Hi, everyone. David Rönnberg here from Musti. With us, you also have Toni Rannikko from Helsinki and also Essi Nikitin that will help us with the presentation. Today, we're gonna go through the half year report that we sent out this morning. We can start with going through the highlights in the report. We think that we had a solid first half of the year, and important to point out that we are on track with our long-term targets. Net sales increased with 16.2% to EUR 193.8 million in H1. That was mainly driven from new customers as before, and we are continuing taking market share in all three countries. In the second quarter, sales increased with, for us, only 12.1% to EUR 92.4 million.
The sales were negatively impacted, especially in February, due to disruption in supply chain, rapidly accelerating inflation, but maybe most of all, the terrible war that impacted consumption, and mainly that was in Finland. We have those returned to normal levels from mid-March, and in April, we saw a strong bounce back. Important to point out that we're not selling anything to Russia or Ukraine. H1 sales like-for-like was 6.9% in total, 4.1% in stores, and online, about 16%. We were meeting quite high online growth number last year. With the 16% like-for-like online, on a two-year basis, that's pretty high.
The group's adjusted EBITDA increased by 17.4% to EUR 33.8 million for H1. The adjusted EBITDA margin was 19.6% versus last year 18.6%. In the second quarter, EBITDA increased to EUR 14 million versus last year EUR 13.1 million. One of the key things that we're looking at is the number of loyal customers, and that was growing as well this period. We are now at 1.37 million customers, and that's approximately 12% growth versus last year. If we include all our customers that is in our online verticals, we had a new record coming in at 1.66 million customers. We're extremely happy with that. In H1, the group's adjusted EBITDA increased by 10.8% to EUR 20.3 million. The adjusted EBITDA margin was 10.5% versus last year 11%, so it was down a bit.
There are some specific reasons behind that and also why the Q2 adjusted EBITDA came in at 7% versus last year, 7.7%. Toni will go through this more in detail later. Cash flow from operations came in at EUR 18.5 million in H1 and EUR 5.3 million for Q2. This section is part of Toni's details. As I said earlier, after the period, in April, sales was strong, 18% growth and 40% on a two-year basis. We have a strong start of Q3, which we, of course, are very happy about.
Let's look more into the growth of the company on next slide. As said, net sales increased by 16.2% during H1 and 12.1% in Q2. We see H1 more as a period than Q1 and Q2. The reason behind it is the kind of outdoor effect and the impact of that. It relates to when the cold weather is coming. This year, we had it in December, and last year, we had it in January. That actually swings a bit between the quarters. That's why we're looking at H1 more as a period.
For H1, Finland had 12.6% growth, which is a good number. Strong growth in stores and a bit lower online due to the high comps that we're meeting. Sweden had 14.7% growth, strong growth in stores and online. Norway, the ramp-up country, had 43.9% growth in the six-month period. That's very strong growth, both in stores and online.
If we look a bit on a longer perspective, you can see in the middle chart there that the CAGR sales growth H1 2019 to H1 2022 has been steady at 16%. Net sales, rolling twelve months, was EUR 368 million with an LTM growth of 18%. As before, per segment, Sweden and Norway are taking bigger share where Finland has 44% and Sweden and Norway have 56%. Last year, the same period, Sweden and Norway had 52%. It's part of the strategy in growing Sweden and Norway to be a bigger part of the company.
If we look at sales on a bit longer perspective on next slide. Musti growth has been increasing on a two-year basis for many quarters, but in Q2, it came down to 35%. It's important to look at it on a two-year basis as well, especially when we're meeting these extremely high comps. As I said, it was impacted in February due to the reasons I said earlier. If we look at H1 more and the period, how it was, it came in at 16% growth and 38% on a two-year basis. After closing April, as I said, 18% growth, strong bounce- back, 40% on two-year basis. Also, we want to point out that stores were growing 27% in April with 8% like-for-like. Happy with the strong start.
