Ladies and gentlemen, welcome to the Matas Q1 report. For the first part of this call, all participants are in a listen-only mode. Afterwards, there will be a question and answer session. To ask a question, please press five star on your telephone keypad. This call is being recorded. I will now hand it over to the speakers. Please begin.
Thank you, operator, welcome to the conference call covering the first quarter of our financial year. I am Gregers Wedell-Wedellsborg, CEO of the company. I'm joined by Per Madsen, who has joined as CFO August first. We're now a new lineup to lead the company. We're happy to report on the first quarter of the year with a stable business, growing business driven by rising customer traffic. I will go through the agenda, which is to give some comments and some flavor on what's happened in the quarter. I will then hand over to Per to cover the financial results for the year. I will return briefly to the guidance and open for Q&A.
The overriding impression of this quarter is that it's running in line with our plans and expectations. We have seen growth of 3.2% driven by underlying like-for-like growth in particular, but also some effects of our acquisition of Web Sundhed, which we made in the same quarter of last year, and some increase in wholesale sales as well. Overall, a growth of 3.2% and correcting for special items, and there's only one special item, a big party that we had to celebrate all our many colleagues after COVID, a stable EBITDA margin of 18.2%. As we look across the business, we are seeing progress on all our strategic initiatives.
I will dig deeper into just a few selected ones of the most important items, the first three, which is that we want to expand our assortment. That is our key growth driver for the coming years. I will look into the online channel in particular, which is going to be our strategic growth driver, but also take a look at the physical stores. We are seeing some interesting things in the physical stores happening and new initiatives in the physical stores. Otherwise, we have three areas where there's really no news today. We, as you know, have introduced some of our brands in Germany.
We can't report anything other than now the products are on the shelves, and we will get back to the performance of course, in due time. No news on our big Matas Logistics Center project in this quarter. We're continuing to work on ESG issues across both ES and G, and of course, have hired a new director to front our ESG efforts. Highlights. Three highlights. One is that our overriding growth driver for the coming years is to introduce an even wider assortment, especially on matas.dk, so that customers that already like shopping with Matas can get access to new brands, to new categories, covering new needs.
Of course, this is an area we follow very, very closely, because already back in August 2021, we started introducing new categories and new brands, and we are really seeing progress and momentum on that exercise of finding, identifying, buying, sourcing the new brands and figuring out the ways to market those brands to the consumers. This is just a taste of new brands that we have introduced in the quarter. 80 new brands all in all since August 2021. Professional hair care and dermatological skincare as two areas where we have started out and are seeing really good progress. A lot of new lifestyle and wellbeing brands that we have in pipeline to be introduced in the second quarter of the year, right now.
Also coming up, a very big expansion of our assortment in all things related to medicine and over-the-counter. Very good progress on our assortment expansion, which is the big growth driver going forward. Second, e-commerce. As you might have noticed, e-commerce sales are flat compared to last year. I just want to highlight that e-commerce growth compared to pre-COVID, the financial year 2019-2020, is 171%. What we saw during COVID and all our colleagues in across retail saw was a massive boost in e-commerce sales, and we're actually quite pleased to see that we can maintain that level because the market overall is probably declining or is declining a bit. We're gaining market share online.
We do believe that the structural growth to online will for sure return. Given that our strategy is driven by the fact that we introduce new products and not only that we're converting physical sales to online sales, we follow that very closely. What we see is that when we introduce new assortment to our customers online, they appreciate it. We get more traffic from Google. We get more cross sales. We get more customer satisfaction, more repeat sales. Those early indicators that customers are actually appreciating the new assortment and are willing to buy, we are seeing those early indications. We also invest heavily in customer satisfaction, and delivery speed is really one of those drivers that we have been focusing on for actually years and years.
What we recorded in this quarter is the highest Net Promoter Score, customer satisfaction score that we have ever recorded online, which I think is really a testament to the team's effort to work across all touchpoints. Also, there are quite big changes, and you might know this, quite big changes in how you can use data to advertise to customers, and there are big limitations on how you can use third-party data, and we have a true and lasting competitive advantage in having access to first-party data, which allows us to market directly to every single customer and address her needs specifically. Club Matas, which was also always a very valuable part of our business, is actually even more valuable now.
