Interim report January - September 2022

02 November 2022 07:30

July 1–September 30, 2022

  • Net sales increased 23 percent to SEK 3,660 M (2,968). Adjusted for the acquisition of Koivunen, net sales increased 8 percent. Organic growth was 4 percent. Net sales were positively impacted by 3 percent due to currency effects.
  • Adjusted EBIT amounted to SEK 281 M (290) and the adjusted EBIT margin was 7.5 percent (9.6).
  • EBIT amounted to SEK 235 M (255) and the EBIT margin was 6.3 percent (8.5). EBIT was negatively impacted in the quarter by items affecting comparability of SEK 22 M (0), attributable to transaction tax in conjunction with the acquisition of Koivunen.
  • Earnings per share, before and after dilution, amounted to SEK 2.23 (3.02).
  • Cash flow from operating activities amounted to SEK 473 M (450).
  • Net debt was SEK 3,659 M (2,275) at the end of the period, compared with SEK 2,264 M at December 31, 2021 and SEK 2,649 M at June 30, 2022.
  • The unstable global situation impacted sales and profitability in the quarter in the Group’s markets.
  • On July 1, MEKO finalized the acquisition of Koivunen in Finland for a purchase consideration of EUR 131 M and the operations were included in MEKO’s financial statements from that date.
  • As of the third quarter of 2022, the Group reports according to five business areas: Denmark, Finland, Poland/the Baltics, Sweden/Norway and Sørensen og Balchen (Norway). Comparative figures have been restated.

January 1–September 30, 2022

  • Net sales increased 11 percent to SEK 10,172 M (9,180). Adjusted for the acquisition of Koivunen, net sales increased 6 percent. Organic growth was 2 percent. Net sales were positively impacted by 3 percent due to currency effects.
  • Adjusted EBIT amounted to SEK 746 M (828) and the adjusted EBIT margin was 7.2 percent (8.9).
  • EBIT amounted to SEK 610 M (721) and the EBIT margin was 5.9 percent (7.7). EBIT was negatively impacted in the period by items affecting comparability of SEK 48 M (0), attributable to costs and transaction tax in conjunction with the acquisition of Koivunen.
  • Earnings per share, before and after dilution, amounted to SEK 6.07 (8.12).
  • Cash flow from operating activities amounted to SEK 722 M (1,035).
  • Restrictions related to covid-19 affected both the period and the comparative period, but to a varying extent in the different business areas.
  • During the period, the Parent Company Mekonomen AB (publ.) completed its name change to MEKO AB (publ.).
  • 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.

Vd:s kommentar

A sign of strength for MEKO's strategy

The third quarter clearly demonstrates the underlying strength of MEKO’s strategy. Despite the turbulent times, with
rising inflation and interest rates, we have increased growth and taken important steps to strengthen our business.
Cash. Cash flow was strengthened, profitability remained at a healthy level and we are working purposefully to
extract synergies and reduce costs in an optimal manner. With the acquisition of Koivunen, we have strengthened our
position in northern Europe and created an additional platform for continued long-term profitable and sustainable
growth. There is a fundamental stable demand for vehicle servicing where MEKO is leveraging its position as industry
leader in northern Europe.

Strong growth in Poland and the Baltics – more cautious in Norway and Denmark
With the acquisition of Koivunen, MEKO has gained a much stronger position – no other company can provide a similar offering of vehicle servicing and spare parts in the countries around the Baltic Sea. This strategic step also involves substantially increased opportunities to improve profitability in the long term. We can see at the same time that the market situation in the third quarter varies according to region. Rising prices and uncertainty about the economic situation is giving rise to caution, but the picture is mixed.

Organic growth is accelerating in the key growth markets of Poland and the Baltics by a clear 11 percent. Developments in Denmark and Norway are more cautios due to a decline in general consumer purchasing power. Overall, the Group’s net sales increased by 23 percent to SEK 3,681 M (2,968) during the quarter, mainly driven by the acquisition of Koivunen. Excluding the acquisition, organic growth was 4 percent. I consider this as further clear confirmation that MEKO’s business model stands firm regardless of the economic situation. There is constant demand for goods and services linked to the need for vehicles that are always in working order. MEKO’s vision is to make this mobility possible also in the future, regardless of the technology in the cars. For us, it is only natural that we are leading the industry’s transformation with the market’s most comprehensive service offering for electric cars.

Continued cost focus and healthy level of profitability
MEKO has extensive experience of being flexible and successful in reducing costs. During the year, we launched a large number of activities in response to rising prices, currency fluctuations and uncertainty in the markets. Our activities have an immediate positive impact on profitability, while some effects will be felt gradually. Overall, we have reported favorable profitability that is following a long-term positive trend for the Group, which is satisfying. EBIT for the third quarter amounted to SEK 235 M (255) and the EBIT margin was 6.3 percent (8.5). Earnings were also charged with SEK -22 M (–) related to the acquisition of Koivunen. Adjusted EBIT amounted to SEK 281 M (290) and the adjusted EBIT margin to 7.5 percent (9.6). The gross margin fell slightly to 45.1 percent (46.4), mainly due to currency fluctuations.

Strong cash flow underpins financial position
We reported strong cash flow from operating activities during the third quarter, driven by favorable profitability and slightly lower tied-up working capital. Our financial position remains solid, despite an increased debt/equity ratio as a direct result of the acquisition of Koivunen. Net debt amounted to SEK 3,659 M (2,275) and net debt/EBITDA excluding the effects of IFRS 16 to 3.4 times (1.8), which is slightly above our target of 2–3 times. We can see major opportunities for continued growth and higher market shares through responsible investment in availability for our customers. Our strategic decision to maintain comprehensive stocks of attractive components and spare parts stands firm, though we have reduced the levels slightly as a stabilization in the supply chain was noted during the quarter.

Well prepared for the future
Growth through carefully chosen acquisitions is a key part of MEKO’s tried and tested way of creating value. As previously communicated, the acquisition of Koivunen is expected to produce synergies of about SEK 40 M. Following the consolidation of Koivunen at the beginning of the quarter, we have learned more about the operations and also identified opportunities to create even greater synergies. To achieve this, Koivunen has been divided into two areas and incorporated with other parts of the Group. Koivunen Finland and Mekonomen Finland form the new Finland business area, while operations in Estonia, Latvia and Lithuania merged with Inter-Team into the Poland/the Baltics business area. As a consequence, business area FTZ changes its name to Denmark and Meca/Mekonomen to Sweden/Norway.

Alongside of this, we continued our strategic prioritized work to develop MEKO’s business with the aim of meeting and creating demand for new services. One important, proactive step was taken during the quarter when we signed a partnership agreement with Mobivia Fleet Solutions, part of Mobivia SA. The agreement will offer our fleet customers a multi-brand solution in Europe and thereby access to completely new markets. The partnership offers existing customers and new electric vehicle producers service in our joint markets.

Taken together, MEKO stands strong. We have affirmed our position as industry leader and operate in a new, broader international context. This also offers more opportunities for an increase in profitability and growth. We will capitalize on these opportunities.

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 November 2, 2022. The interim report is published in Swedish and English. The Swedish version is the original version and has been translated into English.

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