Let's move on and look at the gross margin development. The gross margin and share of own exclusive products are strong. The development is in our favor. The trend in our gross margin has been very strong the last quarters, and during Q2, it increased to 46.5% versus last year, 45.3%. For the period H1, 47% from last year, 45.7%. The strong development is mainly driven by couple of reasons. The most important thing is our increased share of own and exclusive brands that is going upwards, as you can see on the right side, the successful campaigns plus the increased gross margin in our pure play that we've been working with the last 12 months.
This has been important for us to be able to increase our gross margin in the pure play and online verticals, so we're not diluting the business in the gross margin perspective. All this is, of course, extremely positive for Musti going forward in this turbulent situation where similar companies are in.
Let's look at the EBITDA development on next slide. Musti continues to increase the EBITDA. In Q2, Musti delivers EUR 14 million in EBITDA with a 15.1% margin. We have seasonality effect between the quarters, as I said. That is also reflected in the margin, of course, where Q2 and Q3 is the lowest. We were in one of the lowest quarters, and Q4 and Q1 is the highest. That's also why we would like to look at it as periods, half years. For H1, Musti delivers EUR 33.8 million, 17% growth versus last year.
If you look at CAGR, even here, you can see that it has been stable, ongoing at 22% EBITDA growth. Very strong momentum trends is in our favor, and we're pacing our own goals. During this period, we have also strengthened our concept. You can see that on slide eight. Musti has strengthened its position in the Nordics the last years. We have been focused on opening stores, acquiring franchise, and growing our online business. This has been important for us to take market share and build the kind of a concept in the three Nordic countries. The last 12 months, we have added 56 stores, and this is more than we planned when we did the IPO. You see it on the left. Every year, we added then 20, 29, and last year, 56.
These stores are still in a ramp-up mode, so they burden us short-term, but they will help us long-term. You can see the economics in the middle chart. When they are mature after three years, they give us approximately EUR 1.1 million sales and EUR 300,000 in contribution. These stores is in a ramp-up phase, year one. This means that they will enable us to reach our financial targets. That's also why we've been speeding up, because we have seen a greater opportunity to open more stores.
At the same time, which is also extremely important, we have been investing and pushing our online verticals. You can see on the right side, the online sales that now stands for 23% share of sales. That has been growing 21% CAGR since H1 2019. With this combination, Musti are well-positioned to keep on gaining market share with this strong omnichannel model. We have built it for future growth. Remember, it is burdening us short-term, but will help us long-term.
Now we will hand over to Toni, that will go through the EBITDA and the segments more in detail.
Thank you, David. About the EBITDA. In the first half, it increased to EUR 20.3 million, so posting a best first half ever for Musti with 11% growth on the first half. As David there explained on the previous slide, adding these new stores and investing in the future capabilities in a short term, especially now when we had a little bit lower top line on the quarter two compared to Musti's growth speed in history, this is burdening our bottom line there below EBITDA. That's also one of the reasons why we internally and also we've been talking with you, investors about the EBITDA, as that will show in our mind, in other way how well the machine is worked.
There were also no adjustments in the EBITDA in the second quarter. What we have been talking in the past about Eskilstuna is sort of now business as usual. Of course, one of the reasons for the cost in the quarter and a bit also on the first half was that the high volumes in Eskilstuna, our central warehouse are covering the central cost and the group cost part. Also, kind of, looking at the first halves there from 2019, 2020, 2021 and 2022, we are in a good trajectory also regarding our long-term targets.
On the next slide, we could look a little bit on kind of characteristics of our business. Pets have proven quite resilient to different type of consumer shocks and changes. Especially with Musti, we have a large share of these non-discretionary staples, which over 50% is food and cat litter, where consumers have been found very brand loyal. What comes to the brands, the high share of own and exclusive with Musti, what we posted now was 53% as a group provides good shelter in this case as well, what comes to the gross margin and pricing power. Also, the all-time growing size helps us in the inflationary environment to negotiate with our suppliers and kind of push back the part of the inflation, what is then possible by our good sourcing team.
