I must advise you all that this conference is being recorded today, Thursday the seventh of February, two thousand and nineteen. Without any further delay, I would like to hand the conference over to our first speaker for today, Mr. Gregers Wedell. Please go ahead, sir.
Thank you so much. Good morning, everyone. Welcome to our presentation covering the third quarter of the 2018-2019 financial year. With me is Anders Skole-Sørensen, our CFO, Elisabeth Klintholm, head of IR and Corporate Affairs. I will start out with a few high-level comments on the quarter, after which Anders will take you through the Q3 numbers. Finally, I will talk a bit about our strategic progress and the initiatives that we launched in the quarter. As usual, we will end with comments on the outlook for 2018-2019, finally a Q&A session. Please turn to slide two. The quarter overall was in line with our expectations and characterized by good strategic progress on a number of areas. We completed notably the acquisition of Firtal Group on November 13th.
It's a transaction that more or less doubles our online turnover compared to the full year 2017-2018. For the quarter overall, we increased turnover and continued high organic growth rates on digital. We were able to also drive positive like-for-like growth in the quarter. Earnings, as you know, were down because we have decided to fast-forward our digital action plan growth plan and decided to add more resources to digital to be able to drive future growth. Let's have a closer look at the numbers. Revenues for the quarter came in at DKK 1.926 billion, an increase of 1.7% compared to last year. The majority of the increase came from the acquisition of Firtal. Revenue from Firtal is in the numbers from November 13th. Like-for-like growth reached 0.5% for the quarter up from a decline of 0.8% in Q3 last year.
The growth was driven by strong development in the online sales on matas.dk, which reached 55% for the quarter. We are quite satisfied with this continued high growth on matas.dk. We have, as I mentioned, allocated more resources to this area in the quarter. Earnings came in at DKK 206 million, a decline from DKK 227 million last year. This decline was driven by a proactive decision to invest more in online and also be competitive on our campaigning. The EBITDA margin before special items reached 18.8%, down from 21.1% last year. The EBITDA margin was 16.7% year- to- date, which was well in line with our guidance for the year, an EBITDA margin in excess of 15%. With that overall introduction to the quarter, I will ask you to turn to slide number three and hand over to Anders for a deeper look into the financials.
Thank you, Gregers. Let me begin by giving you a little bit more detail on the revenue development. As Gregers mentioned, revenues increased from DKK 1,075 million to DKK 1,093 million. It was driven primarily by the Firtal acquisition and continued strong growth online. If we look at the specific areas, sales of beauty products grew 0.6% year-over-year in the third quarter, driven by increased sales of high-end beauty, while mass beauty declined due to the continued competitive pressure, specifically on color cosmetics. In the Firtal areas, sales increased by 19.4% year-over-year. That was primarily due to the acquisition of Firtal, but also driven by fairly strong sales and strong campaigns in the quarter. Sales in the Matas area decreased 4.4%, driven by a reshuffling of campaigns and intensified competition.
Finally, MediCare dropped by 1.9%, primarily due to lower sales of nicotine gum as competition from supermarkets and discounters intensified in that specific area. The gross margin came in at 44.0%, let's just say 44% in the third quarter, which is down from 45.0% last year. Decline was, as Gregers already mentioned, primarily due to our decision to invest in competitive campaigns in the quarter. Total costs, excluding special items, rose by 6.9% in the quarter compared to the same quarter of last year. The increase came both from other external costs and from staff costs. I will revert to this in more detail a little later. Following the decline in gross margin and the increase in cost, EBITDA before special items was, as mentioned, realized at DKK 206 million against DKK 227 million in the same quarter last year.
Lower gross margin and the increase in cost led to a drop in adjusted net profit to around DKK 140 million in the quarter compared to DKK 155 million last year. Free cash flow was DKK 127 million, which is a marked drop from the DKK 237 million generated in the third quarter of last year. Of course, the free cash flow was negatively impacted by the acquisition of Firtal Group. Cash flow from the operating activities were actually slightly higher than last year. If you look at the number of transactions in our stores and online, they fell by 1.3% in the quarter compared to the same period last year. On the other hand, we continued to see a growth in the average basket, which was up by 2.5% or slightly above DKK 4. That's DKK 4.4 per transaction. With that, please turn to slide number four.
