Interim report January - March 2024

16 May 2024 07:30

Strong growth and further measures to improve profitability

January 1 - March 31, 2024

• Net sales increased 9 percent to SEK 4,320 M (3,973). Organic growth was 11 percent. Net sales were positively impacted by 1 percent due to currency effects.
• EBIT amounted to SEK 146 M (200) and the EBIT margin to 3.3 percent (4.9). EBIT was negatively impacted by items affecting comparability of SEK -54 M (-) during the quarter.
• Adjusted EBIT amounted to SEK 224 M (227) and the adjusted EBIT margin to 5.1 percent (5.6).
• Earnings per share, before and after dilution, decreased to SEK 0.92 (1.43).
• Cash flow from operating activities increased to SEK 285 M (27).
• Net debt in relation to EBITDA decreased to 2.7 (3.3) at the end of the period.
• MEKO's Nomination Committee proposes Dominick Zarcone as new Chairman of the Board.
• MEKO grows in car glass offering - initiates two-year partnership with ALD Automotive/LeasePlan in Sweden.

Significant events after the end of the period:

• MEKO optimizes operations in Denmark to strengthen its position.
• MEKO automates and streamlines the central warehouse in Finland.
• MEKO strengthens its position in Poland through strategic acquisition of Elit Polska.

CEO comments:

During the year's first quarter, we demonstrated robust growth with stronger cash flow supported by a solid underlying business. In parallel, we are implementing several measures to improve profitability and are now seeing the first effects in the form of lower operating expenses - a concerted effort that is continuing in all of our business areas.

Our aim is to be the most comprehensive partner for everyone who repairs, services and maintains cars in northern Europe. We satisfy our customers' needs through a range of well-established brands in eight markets, and I can confirm that the business continued to grow in all markets during the first quarter.

The market trend was more favorable in our larger business areas and slightly more challenging in Poland/the Baltics. We can also note that the Easter break with closed branches and workshops fell in March this year, unlike the year-earlier quarter. Despite this calendar effect, net sales increased 9 percent.

Strong cash flow and stable adjusted EBIT
The favorable sales performance enabled us to strengthen cash flow from operating activities during the quarter. The Sweden/Norway business area performed well, as Sorensen og Balchen in Norway. We could also see a solid underlying trend for the Denmark business area, which is restructuring operations to improve profitability. In Finland, we are taking further measures to achieve the same level of efficiency as in the other business areas and anticipate gradual improvements in 2024, though this has entailed costs.

Overall, we reported a stable adjusted EBIT but a lower adjusted EBIT margin year on year. EBIT declined, partly due to planned costs for implementing a new, common business system and an impairment for accounting purposes of the value of our holding in the listed company Omnicar, resulting from the market's revaluation of the company and similar start-up companies.

Profitability improvements with positive effects
These activities are part of a larger plan aimed at improving our profitability. We launched this initiative In November 2023, and have since then implemented measures in all parts of the company.

This includes a decision to build a new, automated central warehouse in Norway to raise efficiency and improve service levels for our customers. In addition, we are consolidating our Norwegian distribution network, and in parallel launched a streamlining of operations in Sweden. The restructuring in Denmark involves a new, optimized organization in Denmark to strengthen our logistics and service levels. In Finland, we have decided to automate our central warehouse to raise efficiency, reduce costs and expand our lead as the most accessible partner in the independent auto aftermarket in the country.

The first effects of our activities were visible in this quarter. The measures in Sweden made a clear contribution to the profitability improvements in the Sweden/Norway business area. We now expect further improvements as work progresses.

Award for our sustainability performance
We have high ambitions for our sustainability work - MEKO is to be a driving force for increased sustainability across our industry. It is therefore gratifying when our efforts bear fruit. During the quarter, our achievements in sustainability were recognized by EcoVadis, one of the world's leading providers of sustainability ratings. Scoring well-above industry averages across all categories, we are in the top 35 percent of assessed companies. This has inspired us to also continue our focused work in this area.

Strategic acquisition in Poland strengthen us
Continuously improving our operations is part of our strategy. Equally important is growing through carefully selected acquisitions. Therefore, I am pleased to announce that on May 10th, we were able to announce that the Polish company Elit Polska is now becoming part of MEKO after reaching an agreement with the seller LKQ Corporation. Elit Polska is a spare parts wholesaler that complements our operations well with its two warehouses, 49 branches, and 485 employees spread across Poland. This makes MEKO the third-largest company in the Polish automotive aftermarket, where we also see opportunities for significant synergies 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 on May 16, 2024 at 07:30 CET. The interim report is published in Swedish and English. The Swedish version is the original version and has been translated into English.