Ladies and gentlemen, welcome to the interim report for the period 1 April, 2020 to 30 September, 2020. For the first part of this call, all participants will be in listen-only mode. Afterwards, there will be a question and answer session. Speakers please begin your meeting.
Thank you, operator, and welcome everyone to our Q2 update. I'm Gregers Wedell-Wedellsborg, and with me, CFO Anders Skole-Sørensen. We've had a very unusual and very strong financial quarter. We are also facing new restrictions in Denmark right now. The agenda that we have for today is three-part. I will comment on the overall situation. I will hand over to Anders, who will comment on our financial results. Finally, I will give you a bit of background on the outlook for the financial year. The results are exceptionally strong. Some of that are due to one-off effects. I'll get back to that. We saw very strong results in the Q2 of 2021, and we have seen that trend continue into the first part of Q3.
Topline growth at 13.4, like-for-like 13.6, and EBITDA up 28.1%, reflecting that we are seeing positive scale effects in our business, and in particular, in our online business. Also, this is a quarter where we have had beneficial terms and good trading terms due to the competitive situation, but also where we have seen the strength of our business model and the strength of our strategy. I think it's notable that the stores have had a really strong comeback in the summer quarter, up 3.8%, of course, due to the fact that people have been vacationing at home and that they have spent a lot of time shopping locally where we have our stores. Also, we have seen online sales that really boomed in the first quarter. We have seen continued strong performance on online.
A lot of customers that shopped for the first time online are continuing to shop online. As I mentioned, we also see positive scale effects and profitability, proof of online profitability again in this quarter. As for the mix of business, we have sales up across all categories, and for this quarter also, we're seeing that our efforts to address the inventory situation is starting to pay off despite some supply chain volatility still. As for the outlook for the full financial year, we are in the middle of a second wave. That, of course, implies increased risk and uncertainty, but also we know from the first wave that there is some upside potential for Matas in a situation like this. I will speak about that at the end of the presentation.
Of course, we upgrade our guidance for the year, both for the growth numbers and the EBITDA margin. Looking at the stores, 3.8% growth. It's been a long time since we've seen that. It's driven both by footfall and particularly by basket size in the quarter, and it is consistent throughout the quarter, so it's not just a matter of a strong summer. Even after the school start, we have still seen stores performing very well. We see that main street local shops are performing well. Cities and malls are flattish. We, of course, have seen some one-off effects from demand for health products, and that drives traffic to the stores as well. We have also seen new segments that haven't been shopping in Matas stores for a while come back to the stores and rediscover the stores.
We've been doing a lot to animate the stores online and provide, for example, online advice to customers via video chat or live streaming sessions from the stores connecting online and the physical stores. The online growth boom that we have seen accelerate over the last many quarters also performing strongly in this quarter. 20% of total revenue is online in this quarter. It's lower than the last quarter, not because growth has stopped, but because the stores have started to perform more strongly. As you can tell from our last 12 months turnover, we have about DKK 800 million in turnover for the last 12 months online only. Also, I should mention that we, in the second quarter of the year, have acquired 40,000 first-time customers through matas.dk, and that is particularly within the young demographic. As for the categories, this is also a very encouraging picture.
We see growth across all categories, it's not just driven by the fact that people are in demand for health products. It is across the board that we are seeing uptick and a mix that is not far away from what it usually is. The health and wellbeing growth is driven in great part by sanitizers and face masks. As for face masks, we have sold for around DKK 20 million, and you should note that we decided to sell face masks at almost no margin as part of our contribution to keeping the infection rates down. With that, I will hand over to Anders, who will go through the financial numbers.