One shelter also for the inflation is the Musti cost base. On the pie chart there on the left, you can see that 1/3 of our cost base is roughly the sort of fixed cost, which is sheltered a bit better here in the Nordics from the inflation compared to materials and services. Salary inflation related to the premises has so far been lower than, for example, the raw materials and some of the products, and not to mention the gasoline and distribution cost. These three points are good to remember, in case of this inflationary environment and what is sort of the backbone of Musti.
From here, we can step into the three segments we have, and we start from Finland. We had 9% growth in Finland in quarter two, quite on level with like-for-like growth, but kind of this hesitance with the consumers, especially in Finland, was visible in February and early part of March. As mentioned there in David's slides, in end of March, and especially then in April, we have seen clear return to normal what comes to Musti customers. The growth in Finland was supported by growing the network, acquiring the franchise stores end of last financial year and good inflow of the new customers. Profitability declined a bit in Finland what comes to the quarter and then now on the first half as well.
Next one, we can take a look at Sweden. Good growth in Sweden as well, 9% growth. It's almost similar to like-for-like, but the most delighting part in Sweden is maybe the EBITDA increase of almost 40% to EUR 6.1 million. This was due to kind of a better operating leverage in the country, growing sales and a bit offset maybe the online part. But also in the online, we were performing quite good on the quarter and also on the first half. Adjusted EBITDA margin increased in the period to 15.6%.
Looking at the right side of the picture year-on-year, comparing the first half of 2019 to 2020, 2021 and this year, there is a good track where we are on with Sweden. Now we have also combined in the management team that Daniel leading Sweden is also looking after Finland and utilizing these great learnings in Sweden for Finland market.
Finally, Norway always on its own growth numbers, top line growth 35%. Here, maybe pointing out the right side of the picture again from 2019, sort of a break-even first half to EUR 5 million profits in this year and the pace keeps going on in Norway. Good ramp-up of the new stores. A little bit tailwind also on the currency for the period and great performance on both profitability and growth.
We can move into the financial position and cash flow, as David promised there in the beginning. Cash flow on the quarter a bit lower than we have used to. There are good reasons for that. We have identified the risks in the global supply chain due to the turmoil there in the world and have increased our inventories quite significantly. Also kind of the increasing inflation in the world, we have secured our inventories and availability for the customers with the current prices and availability from our suppliers. Also good to notice that during the period we paid the first half of this year dividend, or technically a capital return of EUR 7.3 million, and the second portion will be paid out in August.
Gearing jumped a bit on the quarter as well. We took a little bit more debt with the current facility. Leverage there in the last twelve months adjusted to EBITDA was 2.2x, still within the threshold of our targets and it's kind of coming up from two ways. A bit on the profitability and bit on more depth. Investments in the quarter were EUR 3.6 million, which out of EUR 2.7 million was a goodwill from the acquisitions in Sweden, and then rest is store network expansion and some IT investments.
My final slide on the long-term targets, no change there. We are aiming to reach the EUR 500 million, at least the EUR 500 million top line by the end of 2024, our financial year, autumn 2024, and also deliver EBITDA margin of at least 13% at the same time. We keep the leverage below 2.5x, and aim to pay dividends or capital return equivalent to 60%-80% of net profit. Now I hand over back to David to summarize the topics.
Perfect. Thank you very much. Yes, if we look at the summary of the full presentation, we had a solid first half of the year, and we are well on track with our financial targets, as I said. During H1, sales grew by 16%, mainly driven by new customers. The EBITDA grew by 70% in the same period. A good progress there. It has been a turbulent second quarter, impacted especially in February, where sales was impacted by the reason we talked about. We had a strong April bounce- back, where sales came in at 40% growth on a two-year basis and 18% on a one-year basis. Gross margin has been developing very well the last six months, and if we look at H1, 47% versus last year, 45.7%.
