Very good, good morning everyone, and welcome to the Musti Half-Year Financial Report presentation. My name is Martin Svedholm, I'm the head of the Investor Relations and Treasury at Musti Group, and today, David Rönnberg and Toni Rannikko will present the results. Without further discussion, I'll let David take over.
Thank you very much.
Let me share my screen.
Thank you, Martin. Yes, hello and welcome everyone. So there's a quarter that we are proud of, in a tough environment, has been a bit slower consumption overall, but I think what Musti have achieved during this first half of the year is really good during the circumstances. We had quite good topline, so net sales increased with 7.6% in local currency and about 5% in euro, so we ended up at EUR 222.9 million. We had quite good like-for-like, a bit slower than expected, but during the circumstances we ended up at 4%, which we are, of course, proud about. During the quarter we've seen this slower consumption overall, and it's also affecting all countries, it's not any country that is specifically impacted. The adjusted EBITDA was EUR 35.5 million, more or less in line with last year.
It was a bit stronger first quarter and a bit slower second quarter. Our gross margin, though, that went down to 44.9% versus last year 45.5%, and especially in Q2 was lower than last year. And I will say that that is the biggest impact of the deviation or a bit slower profitability than we have expected. Other than that, we've had good progress and good cost control overall in the company, and in the supply chain, we have been performing well. Happy to see that the online like-for-like growth was still going strong, 12.8%, so still growing faster than stores, and this is also all three countries performing well. Our own exclusive brands continue to be strong, 52%, and cash flow continue also to be good in the period.
Important to point out here is that there's a lot of one-offs related to the transaction with Flybird, so if we exclude the one-offs, we're more or less in line with last year's cash flow in the six-month period. So let's move on and look more into the details of the quarter report. If we look at the sales, as I mentioned, we had 6.4% growth in the quarter, so EUR 107.2 million. Or in euro we ended up at 5.5% growth. If we look at the countries, if we start with Finland, we had 4% growth, so a bit slower than expected. Sweden, 5% growth, but here we also see the FX impact hurting the growth, so it's a bit higher than if we look at local currency.
Norway, 12% growth, and here it's a huge difference when we look at the local currency that came in at 16%. From an online share of sales , it increased, more or less 1%, so went from 24%- 25%. And if we look, from a longer perspective.
Perspective, CAGR, H1 sales growth was around 10%, between 2021 and 2024. And then when we look at the net sales rolling 12 months, EUR 437 million, and also here we have some FX impact, so a bit higher when we exclude that. Finland, still biggest country with 43.4% share of sales. So overall quite good topline. If we see it over a longer period, good 10% CAGR. If we move into the gross margin, which I think is the thing that is standing out most in the quarter, where we've been seeing that the margin has been below our expectation, we have been facing some temporary pressure here. So the margin decreased to 43.9% from 45.1% last year in the quarter. Mainly three areas that we want to point out.
First of all, of course, the FX impact, SEK and NOK versus euro, has not been positive for us. That is probably the biggest impact. The second impact we see is that we've done targeted investment in price and campaigns, and that is related to a bit slower consumption overall in the three countries. We also see that this is important for us to be able to take market share, which we have done during the quarter. The third one then is the mix effect, both in products, a bit slower in discretionary, and also in channels, that we see that the online has been growing faster than stores. During the period and during the last 12 months, we've seen that our own exclusives has been quite stable. We believe that this gross margin temporary pressure will ease out in the coming quarters.
Let's move on to profitability. Our group adjusted EBITDA decreased with about 10% in the quarter and came in at EUR 15 million versus last year EUR 16.6 million, mainly driven from this gross margin impact. As I said, we, we see that the gross margin pressure will ease out, going forward. We had good performance in our warehouse operations and overall good cost control. With the topline that was growing, with good cost control and the good performance in the warehouse, it's the margin deviation that is impacting the profitability. If we look at the H1 adjusted EBITDA, it came in at EUR 35.5 million. CAGR since 2021- 2024, 7% growth. Over a longer perspective, still, still positive development. With that, I will hand over to Toni that will go through the segments.
