Interim report January - March 2019

Record sales and improved EBIT with and without acquisitions

1 January-31 March 2019

  • Net Sales amounted to SEK 2,909 M (1,432). Net Sales rose 103 per cent, of which 2 percentage organic growth. 
  • Adjusted EBIT amounted to SEK 214 M (99).
      
  • EBIT totalled SEK 170 M (60) and the EBIT margin was 6 (4) per cent. EBIT was negatively impacted by items affecting comparability of SEK 5 M (-20), attributable to integration costs of FTZ and Inter-Team.
     
  • EBIT and adjusted EBIT were positively impacted by IFRS 16 of SEK 4 M.
      
  • Earnings per share, before and after dilution, amounted to SEK 1.68 (1.15).
      
  • Cash flow from operating activities amounted to SEK 158 M (6), which has been positively affected by SEK 130 M as a result of IFRS 16. The total cash flow for the period has not been affected by IFRS 16.
      
  • Net debt was SEK 4,185 M (1,529) at the end of the period, compared with SEK 4,098 M at year-end.
      
  • As of 2019, leasing is reported in accordance with the new standard IFRS 16, the comparative figures have not been recalculated. See page 8 for further information.

CEO comments
Record sales and improved EBIT with and without acquisitions

A quarter focusing on improving profitability In 2019, Mekonomen Group’s focus remains on pursuing profitable growth in all of our Group companies, with an emphasis on profitability. At the beginning of the year, a cost-savings programme was initiated, which together with greater focus on efficiency will lead to a decrease in costs. In parallel, work began to address unprofitable operations and to focus on strategic projects that strengthen the platform of our core operations.

To conform and streamline the Group structure after the acquisition of FTZ and Inter-Team in 2018, Mekonomen Group consists of four business areas, FTZ, Inter-Team, MECA/Mekonomen and Sørensen og Balchen, from 1 January 2019.

Record sales
The Group’s total net sales more than doubled in the first quarter to SEK 2,909 M (1,432), largely as a result of the acquisition of Danish FTZ and Polish Inter-Team. Easter holidays took place in the first quarter last year, but not this year, which had a positive effect on sales in the quarter. Organic growth1) in the rest of the Group rose 2 per cent, mainly driven by robust sales growth in the MECA/Mekonomen business area. We estimate that the growth was in line with market developments in the quarter.

FTZ reported net sales on par with our expectations in the first quarter, while Inter-Team reported higher net sales than expected driven by high export sales and strong growth in the Polish market.

The acquired companies FTZ and Inter-Team have generally a lower gross margin than the Group as a whole and the Group’s gross margin was therefore adversely impacted, in line with expected, and fell to 45.5 per cent (53.0) during the quarter. The positive effects of increased purchasing volumes and product mix, together with the price adjustments performed at year-end made a positive contribution to gross margin. The EUR continued to strengthen during the quarter and we regularly monitor whether further price adjustments are required to offset rising purchasing costs.

In the first quarter, adjusted EBIT2) rose to SEK 214 M (99) and EBIT increased to 170 (60). The acquisitions of FTZ and Inter-Team contributed positively to both adjusted EBIT and EBIT result with SEK 92 M. The improved earnings in the Mekonomen group excluding FTZ and Inter-Team, were primarily driven by an increase in sales and better gross margin compared with last year.

Well positioned with the right business focus
Looking ahead, our work to create profitable growth in all operations, with an emphasis on profitability, will remain our top priority.

The cost-saving programme, which was initiated in the first quarter, is proceeding as planned. The programme will yield cost reductions of SEK 65 M on an annual basis, of which SEK 30 M will be achieved as of the third quarter of 2019, and full effect as of the fourth quarter of 2019. Work generating synergies from the acquisition of FTZ and Inter-Team and the merger of MECA’s and Mekonomen’s central warehouse in Sweden is proceeding as planned.

Even with the strong focus on raising profitability, reducing debt and improving cash-flow we keep our strategic focus that aims to constantly develop and adapt our core business. These include developing our service
offerings and product range to our large customer groups affiliated workshops and other workshop customers.

I spend considerable time in our various operations, which has strengthened my positive view of the group companies. From the recent few months it is particularly striking that we are at the forefront in our industry i terms of technical expertise. We maintain very high quality in our training of technicians and technical support in all the business areas in the Group. Our ability and power to adapt to the increasingly advanced technology in modern cars, efficient logistics and that great majority of our sales are done through digital channels, are key competitive advantages for us, and I am confident that we are in a good position and have the right business focus to create shareholder value onwards.

Pehr Oscarson
President and CEO

About Us

Mekonomen operates in the car aftermarket and consists of leading car service chains in Northern Europe with a proprietary wholesale operation, more than 460 branches and over 3,400 affiliated workshops operating under the Group’s brands. Through its branch network, Mekonomen Group offers affordable spare parts and accessories to the affiliated workshops, other workshops, other B2B customers, as well as car owners. Around 90 per cent of sales are business to business, where 80 per cent of the orders are digital. The largest business to business customers are affiliated workshops operating under the Group´s concepts AutoMester, BilXtra, Din Bilpartner, Meca Car Service, Mekonomen Bilverkstad, O.K. Serwis, Speedy and others. The Group operates through four business areas – FTZ with operations in Denmark, Inter-Team with operations in Poland, MECA/Mekonomen with operations in Norway and Sweden and Sørensen og Balchen with operations in Norway.