On page four, you can see the longer-term development in revenue growth, gross margin, EBITDA margin, and the level of inventories. As Gregers has already mentioned, the quarter had a positive underlying like-for-like growth of half a percent. However, if we look at the 12-month trailing like-for-like growth, it remains in negative territory, although the decline is tapering off. If we look at gross margin, the 12-month trailing gross margin declined 0.3% in the quarter from 44.9% at the end of last to 44.6%. Long-term trend for the EBITDA margin before non-recurring items remains negative, with a decline of 0.7% from 16.1% to 15.4% in the quarter. Finally, if we look at our inventory level at the end of Q3 was above DKK 900 million, which was frankly too high and not in line with our expectations.
The increase was partly driven by the acquisition of Firtal, which added roughly DKK 30 million to the numbers, but also an increase in the number of SKUs we stock, and also a few new stores. In the quarter, this quarter we are in right now, we have initiated plans to curb inventory levels. With that, please turn to slide number five. As we have already covered the first few lines, let's start with just a closer look at costs. I already mentioned total costs, excluding special items, rose by 6.9% of the quarter compared to the same quarter of last year. Other external costs rose by 9% year-on-year, driven by increased marketing costs, primarily from the addition of marketing costs from Firtal Group, but also the high growth in online sales led to an increase in fulfillment costs, while we actually had a slightly positive impact from lower rents.
Staff costs rose by 3.2%, primarily driven by increased costs related to the online business, that is both Firtal and Matas.dk. In the quarter, there were also some costs related to redundancies that we made. Special items declined. Can't actually see that here, but you can see it in one of the previous pages. Declined to DKK 1.3 million from DKK 5.5 million in the third quarter of last year. That quarter, the number was higher because we closed off both StyleBox and four Matas stores. If we look at the effective tax rate, it was unchanged at 22% in the quarter. Profit for the period after tax came in at DKK 122 million, which compares to the DKK 134 million in Q3 of last year. With that, please turn to slide number six. On slide six, we look at cash flow development.
As you can see, cash generated from operations amounted to an inflow of DKK 337 million in the third quarter, slightly higher than the year before. CapEx and investments stood at DKK 139 million, which is an increase of DKK 116 million from the same quarter the years before. As already mentioned, the main reason was the acquisition of Firtal, which was completed in the quarter, and resulting in a payment of DKK 111 million. As a result, the free cash flow was DKK 110 million lower than in the same quarter before, and free cash flow stood at DKK 127 million in the quarter. With that, please turn to slide number seven for a look at our progress on strategic initiatives, which I will leave you to do, Gregers.
Thank you, Anders. As for the strategy renewing Matas, we are very pleased with the progress in this quarter. We have made progress on every single one of the five tracks in our strategy. We have headlines on this slide, and if you turn to slide number eight, I will dig into the first one, which is live our purpose. In the quarter, we have continued our successful rebranding campaign or revitalization campaign of Matas, and we have been preparing our 70th anniversary, which will take place over the next quarter. We have been in preparation mode with the new store concept, and actually today we are unveiling a range extension of our private label brand, the Stripes, a new design and a range extension. We are very happy to see that out to the market. If you please turn to slide number nine.
In online, as we already mentioned, we continue to see this strong momentum from the strategy that we launched earlier last year in digital. For the nine months up to the third quarter, we have been growing 54%, and that has made us move forward the growth plan for digital and add more resources to digital so that we can continue to win market share in that space. If you please turn to slide number 10. With the stores, we have been working in the engine room. As we have told you before the summer, we will be unveiling our new store concept. We look very much forward to that. Besides redesign of the store and rethinking the entire store experience, we are also doing a lot of changes to the assortment and to how we operate the stores and also working actively with the store network.