The other part that we were also mentioning was the store openings, that we have been pushing a lot more store openings in the last 12 months, 56 stores. They have burdened us short-term profitability, but they will support us reaching our long-term targets. Pet sector has proven to be resilient in tougher times, and the momentum continues to be strong and Musti is on track with our long-term financial targets. Perfect. I think that's that's everything in the presentation, so I will hand over to questions.
Yes. Hi, everyone. This is Essi. Unfortunately, we seem to have some technical problems with the teleconference, but please send your questions to the webcast chat and we can read them from here. Let's do so that I will read the questions, and Toni and David, you are free to answer. The first question comes from Joni Sandvall. April sales were up 18% year-on-year. Can you open country- by- country development?
It has been strong, I could say, in all three countries, coming back to normalized levels, and especially Finland that was a bit more impacted earlier in the Q2. We saw an uplift, but going back to normalized levels in all three countries.
Thank you. The next question is also from Joni Sandvall. Can you open your cost pressure due to inflation? I think at least in Finland, retail sector has employee negotiation during autumn.
Yeah, I can take that. What comes to the salary inflation this financial year, it's quite well locked up. We have around 2% salary inflation in Finland and Sweden and approximately 3% in Norway. What then shall happen in autumn negotiations is then up to that. Of course, there is pressure all over this. At the moment, what we see comes to the inflation, it's a lot about the distribution. What we have seen already earlier was the freights from Asia to Europe and now more increasingly the distribution in the Nordics as well, that the fuel surcharges with all the operators are going upwards due to the gas prices rising.
That is something that we mitigate what we can, but of course, we need to push part of that also into our consumer prices. Maybe kind of in the products, what we see the main pressure of inflation is more maybe on the food side than on the accessory side, and there, our own production facility helps us quite a lot, so we're increasing the volumes in there. There we have a good availability of all the raw materials, what we need.
Looking back the last quarter, what there is sort of a inflation in our numbers. We talk about maybe 3.5%-4%. The last twelve months is around 2%-2.5%. Of course, we can see that it's increasing, and we have done some price increases already and then are utilizing that part in the future more.
Thank you, Toni. The next question from Joni Sandvall: "How large impact did you have from additional sick leaves in Q2?"
Not material. It was a bit higher than on average, but not material on a sort of a group level.
Thank you. The next question comes from [Mathias Sarasi] : "You have mentioned increasing number of acquired franchise stores as part of the reason of decreasing margins in Finland. Can you please be more specific on this number and its impact on margins? How long do you think this effect could last?"
Well, the effect kind of goes then through the year-on-year comparison, and we acquired those big bunch of franchises at the quarter four last year. We can see that the impact there kind of in year-on-year numbers still couple of quarters. The dynamics were so as we discussed in the previous quarter, that our franchising fees and then the sales to the franchises, how they are channeled through the group and different parts. Now Finland sort of in the short-term is a bit suffering from that one. It's around [inaudible] percent impact on Finland what there is on the profitability in that sense. No kind of anything that turns the needle totally but is an impact for Finland now still for a while.
Thank you. Another question from [Mathias Sarasi]: "Can you comment on your plan regarding number of new stores opening, acquiring in the future? Do you think that the pace seen in the last 12 months is something sustainable?
Yeah. We are when we built our EUR 500 million plan, we, of course, had a target of number of stores and online, et cetera. We are currently ahead of our plan. We will probably slow down a bit with store openings because we have been opening and acquiring more than we planned. I think you will see a lower number than the 56 that we have the last twelve months, or 54. It will come down, that's for sure. We should remember that the kind of a new store openings that we're doing is hurting the old stores as well from a like-for-like perspective. That's why we're also shifting more into looking at growth.
If we just take Finland, for an example, the cannibalization effect of opening stores and acquiring the franchise center is about 3% impact on the like-for-like. We look more on the growth than on the like-for-like, specifically in specific areas.
