Interim report – 9M 2017/18

Matas A/S
Interim report (Q1 and Q3)

Interim report – 9M 2017/18

Company announcement no. 13 2017/18

Allerød, 6 February 2018, 2018-02-06 07:59 CET (GLOBE NEWSWIRE) -- Digital
build-up, lower prices and better advice 

“At Matas, we are facing a new market situation, and we are in the process of
reinventing ourselves step by step. In November, we announced a range of
measures to free some DKK 30-40 million for new priorities. The plan has now
been successfully completed. This has already led to lower prices for our
customers on a wide range of well-known everyday products. We are now embarking
on the next steps to enhance the customer experience. 

We are launching a broad-based digital growth plan entitled “Matas 4D”, setting
out, as one of our main goals, to make shopping on faster and easier.
Accordingly, we will soon offer guaranteed next day delivery for orders placed
by 6 p.m. 

At the same time, we are investing in a comprehensive training programme to
take Matas’s distinguising feature, the good advice, to the next level. We want
Matas to be the preferred place to get good advice and learn about new brands”,
said Gregers Wedell-Wedellsborg, CEO of Matas A/S, and added: 

“Sales for the first nine months of the financial year were in line with our
revised guidance, but there are still two sides to the story. Christmas sales
were fairly robust, and grew sales by 40% in the past quarter alone,
but this cannot outweigh the impact of a declining footfall and increasing
competition on our everyday sales. Our performance in the third quarter was
slightly down compared with the same quarter of last year, and we reported an
EBITA margin of 19.5% against 20.2% last year”. 

Q3 2017/18 highlights

  -- Guidance has been revised and Matas now expects a decline in underlying
     like-for-like revenue of 1-2% (previously: a decline of 0-2%) and EBITA
     between DKK 445-460 million (previously: DKK 440-470 million).
  -- In connection with the release of the interim report for Q2 2017/18, Matas
     launched a range of measures to free resources for initiatives to enhance
     the customer experience and add competitive strength. These measures
     included closing down StyleBox as an independent chain during the first
     half of 2018; speeding up efforts to consolidate stores, which led to the
     decision to close four minor stores in the first quarter of 2018; and
     launching a programme to gradually reduce costs over the coming quarters.
  -- The initial efforts to enhance the customer experience and strengthen the
     Group’s competitive power have resulted in a new price strategy for a
     selection of well-known products, which will be marketed at ”Fair prices”,
     as well as a digital reinforcement programme. Concurrently, the process to
     update Matas’ strategy has been launched and is progressing satisfactorily.
  -- Q3 2017/18 revenue came to DKK 1,062.8 million, in line with the DKK
     1,064.3 million reported for Q3 2016/17. Underlying like-for-like sales,
     i.e. sales from stores operated by the Group in both Q3 2017/18 and Q3
     2016/17, were down by 0.8% in Q3 2017/18.
  -- Revenue was supported by increased sales in all shops-in-shop except the
     Material shop. Online sales were up by 40% over the year-earlier period.
     The average basket size grew by 7.2% to DKK 175.3, offsetting the 5.1%
     decline in the number of transactions. A total of 6.0 million transactions
     were completed in the third quarter of the financial year.
  -- High-End Beauty sales developed satisfactorily, offsetting the negative
     impact of declining Mass Beauty sales amid a larger number of competing
     outlets relative to the same period of last year and increased competition
     from supermarkets. Overall, Beauty sales were slightly ahead.
  -- Q3 2017/18 gross profit came to DKK 484.2 million, taking the gross margin
     to 45.6%, which was largely unchanged from 45.8% in Q3 2016/17.
  -- Total costs were up by DKK 7.0 million relative to the year-earlier period.
     Adjusted for non-recurring costs incurred in connection with layoffs and
     store closures, costs increased by DKK 1.5 million.
  -- Q3 2017/18 EBITDA before exceptional items came to DKK 227.0 million for an
     EBITDA margin of 21.4%, as compared with 21.8% for Q3 2016/17. EBITA was
     DKK 207.8 million against DKK 214.6 million in the same period the year
     before, which took the EBITA margin to 19.5% from 20.2% in Q3 2016/17. The
     EBITA margin was driven down by a slightly lower gross margin combined with
     higher costs and amortisation and depreciation charges.
  -- Q3 profit after tax was DKK 134.2 million, and Adjusted profit after tax
     net of amortisation not related to software and exceptional items was DKK
     154.8 million, compared with DKK 147.0 million and DKK 161.8 million,
     respectively, in Q3 2016/17.
  -- Cash generated from operations fell to DKK 329.4 million in Q3 2017/18 from
     DKK 400.6 million in the same period the year before. The free cash flow
     was an inflow of DKK 237.4 million against an inflow of DKK 299.4 million
     in Q3 2016/17. The decline was triggered by a lower EBITDA in combination
     with a smaller working capital reduction than in the same quarter of last
  -- Gross debt stood at DKK 1,509.2 million at 31 December 2017. Net
     interest-bearing debt was DKK 1,457.0 million at 31 December 2017,
     equivalent to 2.5x LTM EBITDA before exceptional items and unchanged
     relative to the end of Q3 2016/17.