If you please turn to slide 11. On the strategic track on growth on the Capital Markets Day, we announced that we would aim for winning a bigger share of the green market. We have, primarily due to the acquisition of Firtal, delivered 19%+ growth in Firtal in Q3, and made a step change on that particular track. There as well, we are pleased with the progress. If you please turn to slide 11, Change How We Work. We have made some changes to management. We have a new chief commercial operator on board from October 1st. She will focus on category management, on pricing and promo, and on our processes to make our commercial processes more lean and effective.
We have also brought on board, starting January 1st, a new supply chain director with a very strong track record in retail, in lots of different fields in retail. His focus will be on inventories, but also on thinking ahead on our omni-channel fulfillment and our capacity to deliver both to the stores and direct to the consumer. Finally, we have continued, as you can tell from our accounts, our focus on operating our stores even leaner in this quarter. If you please turn to slide 13. Our guidance for the year. Revenue guidance, we have an unchanged level for the underlying revenue for this financial year compared to last year. We have a specification that we expect the like-for-like growth to be between -0.5% to +0.5% compared to the previous guidance of +1%, -1%.
We are up till the end of the Q3 at zero like-for-like growth for the first nine months. We expect EBITDA margin, maintain the guidance on EBITDA margin before special items to be above 15%. We are currently at 16.7% for the first nine months. As for CapEx, we maintain the same guidance as before. Our CapEx in the range of DKK 110 million-DKK 130 million, and total investments, including the purchase price for Firtal between DKK 240 million and DKK 260 million. Finally, we reiterate that we will expect to pay a dividend for this financial year. As stated in the Q3 report, Firtal Group has been included in our accounts from closing, meaning that Firtal will be fully in our Q4 numbers. Please turn to slide 14. With that, we have concluded our presentation. We are ready to take your questions. I will hand over to you, operator.
Thank you, ladies and gentlemen. We will now begin the question and answer session. As a reminder, should you wish to ask a question, please press star and the number one on your telephone keypad and wait for a name to be announced. Should you wish to cancel the request, you may press the pound or hash key. Once again, it's star and the number one should you wish to ask a question. You've got two questions on the line. First question comes from the line of Michael Rasmussen. Please ask your question.
Yeah, thank you very much. Michael here from ABG. Firstly, if you could discuss a little bit on the stores. Is it right to assume that you opened two stores during the quarter? I think that you have left out the normal talks about stores in the release. Staying on the stores, if you could please tell us how the development has been in the Matas Natur stores so far. If you could talk a little bit about the number of stores that you plan to refurbish or upgrade in the fourth quarter, including costs on that. Then also if you're planning any closures of stores going forward. Thank you.
Okay. Thank you, Michael. As for new store openings, you'll find it on page seven of 22 in the report. We have opened one new store in Ølby, we have expanded one store in Vanløse. That's for the quarter. Development in store sales was slightly down in stores, we don't give out specific numbers on that.
Gregers, when you say slightly down, is that for Matas Natur, the Natur stores that you're talking about, or?
That's for the overall.
That's the overall.
Yeah.
We don't doubt the information on Matas Natur. Judging Matas Natur, we are very happy with the overall progress of the Matas Natur initiative. We have no plans, and we have had no plans of expanding the two stores. They serve a very specific purpose of both the marketing purpose, but also a purpose of being able to source new brands and experiment with the customer experience and the target group that is interested in Matas Natur. What we will use those two stores for is to the learnings that we have from those two stores, we will take the best part of that into our blue Matas. We have no plans of expanding the Matas Natur stores at this point.
I think just to add, they are insignificant in the big picture, so that you don't need to worry that they're sort of making a big hole in the accounts.
No. That's a good point.
Yeah. Very insignificant.
Sure. On the refurbishments?
As for the refurbishment rollout, we don't give out any specifics other than what we said already, that we will be opening the first stores in the new concept before the end of the financial year. We don't give out any numbers or details on the overall rollout plan.
Great. Talking about your staff costs now with you hiring in a new CCO and a new supply chain director, in general, I understand that the IT guys are a little bit pricier than your normal store staff. Should we expect staff costs to come up slightly in the next couple of quarters?