Thank you, Gregers. Good morning. As you know, I've been doing this for a number of years now, since basically the IPO back in 2013. When I looked at it this morning, I was a bit tempted to say, Well, this is basically a situation where I could say nothing and just let the numbers speak for themselves. Nonetheless, as it is my job, I will actually just come up with a few comments here. Gregers has already mentioned revenues, I'm not going to talk more about this, it is really an extraordinary quarter. I must say, with my 13 years in the business, I've never seen anything like it, quite an extraordinary quarter. As for the gross margin, some of you may have noticed that there is actually a small drop in the gross margin from 43.5%- 43.1%.
If you look at and delve a little more into those numbers, there's a few interesting points that I'd like to make. First of all, as Gregers just mentioned, we just saw a lot of particularly face masks, but also other products of that sort, and we did do so at a very low or almost nonexistent margin. That actually explains more than half of that drop in gross margin per se. Then I think a second point is quite interesting, and that is that if we look at the online margin, and you do know that the online margin, all things considered, is lower than the margin in the stores, but if we do look at that, it's actually been moving very much in the right direction.
We are seeing what I would almost call the normalization of the online business insofar as we are seeing that the online business is much less driven by campaigns than it used to be. There are more of our customers who are just using the online channel as their Matas store in a more general way, and that means that the gross margin in the online business is going the right way. That's very positive if we look at it in the medium term. As to the costs, I will just come back to that in more detail. Overall, the cost picture is also quite positive, with costs overall falling as a share of sales.
EBITDA, obviously, with good revenue, with the gross margin very close to the same level, EBITDA has moved quite significantly ahead, as has the adjusted net profit. Free cash flow has always also been quite positive. As Gregers already mentioned, it is very good news that we are seeing both a solid growth in the number of transactions, up by over 6%, and we are combining that with a very solid increase in basket size. In reality, this very big increase in basket size probably actually means that people are perhaps going a little less than they would be otherwise because of the COVID-19 situation. In reality, it's very positive that we're still seeing that lift in transactions.
Now, with that, just turn to the next page, please. There, we're just looking at the long-term trends, and obviously, if we look at revenue growth, it's going through the roof right now. It is obviously a very significant deviation from what we've seen. Again, if we look at it with a slightly longer-term perspective and taking what I would say a positive view to that, we really see this as a situation where Matas, and if you look at the dotted line, that's the last 12 months like-for-like growth. We are really seeing that we've turned the corner, that we are moving into positive territory. As for the gross margin, we still think, given what I just explained to you, that we are actually seeing something that is close to a leveling out of the gross margin.
As the EBITDA goes, obviously, EBITDA goes up as a percentage because of the high growth and the fact that we have our costs well under control. With that, let's come back to the costs. I promised I was going to talk a little more about the costs. As I said, the total cost ratio was down from 26.3% in the same quarter last year to 24% this year. If we then look at costs, yes, they have gone up by DKK 8.5 million, but if we go down and sort of decompose that increase, what we're seeing is that a lot of that is driven by the high-growth sales on the online business, both in matas.dk, where it added about DKK 8 million of cost, and also in Firtal, which is growing quite rapidly, where it's also adding cost.
Some of that cost is, for instance, the fact that in Firtal, as an online-only player, they have quite a high portion of costs in the marketing department, which goes up in step with the turnover. As you see, we've also added around DKK 3 million of what we think is specifically cost related to the COVID-19 situation. That has something to do with the way we run our distribution centers and also some of the costs that we associated with out in the stores. This is really the positive news, if we strip that out, we can see that the underlying cost base is actually still going down, and it's actually gone down in the second quarter by roughly DKK 10 million.
That means that the continuing work that we've been talking about for a number of quarters now with rationalizing the way we operate and optimizing both our headquarters and our stores, that work is continuing, and it is actually also showing good results. With that, just shortly on the cash flow and the cash working development, you can note that the working capital per se has actually been a slightly negative development, and that is because trade payables have fallen more than the positive fall in inventories. The reason for that is if you look at last year, we were in a situation where we bought a lot of the Christmas stock, for lack of a better word. We bought a lot of them already in the second quarter.