9M 2017/18 highlights

  -- 9M 2017/18 revenue was DKK 2,661.7 million, a year-on-year decline of 0.8%.
     Underlying like-for-like revenue was down by 1.0%.
  -- Gross profit for 9M 2017/18 was DKK 1,207.5 million, equivalent to a gross
     margin of 45.4%, down from 46.6% last year.
  -- EBITDA before exceptional items came to DKK 471.0 million, for a 9M 2017/18
     EBITDA margin of 17.7%. EBITA was DKK 415.8 million, equivalent to an EBITA
     margin of 15.6%. For the same period of 2016/17, EBITA was DKK 449.0
     million and the EBITA margin 16.7%.
  -- 9M profit after tax was DKK 248.6 million, and Adjusted profit after tax
     net of amortisation not related to software and exceptional items was DKK
     309.1 million, compared with DKK 286.1 million and DKK 330.6 million,
     respectively, for 9M 2016/17.
  -- The free cash flow came to DKK 296.0 million for 9M 2017/18, down from DKK
     303.3 million in the same period of last year.


Our revised guidance for 2017/18 is:

  -- A decline in underlying like-for-like revenue of 1-2% after taking a
     negative calendar effect into account (previously: a decline of 0-2%)
  -- EBITA, including non-recurring costs incurred in connection with the change
     of Matas A/S’s CEO, is expected to be in the DKK 445-460 million range
     (previously: DKK 440-470 million)
  -- Investments of around DKK 90-100 million, excluding store acquisitions

EBITA is stated before exceptional items as per the definition on page 80 of
the Annual Report for 2016/17. Accordingly, exceptional items related to
planned measures to improve the profit performance are not included in the
EBITA guidance for 2017/18. Non-recurring costs of DKK 12.7 million incurred in
connection with the change of Matas A/S’s CEO are included in EBITA guidance. 

Telephone conference

Matas will host a conference call for investors and analysts on Tuesday, 6
February 2018 at 10:00 a.m. 

The conference call and presentation can be accessed on our investor website: 

Conference call access numbers for investors and analysts:

DK                                                     +45 35 15 80 49

UK:                                                    +44 (0)330 336 9105

US:                                                    +1 646-828-8143

Event code:                                     “Matas” or 3318636

Please call 5 minutes before the conference call begins.

Link to webcast:                                                


Gregers Wedell-Wedellsborg

CEO, tel +45 48 16 55 55

Anders T. Skole-Sørensen

CFO, tel +45 48 16 55 55

Elisabeth Toftmann Klintholm

Head of Investor Relations & Corp. Affairs, tel +45 48 16 55 48

Forward-looking statements This interim report contains statements relating to
the future, including statements regarding the Matas Group's future operating
results, financial position, cash flows, business strategy and future targets.
Such statements are based on management’s reasonable expectations and forecasts
at the time of release of the interim report. Forward-looking statements are
subject to risks and uncertainties and a number of other factors, many of which
are beyond the Matas Group's control. This may have the effect that actual
results may differ significantly from the expectations expressed in the interim
report. Without being exhaustive, such factors include general economic and
commercial factors, including market and competitive conditions, supplier
issues and financial and regulatory issues.