Thanks, David. Next question from Joni Sandvall: "Regarding Eskilstuna headquarters costs, should we expect Q2 as a run rate or are you expecting any efficiency gains from, for example, Eskilstuna?
Yeah, we do expect efficiency gains, but now the kind of external factors are a bit burdening Eskilstuna's capability to focus on development items. Probably it's a run rate now for the next quarter and we'll aim to improve towards the end of the financial year in quarter four.
Next question from Olli Vilppo: "Did timing of Easter boost sales figures in April?
Yes, it might did, but not a big effect, I would say. We had the effect in April, but limited, I would say.
Thank you. Next question from Andy Wade: "Please could you confirm that Q2 saw LFLs +8% for the last six weeks and therefore flattish in the first six weeks?"
The like- for- like in April was 8%, exactly. The other I didn't get through. Toni, do you?
Yes, the Q2 had the 8% LFL, and also what we now mentioned about the April growth of that 18% there, the LFL was also 8%.
Okay, thanks. Next question from A. Costa. What's David's opinion about Zooplus being taken private? What's going to be the impact in our digital development? In your digital development.
Yeah.
Are we planning at a certain point to internationalize outside the Nordics?
I think the impact for them changing owner so far is no difference. We of course believe that they will have maybe a more aggressive agenda. I don't know if that's the Nordics, maybe it's more the Dutch region, et cetera. That we will see. For us, when we look at our online verticals, of course we're looking at the opportunities to go outside the Nordic countries. Nothing is decided but we're looking into it.
Thank you. Next question from Andy Wade. Which categories underperformed early in Q2? Was it discretionary categories, for example, accessories? Would April partly have benefited from pent-up demand after the slow start to Q2, so the exit rate may be higher than future LFL rates?
It was mainly the non-food categories that was underperforming in February and part of March. The food has been fairly stable all the time. In April we saw a bit stronger sales in all categories, I would say.
Thank you. Next question from Maria Wikstrom. Any issues with availability of products? Have you seen any bottlenecks, and how you are prepared for the quarters to come?
I think one of the reasons why we have been burdening the cash flow a bit is because we have been needed to take in a lot more products, so we can keep high availability in this supply chain disturbance that we're seeing. Currently, the availability is fairly good. It was a bit low, was a bit lower in Q2, I would say, in the beginning.
Thank you. Next question from Andy Wade. What happened to Sweden sales contribution? It looks to have fallen from 9% in Q1 to 1% in Q2.
Can you take that one or?
Yeah. What happened to Sweden's sales contribution? It looks to have fallen from 9% in Q1 to 1% in Q2.
Well, during the quarter, we took new stores, franchise stores into the network in Sweden, so they were maybe a bit bigger stores. Maybe there is one impact on that one. I must confess, I haven't looked at the Sweden from this angle in that detail, but I'll find the reasons for you, Andy, later on.
Great. Thanks, Toni. Next question from Tommy Ilmoni. Can you comment on how much acquired franchise stores in Finland affected profitability? Why are group function costs so high? Can we expect this level to remain in the future?
Yeah. The franchise stores, like I commented earlier and also in the last quarter, it's about the kind of internal sales dynamics and how we allocate the cost related to those. There's nothing changed in that one. Maybe it's more in this quarter was the volume-driven impact on what was there in the profitability. Group function cost, they are 1/3 of Eskilstuna- related cost and then 2/3 of other group cost, what all we have there, marketing, customer service center, finance and HR and so. Kind of compare that year-on-year.
All the new colleagues and all the new capabilities, what we took into use in Musti during the 2021, also in the quarter three and four, are now there kind of as a fully loaded in this quarter when we compare Q1-Q2 and Q2. This year we have taken quite strict measures on the costs within the company, but of course the 2021 cost growth is still a bit burdening there.
