Ahlsell Q2 2018: High demand, successful initiatives and strong results

Interim second quarter report 2018

Second quarter 2018

• Net sales increased by 18% to MSEK 8,056 (6,818). Organic growth was 8% (8).
• Operating profit (EBIT) increased by 24% to MSEK 582 (471). The number of trading days had a positive effect of MSEK 44 on operating profit for the quarter.
• Profit (EBITA) increased by 21% to MSEK 678 (558), with an EBITA margin of 8.4% (8.2). Adjusted EBITA for the previous year was MSEK 570, with an EBITA margin of 8.4%.
• Profit after tax was MSEK 507 (308). Recalculated deferred taxes following the decision to introduce a new tax rate in Sweden had a positive effect of MSEK 92 on tax expense.
• Diluted earnings per share amounted to SEK 1.18 (0.71). The change to the tax rate in Sweden had a positive effect of SEK 0.21 earnings per share.
• Two acquisitions were completed during the quarter, with estimated combined annual sales of MSEK 70, distributed as follows: Norway MSEK 40 and Sweden MSEK 30. Additionally, an agreement to acquire Kahipa Oy in Finland, with estimated annual sales of MSEK 35, was signed during the quarter. Closing was in early July.

Interim period January - June 2018

• Net sales increased by 14% to MSEK 15,217 (13,387). Organic growth was 8% (8).
• Operating profit (EBIT) increased by 14% to MSEK 1,043 (913).
• Profit (EBITA) increased by 13% to MSEK 1,231 (1,088), with an EBITA margin of 8.1% (8.1). Adjusted EBITA for the previous year was MSEK 1,099, with an EBITA margin of 8.2%.
• Profit after tax was MSEK 831 (643).
• Diluted earnings per share amounted to SEK 1.93 (1.47). The change to the tax rate in Sweden had a positive effect of SEK 0.21 earnings per share.
• Five acquisitions with estimated combined annual sales of MSEK 761 were completed during the interim period. An agreement was also signed for a further acquisition with estimated annual sales of MSEK 35.

Statement from the CEO

High demand, successful initiatives and strong results

The combination of continuing high demand and successful initiatives led to a strong second quarter for Ahlsell. Net sales increased by 18% and for the first time we exceeded 8 billion in one quarter.

We achieved an organic growth of 8%, as a result of a good market development and an attractive customer offering, which led to stronger positions. An example of where we strengthened our position is within personal protective equipment, where we succeeded with a combination of acquisitions and our own initiatives. To ensure that we remain the customer’s natural choice also in the future, we have, for example, developed a Group-wide function in 2018, that will drive the development within digital services.

We also continued to deliver on our acquisition strategy and made acquisitions in all our three main markets. Overall acquired growth accounted for 5% of the quarter’s sales growth.

Profit measured as adjusted EBITA was also strong and increased by 19% compared with the previous year. The adjusted EBITA margin was unchanged at 8.4%. The EBITA is currently somewhat negatively affected by, among other things, growth-promoting initiatives such as targeted sales and marketing initiatives, aiming to further strengthen our position, primarily in Norway and Finland. As always, acquisitions also have an initial diluting effect on the EBITA margin. However, acquisitions are over time, just as they always have been, an important success factor which strongly contributes to increased sales and improved profitability.

While we see our offensive measures producing returns in the form of strong sales growth, we are continuously trimming our organisation, which means that we have a number of cost-saving and efficiency-improving measures under implementation in different areas of our main segments. For example, measures are being planned in ViaCon, which was acquired in November 2017. Third-quarter earnings are expected to be affected by restructuring costs of approximately MSEK 30.

In Sweden, we achieved organic growth of 8%. Our targeted efforts to create customer value have produced results. We won several important contracts during the quarter – in heavy industry, infrastructure, installation and construction – which is testimony to the success of our initiatives aimed at the customer segments. In new construction, we continued to experience high customer demand for both commercial and residential properties. The growth rate in the renovation market was stronger than in previous quarters. In order to remain the best alternative for customers in the future, we continue to invest in the organisation – both in e-commerce and branches. In total, we have established seven new branches in the last twelve months.

In Norway, it is pleasing to see our initiatives producing results. During the quarter, we strengthened our market position further within prioritised customer segments and achieved strong organic sales growth of 9%. The high growth is partly attributable to the lack of an Easter effect* but also to a good underlying market for installation products where our competitive offering is contributing. For example, the sustainable initiative; “efficient construction site” has led to further public contracts. In addition, the acquisition of Bekken & Strøm has developed well and the improved product offering within personal protective equipment has resulted in Ahlsell winning several new deals. We are now clearly one of the market leaders in personal protective equipment in Norway.

In Finland, market activity during the quarter was good and we achieved organic growth of 5%. Our sales to customers in facility management, installation and construction developed well. As in previous quarters, southern and western parts of Finland are growing fastest and we continue our initiatives to strengthen the position in these regions. During the quarter, an agreement was signed to acquire Kahipa Oy, a distributor of HVAC & Plumbing fastenings and installation tools in southern Finland with estimated annual sales of MSEK 35.

Outlook

Within industry and infrastructure, everything points to continuing strong demand in the near future. There has been a decline in building starts in new residential construction, but we have not yet seen any significant effect on our sales. On the other hand, we are already seeing signs of an increasing activity level in renovation. This indicates that demand for renovation is now picking up, as demand for new construction is expected to decline. Just as it has done historically.

I am certain that with our committed employees, the best customer offering and our broad market exposure, we stand strong. Overall demand is expected to remain favourable for Ahlsell in the coming quarters.

Johan Nilsson, President and CEO

Webcast & conference call

At 10.00 on the report issue date, the Company will host a webcast, with President and CEO Johan Nilsson and CFO Kennet Göransson presenting the report. The presentation will be conducted in English and can be followed via webcast and conference call.

Link to the webcast: http://www.financialhearings.com/event/10699

Telephone number for the conference call: SE: +8 5055 6453, UK: +44 203 008 9811, US: +1 855 831 5944.

For further information, please contact:
Karin Larsson, Head of IR and external communications
+ 46 8 685 59 24, Karin.Larsson@ahlsell.se

Johan Nilsson, President and CEO Ahlsell AB
+46 705 532 829, Johan.Nilsson@ahlsell.se

Kennet Göransson, CFO
+46 706 211 294, Kennet.Goransson@ahlsell.se

Ahlsell is the Nordic region’s leading distributor of installation products, tools and supplies for installers, construction companies, facility managers, industrial and power companies and the public sector. The unique customer offer covers more than one million individual products and solutions. The Group has a turnover of just over SEK 29 billion and is listed on Nasdaq Stockholm. About 97% of revenue is generated in the three main markets of Sweden, Norway and Finland. With about 5,800 employees, more than 230 branches and three central warehouses, we constantly fulfil our customer promise: Ahlsell makes it easier to be professional!

Press release, July 19, 2018

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