Thank you, David. So, pretty much kind of a same, same story here, what David mentioned about the gross margin and the pressure on that one. But let's start in Finland. Net sales increased by 4% with a flattish like-for-like growth, and the gap there kind of a like-for-like and the real growth is the PPF Premium Pet Food Finland impact, year on year. So Premium Pet Food Finland just had its one-year anniversary as part of 100% in the group. So next quarter onwards the last year numbers are comparable. Adjusted EBITDA decreased by 9% to EUR 11 million, and kind of we had all over the group good cost control, but this is derived pretty much directly from the gross margin level.
So kind of what we did for the targeted investments in price and campaigns, and maybe Finland from all the three markets has the sort of a toughest consumer climate, what we can see. There was no network changes in Finland during this time, and kind of in this environment fairly good achievement from Finland. Of course we are hope more and will do more in the future. Then on the next page, Sweden, we can see the same dynamics in Sweden plus then weakened SEK during the first or the second quarter was burdening our result. We can see that the movement in SEK continues to that direction also now in the April time.
So this is one portion why also Sweden had a little bit more modest growth and FX neutral growth being 6% is actually a very good achievement in also tough Sweden market. Same dynamics here driven by the gross margin and the campaigns on the profitability. So slight increase in adjusted EBITDA and adjusted EBITDA margin decreased a bit. We acquired one franchise store and four franchise stores left the chain. So Sweden is the last country that we have franchise stores, and this is the last year that we will have franchise stores in the group. Then Norway showing, of course, bit higher growth numbers, net sales increased with a 12.5% and correcting also weakening NOK on the picture almost 16%. So this was driven quite the strong like-for-like in the market.
So in Norway there is a good momentum with the team. We feel that we're getting market share and, and pushing the competition to, even tougher, places. Adjusted EBITDA increased by 14%, compared to last year, and this was supported with a good growth and, and good cost control in the country, despite we had also a campaigning and, exchange rate, headwinds. So adjusted EBITDA margin, slight improvement from, from last year. Really good performance from Erik and, and team Norway. During quarter two we didn't do any changes in the network, but Norway is of course the growth market. So this was kind of a timing issue more that we opened more stores in the quarter one and then, in the quarter three we have also a good pipeline of, of new stores.
Then if we jump into the financial position, so the one-offs or non-recurring items, of course, buried the cash flow as well, but the numbers are not exactly the same as in profit and loss. So we had a net cash flow in the quarter for 7.2%, but then considering there was one-off related payments of almost EUR 4 million, so that is a good improvement for last year cash flow. Main driver here is a good grip on the net working capital during the past 12 months or 15 months. We have done quite a lot of process improvements in this area. Inventory is well in hand and we can see even further improvements in net working capital and inventory position.
So our inventory rotation at the moment is very good, especially on the food part and fast-moving items, and then also on the accessory part it's getting healthier. Net debt, no big movements on that part, and the relation to last 12-month EBITDA, remaining on the 1.9% level. Good cash position and investments, bit higher than last year, mainly related to the production facility, and then our central warehouse and store network. Then we have the page on financial targets. So yesterday evening, we published the board decision to withdraw the public company long-term targets, and this is kind of reflecting the situation where Musti is now with a new majority owner of over 80% of shares and looking for the more on the growth venues, in current markets and other markets. This is also related to the dividend policy.
So the board's will is to invest the dividend in the company's future growth and drive these initiatives with a long-term view in their eyes. Through this, I'll hand over back to you, David, and pull it all together.
Thank you. So I think when we summarize the quarter and the first half of 2024, we're seeing that we are taking market share in all three countries, especially I would say in Norway we're performing really well and taking more market share maybe than in the other countries. There's been a slower consumption, tougher climate, but even though we've seen that in all three countries we've been able to increase sales with 6% or a bit more than 6% and also with positive like-for-likes. Our online verticals has been performing stronger than stores, so they have been growing with a like-for-like growth of 13%.
We see that we are winning new customers, getting new puppies into the system, and also taking care of more family owners of the pets that is also in our service systems that is performing really well. We see that the gross margin has been under pressure during the quarter and that we believe is going to be normalized over the coming quarters. Other than the gross margin, we would like to point out that everything has been performing really well, especially cost control, logistics, and warehousing. We also have had good availability and have also been able to take care of our customers fully. So we're quite happy with the situation even though we've seen a slower consumption trend and that has been impacting our gross margin. This will ease out going forward. So with that, I'd like to hand over to questions.
Yes, I think we could start with Mangunus. Please go ahead.