The management changes, they have been direct changes of management and getting new management on board. On that specific account, no. What you see in the quarter that we add resources to fuel specifically our online and to sustain a high growth rate online. Yes, you should expect something. In parallel with that, we have efficiency programs to make sure that our headquarter cost is kept in control.
Oh, okay.
Again, Michael, we can't sit and discuss what the common cause is. That would be like guiding through the back door, we're not going to do that.
On the net working capital development, obviously, I heard you say, Anders, that you will be looking into the inventories.
Yeah.
Just kind of thinking conceptually about this, as you grow online, what will this mean to your inventories and also receivables going forward? I would assume that the inventories would go up, but at the same time, your receivables would decline.
I don't think it's going to have much of an impact on the receivables, to be honest. Sales online are just like cash sales. There's not really a big difference. As to level of stocks or inventory, sorry, it could be argued obviously, as we have been arguing that to some extent when we are expanding the number of SKUs that we operate, that has an impact on inventory levels. It should also be noted that you can do so online rather more cheaply than if you do it in the stores. It's much more expensive to introduce a new brand in our stores than it is just to introduce it online. The effect is rather small.
There is the effect that when you grow the business, of course, obviously, there is some kind of risk that you might grow your inventories a bit, but there are also some other factors at work here. Obviously, as we pointed out, the inventory level at the end of Q3 was basically too high for our liking, and we have put concrete actions in place to make sure that we will curb inventory levels in the quarter we are in right now.
Okay. Thank you so much.
Thank you. Again, it's star and the number one should you wish to ask a question. Our next question comes from the line of Poul Jessen. The line is now open. Please ask your question, Poul.
Thank you. A few questions about this other cost and the staff cost.
Poul, could you-
We can barely hear you.
Get a little closer to the mic. Yeah, that's it.
That's better. Thank you.
Okay. Headphones, that's not the best. No, the questions were about the staff cost and also external cost, which year-over-year was up a lot, but it can't be Firtal all of it, given the revenue levels of Firtal. Can you say something about the recurring nature of these additional costs for online fulfilling and marketing and so on, looking into the coming quarters? That was one question. On Firtal, can you say something about seasonality on the business? I would assume that it's more stable and less cyclical or seasonal than the rest of the business. You have severance payments mentioned. Is it material or is it just something you have to mention? Thank you.
On the online cost, there's no doubt that as we grow the online business as aggressively as we have been doing, there are some fulfillment costs that are carried through in the system, and that will affect numbers. Obviously, that's something that if you forecast very high growth online, you will also have to take that into consideration, basically because there are some costs associated with the picking and packing and so forth of the goods there. There is a direct link. As to the cost associated with people there, we mentioned it because Is it a significant number? Not in the greater scheme of things, but with respect to that particular line cost line, yeah, you can see there's a difference, and it's part of the explanation. Whether or not that will be of a recurring nature.
Yeah, some of it is a recurring nature, as you know, it also will have swings from quarter to quarter. That's the nature of the game.
You are right in assuming that Firtal is less seasonal than the rest of the business.
Okay. You talk about increased competition in the material segment. Is that supermarkets that's pushing that?
It's both supermarkets and our friends from Jutland as well.
Okay.
You know that a lot has happened in that area. We just see there is some increased competition. We do see some online movement as well in that space.
Okay. I guess you don't want to give more insight into the Firtal impact on the different cost lines.
No, that is correct.
The gross margin, how it's impacted that. Do they have gross margins in line with the rest of the business?
We don't guide specific on their gross margin. As we say, we're looking at a business that we're looking to have an EBITDA margin of more than 11%, but that's about as far as we're going to go.
Okay.
In the greater scheme of things, it's not really going to make a difference if they're 1% higher or lower in gross margin, to be honest.
No. Okay. Thank you. That was all for me.
Thanks.
Thank you again, ladies and gentlemen. It's star and the number one should you wish to ask a question. No further questions at this time. Please continue, sir.
Thank you so much for taking the time today. As always, you can reach out to Elisabeth if you have further questions. Have a nice day. Bye.
Bye.
Thank you. That is the conference for today. Speakers, please stand by. Participants, you may all disconnect. Thank you for joining.