Above and beyond just being a product catalog, the online channel is evolving into an experience that mirrors the experience that we have created in the physical stores, that this is not only about buying product and fulfilling, it's also about providing advice, experiences, and just one example is that we populate all our products with as much content as we can and especially some of the key items we populate with lots of videos and advice on how to use the product, something that sets us apart from our competitors. Then finally, health is one of our.
the areas where we think we can grow over the coming years, and we have launched a new channel, new sales channel, focused on health, operated by our partners, Firtal Group, that we acquired in the fall of 2018. Finally, I wanna touch on the physical stores. As you can tell from the report, the physical stores are growing. Customers have returned to the physical stores. They're very happy about the physical stores. Also in the physical stores, we're seeing Net Promoter Scores at record levels. Real happiness to be back in the real world after years of lockdown.
We are investing in the customer experience in the stores, and three examples of that, mobile POS, the ability to skip the line in front of the cashier and instead pay when you're on the floor, when you have that conversation with the beauty advisor to close the sale and close the transaction on the floor on a mobile POS, something that's highly valued by our customers and allows us to give personal advice based on Club Matas data to the customer. Second, we have tested and rolled out a new fulfillment concept, which is basically then rather than pick in our central warehouse for fulfillment in store, we pick from the shelf, and we're actually seeing a wonderful customer experience. You know, that's a wonderful customer experience.
You place an order online, and then you get a notification within the hour that your package is ready for you for pickup in your local store. That's a really great customer experience. Finally, we are leveraging our strength as an advisory company that someone who's building the customer experience and professional advice to customers, and we have introduced a booking module where customers can actually book an appointment with a beauty advisor in the physical store and get that tailored experience. 4,000 bookings in Q1 with a very attractive sales per customer index on that. With that, the three highlights from how we are running the business, and I will now hand over to Per to cover the financial results.
Thank you, Gregers. I'm very pleased to be here for the first time, and I will take you through our first quarter. Basically a very stable quarter in line with expectations. As already mentioned, a growth of 2.9% like-for-like. Basically rolling through our different key measures, gross margin in line with last year, and the same goes for our EBITDA margin. One thing I just wanna highlight is our profit for the period. As you can see, a growth of 28%, which is linked to the fact that in last quarter of the last financial year, the Matas trademark was finally amortized, which basically means that we have an upside on a running basis on our amortization of around DKK 18-19 million.
Moving on, in terms of our trend lines for the last 12 months moving, as you'll see, very stable numbers again. You can say stable numbers coming out of the COVID period. You'll see in our EBITDA margin a very stable development over the last 6 quarters. Which basically brings me to a couple of other elements. I'll just touch on cost first. You'll see our employee cost, staff cost is increasing by 1.5%, and that is also including the fact that we're investing or deploying more competences and more resources in growing the Matas Group, as outlined by Gregers. Last but not least, our external cost is up by DKK 4 million, which is.
Majority of that is basically linked to what we're all facing in terms of increasing energy prices. I will move into the cash flow, but before I do that, I just want to highlight one of our key areas of focus, and that is our inventory levels. We are focusing on optimizing that on a comparison to our revenue line. As you can see quarter by quarter, actually for the last nine quarters, you will see the development that we quarter by quarter have lowered that and hitting an all-time low in Q1 with 21% of our last 12 months running revenues.
The development you see on the right side, and I think the positive note there, is really that introducing new brands, even with introducing new brands, we're able to keep our inventories at a good level compared to our revenues. Which basically leads me into the last point of today's presentation, which is our cash flow. In first quarter 2021-22, we acquired WebSundhed. If we adjust for that, and then we take into account the improvements we've seen in our working capital, that basically is the reason why we're generating DKK 100 million more in free cash flow this quarter compared to the quarter last year. That concludes the presentation on the financial piece. I'll hand over to Gregers .
Thank you, Per. I will just finally round off by reiterating the guidance. There are no changes to the guidance after this quarter. We expect growth to be between 1% and 4%, and EBITDA margin between 17% and 18%, reflecting that it is a year where we will invest in our growing Matas Group strategy and support the initiatives that we have outlined, and CapEx of DKK 225 million-DKK 250 million, of which around DKK 100 million is of a non-recurring nature. With that, we will conclude the highlights and the overview of the quarter. Operator, we will open for questions.
Ladies and gentlemen, if you have a question for the speakers, please press five star on your telephone keypad. To withdraw your question, please press five star again. We will have a brief pause while the questions are being registered. The first question is from the line of Mads Quistgaard from Carnegie. Please go ahead. Your line will now be unmuted.
Yes. Good morning, thank you for taking my questions. I have a few here. First of all, on other external cost. How much of the other external cost relates to the expansion into Germany in this quarter?
I don't think we break out that number, but it's not material. It's mainly Mads-
Oh
As you know, we have built up the organization over the last year to be ready. There's no real material change in this particular quarter on that compared to last year.
