gross profit in the first quarter.

Market development
We perceived a continued slow market growth in both Sweden and Norway in the first quarter.

Due to the growing fleet of cars in recent years, we see potential for a growing overall market in the future, provided that car scrapping and export of cars do not exceed current levels. However, we do not expect any major change in this market over the next quarters.

Future focus
For the rest of the year we will continue to focus on driving profitable sales growth in all of our Group companies. We continue to evaluate the companies in our business and as a consequence we now in May divested Marinshopen

Our two main strategic projects are proceeding as planned. The Group-wide shared central warehouse in Strängnäs is estimated to generate cost savings of approx. SEK 50 M from 2020. The new digital spare parts catalogue will give the workshops a broader assortment and improved search function. Testing of the new spare parts catalogue in the Norwegian market in the Mekonomen segment is now complete and roll-out to the workshops has commenced. Testing in the Swedish market, within Mekonomen, is ready to start.

We are reviewing our selling prices on a regular basis and are looking for further possibilities to compensate cost increases due to the continued weakening of the Swedish krona with price increases and cost cuts.

The first quarter did not live up to my expectations and I am not satisfied with either the sales or earnings trend during the quarter. Nonetheless, I remain optimistic about the future due to a stable development in our core business, particularly in light of the progress we see in regaining a positive development in Mekonomen’s Swedish operations.

Pehr Oscarson

President and CEO

For further information, please contact:
Pehr Oscarson, President and CEO, Mekonomen AB, tel +46 (0)8-464 00 00
Åsa Källenius, CFO, Mekonomen AB, tel +46 (0)8-464 00 00
Helena Effert, IRO, Mekonomen AB, tel +46 (0)8-464 00 00

This information is such information that Mekonomen AB (publ) is obliged to publish in accordance with the EU Market Abuse Regulation and the Securities Market Act. The information was submitted for publication, through the agency of the contact person set out above, at 07:30 a.m CET on 9 May 2018.