Thank you. I have two questions. First, on the gross margin pressure that you see easing out ahead. Is it annualizing NOK and SEK even if they have been a bit weak now in recent time? Again, is it an annualization here that is the main reason or do you see a lesser need to discount ahead to protect the topline?
I think there are a couple of areas where we can operate to ease out the gross margin. One is the campaign pressure. Second is as we talked about the effects that we can't control than the mix. And we believe that the campaign pressure and the mix will, will change a bit going forward. And the third one that also is super important for us is how we are operating with our own production facilities, and how much volumes we can, we can insource into our production facility. And we can say that that, that project, was a bit postponed about because of the SMAAK incident that happened, six months ago. We were able to, yeah, that we were not able to move as fast as we hoped with the insourced production, and also, I mean due to the SMAAK incident.
Makes sense. All right. And then I just wanted to ask also about the price increases driving topline here. You mentioned in the report I guess, 4.6% price increases in recent six months. If you would look to the coming six months is it you expect lower price increases if any or the same?
I think we overall see that it will be, I think it's going to be price decreases overall.
All right. That is interesting. It's a very rather dramatic shift then. So I mean, but you expect underlying volumes to become better or what how would you protect your topline, in that scenario?
What we're currently reviewing is that we can take out some of the key products to do some price decreases on to get more traffic into the system. We're currently not looking into price increases, as we've done earlier. We're also seeing that the price increases have been coming down the last 12 months. So, from a volume perspective, we see that the volumes will start to go up, and we will then try to launch new products as well, as part of the kind of production facility that we bought a year ago. The work to be able to launch new products is also performing well, and that will drive traffic and have a positive impact on the topline.
Right. So I guess that I mean this picture that we see that you now say that you expect actually price decreases is if anything and that you had a bit of a slowdown on topline here and you didn't do more campaigning that impacted the gross margin. Everything speaks of you having felt or witnessing an increasing price pressure in the market. Could you allude to where that was mainly from? Was it in the online from online competition or from store players or everywhere?
I would say, I would say from everywhere. I think the kind of a price increases that was done driven from groceries, when the inflation hit the market, 12, you know, 18 months ago, 12 months ago. I think those price increases was a bit too high for, from a consumer, perspective to be able to, especially now when the consumption has been slowing down. So there, there are, there are areas where we need to review the price increases that has been done.
Very interesting and clear answers, really plays into the sort of deflationary inputs that you get from everywhere right now. So yeah, thank you for that.
Great. Thank you, Mangunus. Next Maria. Go ahead, please. You're on mute, Maria.
Yes, I actually exactly had two questions, the same questions that Calle posted on the, on the chat, so I can ask those two. So which one was the Easter impact on, on the sales development, and the other one was, I mean, more your expansion plans, and then I have a third more, but let's start with those two.
I mean Easter impact has been, yeah, we have been impacted of the Easter effect, of course. I know that other companies have been talking about 3%-5% impact in the quarter. We don't believe the impact is that high. Maybe 1%-2% impact on the topline.
Negative.
Negative.
And then, I guess, I mean, given that, I mean, you will reinvest the dividends into growth and it's really difficult to see that, I mean, you would need all that cash to open these 25 stores in Sweden plus Norway that you are currently planning. So where are you directing this cash to? So what, like, what's the expansion plan as it stands for now?
First of all, the three Nordic countries we see that Sweden and Norway we have a longer runway there if we are a bit more aggressive opening and acquiring stores. Then from an online perspective we're seeing that when we're adding more cash into the investment into the online verticals we're seeing that it's growing really well, with profitable growth. And then we are now reviewing other countries outside of the three the three one we're operating in. So there's, yeah, quite, quite many places that we're reviewing currently.
Did you make any conclusion? I remember you tried maybe the online vertical in Denmark and did you even start tried something in the northern Germany? Have you made any resolutions if you would go ahead with these two markets?
I think we haven't started anything but I think since Sonae came into the company, we are now reviewing all the options that is out there, before taking a decision.
Okay. And then finally, I mean, thinking a little bit about, like, the future margin profile and as online is clearly the online vertical is growing faster than the sales in the store network. So how do you see this will impact your margin profile in the coming quarters or in the coming years?