This year, we have been a little more conservative as to the purchasing patterns, we've also actually said, Look, we don't really need those goods before in the third quarter, so we are buying them in the third quarter as well. I'll come back to that, because some of the stocks we have are COVID-19 related. That is why some of that stock has already been paid. That's why we don't get quite the same result on payables. Apart from that, a positive development, and if you notice, slightly lower, or actually not slightly lower if you look at the millions, but significantly lower if you look at percentages on CapEx, because we have not spent quite as much money in the store network as we did in the same quarter last year.
With that, let's come back to one of our Achilles' heels, to be honest, where we've had some challenges, and that is the development in our inventories. If you look at it, the big changes, there's still a growth. Last quarter, it was a very significant growth, more than DKK 150 million up. This, it is a very smaller growth of only DKK 24 million relative to the same quarter last year. If we actually then look at those DKK 24 million and decompose and see what actually happened on the inventory side, that is what you see on the right side of this slide. You can see that there's above DKK 40 million of these inventories, which are what we call COVID-19-related products. These are the face masks. It's also the disinfectants and other products that are specifically linked to what's happening in the world around us.
Obviously, those type of products have played a very, very small role historically, and now they're playing quite a big role in our overall inventory. We'd say, there's a very good reason why we have more inventory of these types of products. Secondly, you have to remember that our facility, our new webshop up in Humlebæk was actually established in the third quarter of last year. It wasn't actually there at the 30th of September, but it was in the process of being built up. The fact that we have Humlebæk, which we didn't have at the same time last year, has actually added around DKK 45 million. Because Humlebæk and the webshop is growing as much as it is, it is actually also, of course, then taking up more inventory.
Finally, there's about DKK 7 million, which is, in the bigger scheme of things, not very important, but nonetheless, the small acquisition that Firtal in Aarhus made of what is known as Din Frisør S hop, that's what it's called, added about DKK 7 million of stocks. You could say that we actually had roughly DKK 100 million added to the or DKK 90 million added to the stocks. Then, well, we've only added DKK 24 million on the bottom line. We've actually taken out around DKK 70 million.
The underlying existing business, so to speak, has actually reduced its overall inventory by about DKK 70 million, which is why we're not overly enthused by this number, but we're actually looking at it and saying we think that we are moving very much in the right direction, and we are moving towards the goals that we've set for ourselves in this year. With that, I will turn you back to Gregers.
Thank you, Anders. We might ask the question, so what is the effect of COVID-19 on our overall strategy? The answer to that is that it has accelerated the execution of the strategy that we have, and it has also proven that some of the ideas that we had way back in May 2018 turned out to be right for this situation. What we've seen throughout these six months and the quarter is that we've seen a continuous improvement in our brand rankings. We've seen an increase in our customer satisfaction, particularly online. We have seen, of course, a step change in the online sales and also in the online profitability. We have also seen the value of having a big store network. That is really, really key because people have been shopping in local stores much more than city centers and malls.
Of course, the area where we have placed our bets in terms of category, namely health and wellbeing, is the area that's been most in demand throughout these six months. Finally, I think it's worth mentioning that while all this has been going on, as Anders mentioned, we have not stopped our work to run the business more effectively and reinvent how we work at Matas. At the same time, I should highlight that with the explosive growth on online, we are still very much looking into a logistics and warehouse investment. It's still under review, but you should expect that to come forward in the coming financial years. The other big question, I think, for the quarter is this just a one-off? Have we just been lucky?
The answer to that is yes, we have been lucky, and we have been in a good position as Matas because customers needed our products and competition from travel retail, for example, has been limited. It's not just a one-off. There are significant benefits that we will take away from this situation and that we can translate into long-term advantages, or if you will, into long-term customer relationships that drive value in the next years as well. Just to give you a few examples, the big boom we have from the consumer spending and the market share gains that we are clearly taking strengthens our market position vis-à-vis our competitors, and it has also left a clear positive mark on the brand strength. Our online growth drives the profitability online faster than we thought possible.
