Interim report – Q1 2019/20 Improving top-line and historically strong online sales growth

Company announcement 07 2019/20
Allerød, 20 August 2019

Interim report – Q1 2019/20
(1 April – 30 June 2019)

Improving top-line and historically strong online sales growth

“Overall, we performed in line with our expectations in the first quarter of the financial year. Our investments in innovation and growth in both Matas and Firtal combined with the recent acquisition of Kosmolet A/S resulted in 3.8% top-line growth. Impacted by the lower number of trading days than in the same period last year, our Q1 underlying like-for-like sales were down by 1.2%, but adjusted for the calendar effect, underlying sales improved,” said Gregers Wedell-Wedellsborg, CEO of Matas A/S, and added:

“We are also pleased to note that online sales momentum was maintained with sales via matas.dk surging by an unprecedented quarter-on-quarter growth rate of 67%. Boosted further by the consolidation of Firtal, bringing webshops such as helsebixen.dk, jala-helsekost.dk and made4men.dk, overall online sales tripled compared with the year-earlier period.”

Q1 2019/20 highlights

  • The interim report for Q1 2019/20 is presented in accordance with IFRS 16. However, key financials are also presented before IFRS 16 in order to enable a comparison with Q1 2018/19. IFRS 16 implementation primarily affected EBITDA and EBIT as well as cash flows from operating and financing activities. Revenue and gross margin were not affected by IFRS 16
  • Revenue grew by 3.8% over Q1 2018/19, while underlying like-for-like sales, i.e. sales in stores operated by the Group in both Q1 2019/20 and Q1 2018/19, were down by 1.2% in Q1 2019/20.
  • Revenue was adversely affected by the two trading days fewer this quarter than in Q1 2018/19. The negative calendar effect is estimated to have shaved 1.25 – 1.75% off revenue. Adjusted for this effect, underlying sales are assessed to have grown slightly in the quarter.
  • Online sales via matas.dk were ahead by 67% over the year-earlier period, while overall online sales, including revenue acquired from Firtal, tripled to make up 10.9% of Q1 2019/20 revenue against 3.7% in Q1 2018/19.
  • The gross margin was 45.0%, largely unchanged from 45.2% in Q1 2018/19.

The below comments are based on pre-IFRS 16 numbers.

  • Total costs increased by DKK 28.5 million year-on-year. Other external costs were up by DKK 20.4 million and staff costs by DKK 8.1 million. These increases were driven primarily by the addition of Firtal, the continued digital build-up, increasing marketing activity plus, to a lesser extent, transaction costs incurred in connection with the acquisition of Kosmolet A/S. Costs were in line with management’s expectations.
  • Impacted by higher costs, EBITDA before exceptional items came to DKK 119.8 million, compared with DKK 138.3 million in the same period of last year. The EBITDA margin before exceptional items was 13.7%, down from 16.4% in Q1 2018/19.
  • Disregarding the acquisition of Kosmolet A/S, the free cash flow was down by DKK 80.0 million on the year-earlier period, driven by lower operating income and higher working capital. The working capital was affected by larger inventories and lower trade payables. Reflecting the acquisition of Kosmolet A/S (outflow of DKK 123 million), the free cash flow was an outflow of DKK 129.8 million in Q1 2019/20, compared with an inflow of DKK 72.9 million in Q1 2018/19.
  • Gearing, measured as net interest-bearing debt to EBITDA before exceptional items, was 3.1 against 2.5 at 30 June 2018/19, inflated primarily by the acquisition of Kosmolet A/S.
 After IFRS 16Before IFRS 16Before IFRS 16
(DKKm)Q1 2019/20Q1 2019/20Q1 2018/19
    
Revenue875.6875.6843.8
Gross profit394.0394.0381.7
EBITDA before exceptional items163.2119.8138.3
EBIT70.873.095.1
Adjusted profit after tax66.072.089.7
Free cash flow(86.4)(129.8)72.9
Revenue growth3.8%3.8%1.6%
Underlying like-for-like revenue growth(1.2)%(1.2)%1.1%
Gross margin45.0%45.0%45.2%
EBITDA margin before exceptional items18.6%13.7%16.4%
Net interest-bearing debt/EBITDA before exceptional itemsn.a.3.12.5

Financial targets

The Q1 2019/20 performance was in line with expectations, and the Group consequently maintains its financial targets for financial year 2019/20. Realised and projected KPI levels are set out in the table below.


Financial targets and ambitions		Realised
Q1 2019/20		Targets for
2019/20		Ambitions for 2022/23
    
Customer engagement (M-NPS)64 (index 100)Ongoing improvement70 (index 110)
Revenue/revenue growth*DKK 876 million/+3.8%3.5 – 6.5%Approx. DKK 4.0 bn
Underlying like-for-like revenue growth(1.2)%0.5 – 2.5%Positive
EBITDA margin** before exceptional items (before IFRS 16)13.7%14 – 15%Above 14%
CAPEXDKK 41 millionDKK 200 – 220 millionBelow DKK 90 million
Gearing** (before IFRS 16)3.12.5 – 32.5 – 3

* Includes revenue from Firtal for the period 13 November 2018 to 30 June 2019 and revenue from Kosmolet A/S from 11 June 2019. ** Before effects of IFRS 16, inclusive of Firtal and Kosmolet A/S.

As expected, the acquisition of Kosmolet A/S involved an initial investment of DKK 145 million, of which DKK 10 million was paid in Matas shares. To this should be added contingent consideration of up to DKK 20.0 million.

The Group’s financial targets for 2019/20 are based on assumptions of slightly growing sales of beauty, health and personal care products, a continuing decline in physical store footfall and persistently intensive competition in the beauty, health and personal care market.

Conference call

Matas will host a conference call for investors and analysts on Tuesday, 20 August 2019 at 10:00 a.m.
The conference call and the presentation can be accessed on our investor website: www.investor.en.matas.dk.

Conference call access numbers for investors and analysts:

DK:                                        +45 32 72 80 42
UK:                                        +44 (0) 844 571 8892
US:                                        +1 631 510 7495
Event code:                            2755808

Link to webcast:                     https://edge.media-server.com/mmc/p/vgdm79mg

Contacts

Gregers Wedell-Wedellsborg
CEO, tel +45 48 16 55 55          

Anders Skole-Sørensen
CFO, tel +45 48 16 55 55                  

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

Klaus Fridorf  
Head of Communication, tel +45 61 20 19 97

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.

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