So with the internal projects of increasing our own production, launching product new products in maybe a bit of a lower price segments but it's also internally produced. And also believing that the mix effect will ease out. We believe that the gross margin will stabilize to a level that it was before 2024.
Just quickly on that point, as I mean, online requires also the transportation costs and it's a little bit a different model compared to the delivering to the stores. Do you see, I mean, that's burdening your margins that the higher share of sales goes to the online verticals or what's your view there or what's the profitability between online and stores?
It does, it does. But from a profitability perspective EBITDA, we are quite channel agnostic. So it hurts the gross margin but from a profitability perspective it, it doesn't hurt it.
Okay. Thank you. No further questions.
Thanks, Maria. Then I think we got Calle Loikkanen from Danske Bank. Next up.
Yeah. Hi, hi, hi everyone. Just a couple of questions. I don't know if you mentioned already but how did the customer visits develop in the quarter?
You mean from a traffic perspective?
Yeah. No, I was just wondering that you mentioned that it was a tough environment. So, how did the traffic develop, any kind of like-for-like customer growth or anything like that?
Exactly. So what we've been talking about is the like-for-like overall in the group that was positive. That, that's the area what we've been communicating. It has been a bit different between the countries. And as Toni said, we've seen that Finland has been the country that has been maybe most impacted from the slower consumption.
But you haven't seen any, you know, trends where customers would be perhaps preferring your competitors in this environment or anything like that?
No, absolutely not. We're tracking and following this quite closely, and we're seeing that overall the consumption has been lower, but we have been taking market share during the period.
Okay. That's clear. Thank you. Then I was wondering about the. You mentioned that the sales you have increased the sales prices, but then at the same time you said that the gross margin decreased, kind of due to I think it was targeted investments in price and campaigning. So can you elaborate a bit on this kind of dynamics that apparently you had some very heavy campaigns but then that the general price level increased or how should we read into this?
Yeah. You can take that, Toni.
Yeah. It's kind of if you compare it to last quarter or then you compare year on year how they increase its impact. So, of course a year ago we were still doing price increases on the list prices and the campaigning pressure was lower. And now when you look at the market and economy now the list price increases are very difficult to introduce and to try traffic there is more campaigning. So then taking this kind of a year on year impact out you can see the burden in the gross margin. So sort of an old price increases fading away and then being more active on the price investments and campaigns. That's the combination together with the mix effect, effects and the whole picture.
Yeah. All right. All right. Got it. Thank you. Yeah. And then I was just wondering, has this kind of ownership changes in the company kind of delayed any plans of entering a new country? I remember that I think it was the Q4 results. You said that within the next six months you hope to be announcing something regarding a new country and I think we're starting to be at that six months now. So, has any of the plans kind of been delayed due to all these changes or any updates on that front?
Yeah. I think the situation with the new owner is that we're now reviewing more countries in that sense that only the countries close to us that you can say. So we need to do a bit more of a homework on that part before we take any decisions. So we've seen a delay in that part. Yeah.
All right. Thank you. That's, that's all from me. Thank you.
Very good. I think we had a couple of questions in the chat, but I think David already answered those. If there's any more questions, please raise your hand. If not, then I'm sorry.
Yeah. Sorry. I just have one quick follow-up here. On the price increases, I couldn't see in the report that you wrote the effect in the quarter of price increases. I could just see the 6-month figure. Could you give us the effect of price increases on the Q2 quarter?
I don't think we have that in the quarter. I was trying to elaborate a bit on the dynamics on kind of a year-to-year and short-term for Calle's question, so.
Right. So, we should view it as that even if you write here in the result that the first line of what supports the topline is price increases, we should read that the price increase figure of the six month,
Of 12 months.
It's large. No, let's see here. We have October 2023 to March 2024. There you write that price increases contributed with a certain figure that I can't, I don't see it right now in front of me, but you wrote on the six-month figure I think it was 4.6%. Yeah. The impact of price increases in local currency was 4.6%.
Yeah. So it's kind of the accumulated price increases from the past 12 months, six months and so on. So now kind of on the latest months and the quarters price increases have been more modest.
Yeah. All right. Okay. Thanks.
Perfect. I think we are done then, Martin and Toni.
Great. So thanks for listening. Good questions. We hope to see you soon again. Thanks a lot. Bye-bye.
Thanks for joining. Bye.
Thanks. Bye-bye.
Bye-bye.