THE STRONGEST OPERATING PROFIT EVER

This is a translation of the Swedish interim report. If there should be any discrepancies, the Swedish language version governs.

THIRD QUARTER, JULY – SEPTEMBER 2020

• Net sales increased by 2.9%, or 3.2% FX adjusted, to MSEK 57.0 (55.4)
• Gross profit increased by 0.6%, or 1.0% FX adjusted, to MSEK 41.9 (41.6)
• EBIT was MSEK 5.9 (-13.9)
• Earnings after tax was MSEK 5.6 (-12.7)
• Earnings per share was, basic SEK 0.72 (-1.61), diluted SEK 0.72 (-1.61)

NINE MONTHS, JANUARY – SEPTEMBER 2020

• Net sales decreased by 0.8%, or 0.5% FX adjusted, to MSEK 191.0 (192.5)
• Gross profit decreased by 5.5%, or 5.2% FX adjusted, to MSEK 139.9 (148.0)
• EBIT amounted to 10.3 MSEK (-17.6)
• Earnings after tax amounted to 8.8 MSEK (-16.7)
• Earnings per share amounted to, basic SEK 1.12 (-2.12), diluted SEK 1.12 (-2.12)

IMPORTANT EVENTS

DURING THE PERIOD       

• Working hours for more than 100 employees in Sweden have continued to be reduced according to the “short-time-work program”.
• Pay cuts implemented in many parts of the Group during Q2 have partly remained in Q3.
• Nepa Finland received a grant from government agency Business Finland to cover parts of salary costs during Corona.
• Nepa UK have received back tax attributable to previous years (2018 & 2019) regarding expenses for Research and Development of MSEK 1.1. The amount is reported as reduced tax expense in Q3. In relation to this, the company had MSEK 0.3 in consultancy costs, which has been reported under other external costs.
• Thomas Berthelsen was appointed as Managing Director of subsidiary Nepa USA and Eeva Karhu was appointed as Managing Director of subsidiary Nepa Finland.

AFTER THE PERIOD ENDED

• All employees in Sweden are back at full time work starting from October 1.
• A smaller part of the pay cuts implemented during Q2 remain.

A WORD FROM OUR CEO

The market was good in the third quarter, given the circumstances. Projects postponed from the previous quarter and the need to understand changed consumer attitudes and buying patterns due to the pandemic, contributed to this market development. The markets in Sweden and Finland were the strongest in the quarter.

Earnings improvement

For the third quarter, we reported the strongest operating profit (EBIT) ever of SEK 5.9 million, compared with a loss of SEK -13.9 million for the same quarter last year. Although the result includes temporary govern­ment aid totalling SEK 3.4 million, I am very proud that we managed to deliver on our goal to turn profitable in 2020 after a combined loss of SEK -22.9 million in 2019. The main reason for the earnings improvement is personnel costs, which have decreased substantially compared to a year ago. Other operating expenses have also been significantly reduced.

I would like to take this opportunity to thank our employees for all the hard work and outstanding efforts despite difficult circumstances. It is particularly remarkable that we managed to achieve the profitability target despite the extreme conditions that prevail this year. I see it as proof of the outstanding staff we have.

A more optimized company

While I take pride in what we have achieved, I feel humble about what we have left to do. The transition we have undertaken so far in 2020 has been necessary, but it is not enough. There is still a great deal of work to be done to ensure that we can fully realise the great potential that I am convinced Nepa has and which requires a long-term perspective.

By coordinating our sales and technology development better we can avoid costly special customer designed solutions. With a more uniform product platform intern­ationally, we can deliver on a significantly larger scale without driving additional costs. To achieve this, we will focus on streamlining the most value-creating and scalable offerings in 2021, with the ambition to see a more robust growth path in 2022 and onwards

Outlook

The situation in the world is still uncertain. At the end of the third quarter and early fourth quarter, we have seen a second wave of the pandemic unfold in much of the world. After a strong third quarter, one should therefore be careful not to extrapolate the trend. In the second half of last year, we had a weak third quarter in terms of sales, while the fourth quarter was strong. In such a comparison and given the current second wave of the pandemic, we therefore expect a certain drop in sales in the fourth quarter of this year, compared to the same quarter last year.

Looking ahead, there are reasons to believe that it will take longer than previously hoped before we are through the pandemic, despite positive vaccine news recently. As a result, we expect that the pandemic will continue to affect us at least in the beginning of 2021. At the same time, we now have a considerably more robust company than at the beginning of this year, which instils confidence.

For further information, please contact:

P-O Westerlund, CEO                            Michael Wallin, Head of IR
+46 706 404 824                                     +46 708 788 019
p-o.westerlund@nepa.com                michael.wallin@nepa.com

This is a translation of the Swedish interim report. If there should be any discrepancies, the Swedish language version governs. The Swedish version is information that Nepa AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 08:00 CET on November 20, 2020.

Headquartered in Stockholm, with offices in Norway, Finland, Denmark, UK, USA, and India, we help some of the world's most reputable brands in more than 50 countries to optimize customer experience investments and get more effect out of their marketing and sales. Nepa has been awarded DI Gasell's award for organic fast-growing companies six times since 2011. The company is publicly traded at the Nasdaq First North Growth Market stock exchange since 2016. Erik Penser Bank AB is Nepa’s Certified Adviser (phone: +46 8-463 83 00, e-mail: certifiedadviser@penser.se).