The 100,000 new customers that we have acquired in the first half just on matas.dk, we see repeat purchases from those customers already. Also, as I mentioned, customers shopping in the stores that maybe have forgotten about the stores. I don't know why they would do that, now they're returning to the stores and might rediscover that the store has changed and the assortment has changed and we are able to work with those customers in a systematic way to win them back, as part of our business or even as Club Matas members. Of course, as for our bet on health and wellbeing, this has obviously fueled that drive and placed Matas more as a top-of-mind destination for your health needs.
Just one small example, the core of our business really is to translate from being a physical retailer on one hand and then an online retailer on the other hand, and be an omnichannel retailer. We see when customers shop in both of our channels, we get a lot better share of wallet from those customers. You can see quite a spectacular 51% growth in that number, of course, driven by more customers shopping online. You can also see, on the other hand, other side of the slide, that in the first quarter of this financial year, we recruited 60,000 new customers to matas.dk. A third of those customers has already shopped again, and when we look at customer satisfaction, it is really high, which is really the best thing we can do, give the customer an amazing experience, then they will come back.
We have the comparables from last year, so you can see it's actually a real and significant improvement, both in customer intake, but also in repeat purchase. As for the outlook, it is a difficult time to provide guidance, obviously, because we have just had new restrictions in place for physical retail, mandatory masks in physical retail. When we try to do the balance and give our guidance and look ahead, we do see that there is an increased risk to lower footfall to the physical stores. We have seen that effect in a moderate way since the requirement to wear a mask in the stores. On the other hand, of course, we see if we lose sales in the physical stores, we win sales online. There is an internal hedge. We know that there will be more competition online for sure.
That has been a topic on these sessions for years. We feel that we are in a better position than we had ever been before to meet whatever online competition comes our way. We have also learned from the second wave or from the first wave of the pandemic, how to operate the business in as smooth as we can, what decisions to make and not to make. Our ability to go through this second wave in a less costly way, making more smart decisions has actually gone up. Of course, with the infection numbers that we're seeing, there is also a higher risk to our operation than before. We are operating our logistics facilities with heightened precautions that drive extra cost. As for the recession ghost, if you will, we haven't seen any of that yet.
We have seen consumer spending up, and we also expect governments to continue their policy of stimulating the economy at the right time. That's one to keep in mind, and we have seen how effective it has been as well. As for the opportunities, people are still staying at home close to our stores, shopping online with some limited competition from travel retail, and the other areas I've actually covered already. Just to say that there is a balanced view of what is going on in the coming quarters. That also translate into how we see ourselves positioned against Amazon, who has opened in Sweden, not shipping to Denmark yet. What we've seen in the quarter is that Club Matas is becoming stronger.
We are recruiting members these days, of course, the big shift in our own online channel is perhaps the best defense that we can mount, to have an offer to the customers that is competitive to whoever wants to enter the market. As for our guidance, we have upgraded our guidance, we now expect total revenue growth at around 8% for the full- year, up from around 6%. The same for the like-for-like growth and EBITDA margin before special items above 18%, we have provided the floor, the CapEx remains unchanged. As for our long-term financial ambitions, they are unchanged at this point.
For good measure, I should say that of course, as you all know, in these times, there are higher than usual uncertainty, as to the effect of what's going on with COVID, or if we'll see a recession on the tail end of this development. With that, we close our presentation, and we will open for questions.
Thank you. Ladies and gentlemen, if you do have a question to ask the speakers via the audio teleconference, please press zero one on your telephone keypad now. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Our first question comes from the line of Magnus Jensen of SEB. Please go ahead. Your line is now open.
Thank you very much, and congratulations with the very great results you've delivered.
Couple of questions from my side. First on online, how much growth, I mean, your Q3 is going to be a huge quarter online. How much growth are you able to handle with the setup that you have now?