Okay. It's just the reason I'm asking is because, you know, when you gave the guidance, you mentioned that there will be a 50 bps impact on your full-year margin guidance. If you do sort of the back-of-the-envelope calculation, it translate into a negative impact on EBITDA of DKK 22 million. If you only put, let's say, DKK 4 million in the quarter, DKK 2 million in the quarter, while you're then still keeping, you know, your margin range of 17%-18%, that must then be quite conservative.
Well, you'll see a ramp-up of cost associated with the strategy as we go through the financial year. We only now introduced the products and the merchandising to the physical stores in Germany. No changes to our plans, no changes to our guidance. It's still the same approach that we have taken so far.
Okay. Fair enough. On Germany, when should we expect some feedback on the performance in Germany? I know it's early days today.
You gave the answer. It's early days. We only at the end of the quarter put the merchandise on the shelves. Of course, when we have something material and something that we can draw conclusions on, we will come back and we will communicate on that initiative.
Okay. My last question on staff costs. It's up to you to the recruitment in order to to fulfill the overall strategy. Can you say anything of how many people do you need in the remaining part of the year just to get a sense on staff costs throughout the year, maybe?
That's probably a bit detailed, but the flavor is that it requires somewhat of organization to drive the assortment expansion. That is really the key driver of staff cost in headquarters. Then of course, as we get our online growth going, there will be a cost associated to the fulfillment of that online growth. Then on Germany, there will be some cost on building the sales organization and getting that running as they have to visit the stores and so on. I can't give you the specific guidance on that number.
Fair enough. Okay. Thank you, Gregers.
As a reminder, please press five star on your telephone keypad to ask a question. We'll have a brief pause while any questions are being registered. The next question is from the line of Ole Jessen from Danske Bank. Please go ahead. Your line will now be unmuted.
Thank you for taking my questions. I have two simple one, I guess. One is on inflation and disposable income by your customers. The high growth in the mass market and more or less no growth in the high end. Do you see that as a change in mix of people trading down, or have you not seen any impact so far from food prices and energy prices and so on?
I think it's fair to say that there are a couple of factors influencing the category mix, and one is the resurgence of makeup after COVID. Makeup is a big part of our mass beauty area. We've also introduced a number of products with lower price points to meet and anticipate that some of our customers will want to trade down at some point. As you know, our experience from the last recession is that there's a trade-down from high-end to mass beauty. We don't think that that's what we've seen in this quarter. It's more driven by assortment expansion, probably a bit driven by the fact that the airport is back in business on the high end. We don't draw any conclusions.
It's probably more driven by the fact that we're doing something than customers tightening the belt. It is, of course, we're doing it in anticipation that we need an offer for customers who want to still shop in Matas and have a more affordable alternatives. As you know, Ole, I should mention that-
Yeah.
As customers migrate towards our mass business, we're in the fortunate situation that we're actually more differentiated in the mass business because we have a high degree of own label with better margins.
That was then coming to my other question. That's the gross margin, which is down four percentage points versus the previous quarter. I think in the previous quarter, you said that one reason for the 48% strong margin in Q4 last year was that you got more traffic to the stores with better margins. Then this quarter, we see the margin back, and then you've had even more traffic to the stores. What's the reasoning for the margin if it's not that people are coming to the stores?
It's a lot of moving parts. People coming to the stores will give an uplift in margin. Product mix plays a big role. Promotional intensity plays a big role. WebSundhed has a slight effect on gross margin as well. We acquired WebSundhed in the same quarter of last year, but it wasn't in the full quarter. Lots of moving parts and 0.2, we don't consider, you know, any kind of structural change. We just consider it to be a quite stable level.
And the final one, when you look at the CPI and the personal care component, then there is more or less no price inflation in your products.
So
Is that also how you see it?
Yeah. I think we're happy to see that growth has been driven mainly by customer transactions, rather than price because, customers don't like these, you know, highly rising prices. It does affect price image, and it does affect their behavior. I think from an industry point of view, the beauty business, the health business, has not really felt a strong effect of price increases. There's been a quite good collaboration whereby we try to moderate price increases. You will find price increases on some ingredients and some kinds of products, but across the board, this has not been an industry that's been affected by general price increases.
Okay. Thank you.
Ladies and gentlemen, as a reminder, please press five star on your telephone keypad to ask a question. As there are no further questions at this moment, I will hand the word back to the speakers.
Thank you for joining the call. Thank you for your questions. A stable business, stable growth, good progress on our strategy, and we look forward to seeing you again. Thanks for joining, and thank you, operator.