Interim report January - March 2016

1 January - 31 March 2016 1)

● Revenue increased 3 per cent to SEK 1,424 M (1,382) and has been negatively affected by Easter. Excluding the acquisition of Opus Equipment, revenue increased 1 per cent. Adjusted for currency effects and calculated on the comparable number of workdays, revenue increased 9 per cent. Sales in comparable units rose 4 per cent.
● EBITA amounted to SEK 149 M (169) and the EBITA margin was 10 per cent (12).
● EBIT amounted to SEK 121 M (142) and the EBIT margin was 9 per cent (10). MECA’s export business to Denmark had a negative impact of SEK 5 M on EBIT.
● The gross margin was 54.2 per cent (55.5).
● Earnings per share, before and after dilution, amounted to SEK 2.28 (2.88).
● Cash flow from operating activities rose to SEK 30 M (neg: 47), of which discontinued operations comprised a negative amount of SEK 3 M (neg: 84).
● Net debt at the end of the period amounted to SEK 1,624 M (1,693), compared with SEK 1,626 M at year-end.

1) During the first quarter of 2015, the last two stores in Denmark were discontinued and the Danish store operation is presented in the 2015-2016 interim reports in accordance with IFRS 5, Non-current Assets Held for Sale and Discontinued Operations. The Danish store operations were previously included in the MECA segment. With the exception of cash flow and net debt, all amounts pertain to continuing operations.

CEO’s comments

Favourable underlying growth but weaker result

Underlying growth for Mekonomen Group remained favourable in the first quarter, despite negative Easter effect. EBIT was lower compared with the first quarter of 2015, a main cause being a weak EBIT in Mekonomen Sweden.

The Group’s revenue rose 3 per cent in the first quarter, representing favourable underlying growth of 9 per cent. As in the fourth quarter, growth was driven in the Group primarily of sales to affiliated and other workshops. Sales of our proprietary brand, ProMeister, was good and in the first quarter, sales of ProMeister accounted for some 12 per cent (10) of the Group’s combined spare parts sales.

EBIT declined to SEK 121 M (142). In addition to the negative effect of Easter, operating profit was affected by weak profitability of Mekonomen Sweden, the loss in Denmark and a lower gross margin of the Group, mainly driven by an unfavourable product mix.

In the first quarter Mekonomen Sweden stands for the largest negative impact on EBIT, where negative effect of lower gross margin is not sufficiently offset by increased sales. After the reorganisation that was implemented in late 2015, we still do not see that new working methods and the introduction of retail store system have the desired effect on sales.

The negative product mix effect is mainly a seasonal effect in the first quarter.

The loss in Denmark during the first quarter was halved, compared with the end of 2015, and we have a continued focus on cost efficient increase of sales in Denmark.

MECA’s EBIT in the first quarter, excluding Denmark and the acquired business Opus Equipment, was largely in line with the preceding year, despite fewer workdays. EBIT for Sørensen og Balchen, in local currency, was in line with the preceding year. Mekonomen Norway had a lower gross margin due to consumer campaigns, which adversely affected EBIT.

We expect conditions for a slightly stronger overall market in 2016, primary as a consequence of favourable new car sales in the recent years. For Mekonomen Group, the main potential for a stronger market is linked to a growing fleet of cars aged three years and older.

Focus 2016
In 2016, the sales growth is our main focus. Our cost reduction programs have been implemented according to plan and in 2016 we put our energy to increase the total sales. We continue to see the most potential for growth in our core business to B2B customers. A particular focus is the growth in Mekonomen Sweden, where new working methods with increased presence at customer is expected to give positive effects. Parallel to this, we will intensify our marketing efforts in Mekonomen Sweden. Continued priority in 2016 is to cost effective increase sales in Denmark.

Our projects for the group-wide e-commerce platform for B2B and B2C, and for enhancing quality in our workshops continue as planned.

With our combination of strong offerings, new initiatives and a customer focus, Mekonomen Group is positioned for profitable growth in 2016. Magnus Johansson President and CEO

For further information, please contact:
Magnus Johansson, President and CEO, Mekonomen AB, tel: +46 (0)8-464 00 00
Per Hedblom, CFO Mekonomen AB, tel: +46 (0)8-464 00 00

The information in this interim report is such that Mekonomen AB (publ) is obligated to publish in accordance with the Securities Market Act. The information was submitted for publication on 11 May 2016 at 7:30 a.m.