Thank you. Yeah, that's a very relevant question. It's a question we have actually been discussing and acting on ever since the first wave, because obviously, that was kind of a, I wouldn't call it a wake-up call, but it was really a laboratory for what could happen in the rest of the year. What we did at that point is that we made plans to be able to scale our capacity to the max, both in relations to some of the big shopping days around Black Week, and of course, around Christmas. We feel with the capacity that we have in place, that we should be able to manage what's coming our way.
Okay. You have set a growth rate on it for us to No.
Didn't get that.
Yeah. How much growth can you manage? Are you willing to share such a number?
No.
Oh, okay. Second question is also on the online. You gave us an online margin back half a year ago or so on your online business of 10%. Are you willing to share sort of where you are currently with the very good development you've seen online?
We've decided to disclose the margin once a year with the financial year and indicate as we go whether the margin is moving in the right direction, and it is moving in the right direction. As Anders mentioned, when we look at the online P&L, we see improvements on the gross margin level, but of course, a lot of the drive towards higher profitability online comes from being able to scale both, run our logistics more efficiently and of course, get scale on all the fixed costs that we have. We're seeing that positive movement.
Okay. Then one final question to the online. Now, I guess Humlebæk has been open for more or less a year, and you said that after a year, it would not be a sort of a drag anymore because effectiveness would have gone up. Where are you with that, and could we expect some tailwind from that in Q3 and Q4?
I would say that given that there is a lot of infection in society right now, it's probably the other way around for the next couple of quarters. We have seen the effect that you described. We've seen the operation go up the learning curve and become more and more effective. We have made a series of decisions right now to operate in small cells, to have different kinds of shifts, to do more testing, and all of this does add extra cost to our operation in Humlebæk. We probably won't see a continuation of that positive effect, but rather see some added cost in that regard.
Okay. Understandable. Last question from me. Now people in Denmark have to wear a mask to enter stores. What kind of impact have you seen on your stores so far from that?
Yeah. I think we have been relative to other European nations, we have seen that Danes have sort of gradually become accustomed to wearing the mask because it's been a requirement in the public transportation system for so long. It's not like a shock to the system, but obviously it does moderate footfall and people's appetite to go shopping and have fun. We have seen a moderate negative effect on footfall, and just as in the spring, as soon as we see that effect in the stores, we see a boom in the online. We really see customers just shifting channel as a result of that requirement. It's early days. It was put in place on the 29th, as you know, of October, so it's early days, but we haven't seen a complete shock to the system.
Okay. Thank you. That was all from me. Thank you for answering my questions.
Thank you. Our next question comes from the line of Poul Jessen of Danske Bank. Please go ahead. Your line is now open.
Yes. Thank you. Also congratulations from my side. A few questions on, you are mentioning the value of the mask. Is that the only impact that you have from the COVID-related products? I'm just thinking about sanitizers also, or is that insignificant nowadays? That's one question. The other one is that you mentioned that you're gonna increase or hire about 50- 100 people for digital advising over the next two years. Is that cost that we have to add or is that going to be funded by efficiency improvements in general? The third one, you mentioned that you're looking at LOG23 or the logistics, which could require significant investments in the coming financial years. Could you put a little more flavor on that part?
Yeah. In the spring, it was all about sanitizers, and in the early fall was all about face masks. We see the same pattern in both cases, that we see a massive boom as soon as the requirements are put in place, and everybody runs to the stores and to online to stock up. We see a really rapid flattening out and normalization of demand. For this particular quarter, you're pretty safe if you use the DKK 20 million as sort of a guide to what kind of one-off-ish kind of sales have we seen in the quarter, including the negative margin effect that Anders mentioned on sanitizers. As for the cost that we have or the people that we want to hire to run our digital business, you should not consider that an addition of cost.
