Interim report January - June 2022

24 August 2022 07:30

April 1 - June 30, 2022

• Net sales increased 5 percent to SEK 3,357 M (3,210). Organic growth was 2 percent. Net sales were positively impacted by 2 percent due to currency effects.
• Adjusted EBIT amounted to SEK 240 M (314) and the adjusted EBIT margin was 7 percent (10).
• EBIT totaled SEK 185 M (280) and the EBIT margin was 5 percent (9). EBIT was negatively impacted in the quarter by items affecting comparability of SEK 26 M (-).
• Earnings per share, before and after dilution, amounted to SEK 1.73 (3.24).
• Cash flow from operating activities amounted to SEK 387 M (406).
• Net debt was SEK 2,649 M (2,549) at the end of the period, compared with SEK 2,264 M at December 31, 2021.
• The unstable global situation impacted sales and profitability in the quarter in most of the Group’s markets. High buffer inventory was maintained during the quarter to offset the potential impact of disruptions in the supply chain.
• During the quarter, the Parent Company Mekonomen AB (publ.) completed its name change to MEKO AB (publ.).

January 1–June 30, 2022

• Net sales increased 5 percent to SEK 6,512 M (6,211). Organic growth was 1 percent. Net sales were positively impacted by 2 percent due to currency effects.
• Adjusted EBIT amounted to SEK 465 M (538) and the adjusted EBIT margin was 7 percent (9).
• EBIT totaled SEK 375 M (466) and the EBIT margin was 6 percent (7). EBIT was negatively impacted in the period by items affecting comparability of SEK 26 M (-).
• Earnings per share, before and after dilution, amounted to SEK 3.84 (5.10).
• Cash flow from operating activities amounted to SEK 249 M (585).
• Restrictions related to covid-19 affected both the period and the comparative period, but to a varying extent in the different business areas.
• The unstable global situation impacted sales and profitability in the period in most of the Group’s markets, and had a negative impact on cash flow due to the build up of buffer inventory to offset the impact of disruptions in the supply chain.

CEO comments

Organic growth and strengthened position in northern Europe

MEKO stands strong and is reporting positive organic growth for the Group as a whole, despite changes in market conditions and turbulence in our business environment. It is also very satisfying that, during the quarter, we took an important step and strengthened our position through the acquisition of Koivunen, affording us a market-leading position in Finland and Estonia. The acquisition also expands our operations to Latvia and Lithuania. At the same time, generally rising inflation has created a cautious trend in several of our markets, which, combined with unfavorable currency fluctuations, impacted our profitability during the quarter. We now put full focus on using our insights, by acting decisively and methodically to ensure continued profitable growth.

Acquisition of Koivunen – a key step
For many years, MEKO has had a successful strategy for creating value through carefully selected acquisitions. On July 1 when Koivunen became a part of MEKO, we have established ourselves as the leading player in Finland, where we previously had limited operations, and in Estonia, where we were not represented at all. The acquisition also expands our operations to Latvia and Lithuania. The company had 1,740 MSEK in net sales and an EBIT margin of 5.6 percent in 2021. The distribution channels include concept-affiliated and independent workshops anddistributors, industrial customers and export. Koivunen is a prosperous company with strong brands that will continue to be developed in their existing form as a separate business area. This important step eastward means that we are closing in on our goal of becoming the best and most comprehensive partner for everyone that services and maintains vehicles in Northern Europe.

Cautious trend in several markets while Poland reports strong growth
Russia’s invasion of Ukraine has resulted in a humanitarian crisis with many other knock-on effects, such as challenges related to sourcing of materials and increased prices, combined with currency fluctuations and rising inflation. This, combined with high energy and fuel prices, resulted in reduced consumer purchasing power and, consequently as cautious trend in several of our markets during the quarter. The Norwegian and, to a certain extent, the Danish market were affected to a greater extent. For the Group as a whole, net sales increased by 5 percent to SEK 3,357 M (3,210) during the second quarter, which is confirmation of the stability of our underlying business. Organic growth amounted to slightly more than 2 percent, with Inter-Team in Poland standing out in a positive sense with its organic growth of more than 8 percent.

Currency fluctuations and cost increases impacted profitability
Profitability for the second quarter was impacted by the changes in the market. EBIT amounted to SEK 185 M (280) and the EBIT margin to 5 percent (9). A total of SEK -26 M (-) in items affecting comparability related to the acquisition of Koivunen was charged to earnings for the quarter. Adjusted EBIT amounted to SEK 240 M (314) and the adjusted EBIT margin to 7 percent (10). The gross margin rose to 46.3 percent (45.5), largely thanks to previously implemented price adjustments. The change in earnings compared with the corresponding quarter of the preceding year was due in full to cost increases resulting from generally higher inflationary pressure combined with unfavorable currency fluctuations. The situation is being managed resolutely and methodically, and we are drawing on our tried-and-tested ability to transform. We launched several targeted activities in various parts of the operations to reduce our cost base and secure long-term profitable growth. Our flexibility, together with our underlying stable business, makes me confident that the efforts are having the intended effect.

Solid financial position enables accessibility and continued growth
Our financial position remains solid. After the end of the quarter, we signed a new credit facility agreement of SEK 1,965 M, which replaces earlier financing of EUR 178 M. This provides us with both flexibility and strong resilience. Net debt amounted to SEK 2,649 M (2,549) at the end of the second quarter and net debt/EBITDA excluding effects of IFRS 16 amounted to 2.4 times (2.0), which is in the lower end of our target range. Cash flow from operating activities was positive during the quarter and amounted to SEK 387 M (406). We can see major opportunities to increase sales and market shares going forward through responsible investment in increased availability for our customers. Our strategic decision to strengthen our stocks of attractive components and spare parts stands firm and we are now at approximately the same levels as at the close of the first quarter.

Well equipped to continue our journey
I can confirm that we have a fundamentally stable business and that we have demonstrated that we can manage difficulties and challenging market conditions. Today, MEKO has many established brands, covering various wishes and needs, which together with our proven ability to balance our cost base and extract synergies, will enable continued long-term, sustainable growth and profitability. We stand well equipped to now further strengthen our position in all of our markets through transformation toward an even more sustainable and profitable company. We aim to be the best and most complete partner for everyone that services and maintains vehicles in our markets – today and in the future.

Pehr Oscarson
President and CEO

This information is such information that MEKO AB (publ) is obliged to make public pursuant to 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 August 24, 2022. The interim report is published in Swedish and English. The Swedish version is the original version and has been translated into English.