It will be a transfer of resources from our physical stores to online. It's really migrating. As the business migrates towards online, we migrate some of the people online. You should also take note that those people are productive from a sales point of view. They actually sell something when they are advising customers. That's our business model that we try to translate to the online business. As for LOG23, Anders will answer.
Just for LOG23, just let us repeat and say, well, we are looking into this, we are developing it, and we are, as we go along, becoming more and more certain about which direction we're going. It's not as such going to have, we believe, a significant effect on CapEx in this year. As we've already pointed out, there might be some small adjustments. Then you will see an effect coming into the next years. We're not going to put specific numbers on as of yet because we're still in the exploratory phase. Obviously, the reason why we're mentioning it is obviously is because it is of some significance, and that means that it will be something that you will be able to see in the overall numbers.
As we become more certain about exactly how we're going to do this, then obviously we will also bring that information to the market.
What we're talking about is that optimization?
Yes, obviously, that is one of the things that is on the table that we are going to run part of our logistics with a more automated setup. Yeah. Correct.
There will be benefits as well.
Yeah. No, listen, obviously, we won't do this we're only doing this because we think it's going to be a setup which is going to be cheaper to run in the future, obviously.
Of course. Alternatively, it could also be that you have ambitions to expand the online business beyond Denmark or beyond the current categories.
It's not in our strategy. We're still focusing on becoming the market leader in Denmark for health and wellbeing, both offline and online, and we think that's our main task for this strategy period.
Okay. A final one for now. Do you have any statistics, market shares or whatever that could give an indication of the revenue increase that you have, which of course is benefiting from staycation so far this year? Where are the additional revenues coming from? Is that airport and international traveling alone, or are there any changes in the domestic market shares as well?
I would think it's safe to assume that most of the shifts in market share has been due to the change in travel retail. We don't have data that would suggest that we are either winning or losing market share in the physical space. We're pretty confident that in the online space, we are continuing to take market share across all categories. Most of the increase in the high-end beauty sales is probably due to changed shopping behavior and volumes moving from travel retail into domestic spending.
The increase you are having is reflecting your underlying market share domestically, so it's being spread normally across.
That's a fair question.
That is a fair question.
Yeah.
In all honesty, we can't give a precise answer to that. I think our overall, and this basically is a gut feeling. A gut feeling is that if anything, this has strengthened our position also in the high-end or the selective part of the business. You really can't tell at the end of the day, because obviously there's also been fewer tourists coming into Denmark.
Yeah.
Guess what? They also do some of their purchases at Matas. It's not just a one picture as such, but nonetheless, we think that we have undoubtedly benefited from the, as we call it, the staycation.
Yeah. It's worth noting that the influx of tourists is something that we feel as well.
Yeah
because that's actually a significant customer group for us. It's also worth mentioning that a lot of the shopping that's being done at airport are not planned shopping or substitutes domestic shopping. It's really impulse shopping and gift shopping and so on and so forth. It's probably less affected than you think.
Okay. Thank you.
Thank you. Once again i remind you if you do have a question to ask by the audio tele conference you may do so by pressing zero one on your telephone keypad. Our next question comes from the line of Mads Quistgaard of Carnegie.
Yeah. Hey there. Just one follow-up question from my side. Will there be any changes regarding the upcoming events, such as Black Friday?
I think all of retail has adapted to the situation that we don't really want to do like a come early, stand in line all day for a great offer. We're approaching the holiday season as such by spreading out the offers much more and running campaigns in a different way than we usually do. On top of that, we have decided to do a lot of precautions as to the environment in the store, including actually adding and taking on some new people to advise customers and to make sure that they get their gift wrapping as fast as possible, so on, so forth. I think that's as much as I can comment without sharing our marketing plans.
Perfect. Thanks.
Thank you. We currently have no further questions via the audio teleconference. I will now hand back to the speakers.
Thank you very much for joining and for the questions. This concludes the conference call for the day. Thank you. Bye.