What I said also earlier about the Eskilstuna, that now the kind of a challenges that we have the warehouse or our inventory level is quite high at the moment and we focus on kind of keeping the operations there running and the development of the cost part and capabilities of Eskilstuna will then follow in the near future. Target is to lower the cost in relation to the top line and in general. We have development projects on that area.
Thank you. Next question from Andy Wade. What do you mean by the impact of Finland from cost allocation in relation to franchise store acquisitions? Could you explain this? How much impact did this have?
I believe that's the same question now the third time. Clearly an interesting area. Maybe we can come up with some picture on that in the next presentation to clarify it further.
Sounds good. Next question from [Jonas Häggblom]. Sales mix. Have you seen any signs of customers trading down on their purchases of non-discretionary goods such as food? How is the mix outlook? Eskilstuna update, when should efficiency reach a satisfactory level, and any color on how should we think about the group costs?
We haven't seen anything that people are shifting down. Regarding Eskilstuna, I think we are on a level which is satisfying, but we would like to have more. The more part is a problem in these days because the supply chain disturbance that we're seeing with random shipments coming and also need to have more products than we used to have because of having to order more, et cetera. With that said, it's hard to estimate when we will see the upsides that we're hoping for in Eskilstuna.
Thank you, David.
There was a third, the cost, right? Head office cost.
Uhm.
Maybe you could take that, Toni.
Yes.
Can you please repeat what was it?
Yep. Any color on how should we think about the group costs going forward?
Yes. When it comes to Eskilstuna, we are quite busy at the moment running the operations. We are aiming to have improvements there. Then the rest of the group costs, we are proceeding exactly in the plan and keeping that on a very steady level this year.
Thank you. Next one from Andy Wade. Why are you talking about the profit drag from expansion now? Has it become more of a burden than in the previous quarters? If so, how much more?
Yeah. Exactly. It's the 50 store openings and acquisitions that we've done. It's the number there that has an impact. Maybe Toni can take the more detailed answer on it.
Yes, exactly. Kind of, as mentioned there in the presentation, we have been a bit front heavy on kind of, based on the opportunities, what there is in the marketplace, increasing the network, and that fits perfectly into our plan. Now when just a little bit slower top line quarter. On the long term, when those stores are ramping up and the growth back to normal, then it's more of a blessing than a burden.
Yeah. Then also, of course, it's driving cost, filling up these stores from a supply chain perspective, and other costs, but we're not getting the full volumes.
Thank you. Next one from Maria Wikstrom. Have you progressed on testing the markets in North Germany?
No, we haven't.
Thank you. Next one from Olli Vilppo. Can you talk about sales mix in the Q2? Was the accessory sales hurt more than food sales? Is the bigger inventory value now related to accessories or food?
Yeah, we kinda had a positive outdoor effect in December. We didn't have it in January versus last year. That's why outdoor was lower if you compare it to, say, quarter last year. That was one. Then when the kind of effect came in February, that was also non-food that was mainly impacted. Yes, it was more in that area, which means that we have a bit more inventory in the non-food categories.
Thank you. One from Joni Sandvall. Can you comment on recent developments within the Musti ecosystem and when could we see impact from growth investments?
Yeah, we are doing live shopping in all three countries now, which is going extremely well, that you can go into the websites and follow the live shopping, which is good. The kind of investments that we're doing. We're not doing as much investments in that area that we did earlier. We're doing it more internally in a way. Of course, services is something that we're pushing very hard, p hysical services.
Thank you. We have our last question for this session coming from Andy Wade. You had quite a big swing in EBITDA margin with Q1 + 100 basis points and Q2 - 80 basis points. How should we be thinking about H2?
That's the kind of a problem why we also look at the seasons combined, so Q1 and Q2, because you have the outdoor effect that drives a lot. You have also volumes when that's going up. We had a bit more volumes maybe in December than if you compare to last year, because we had it in January. Yeah, you could say that from a profitability and a margin perspective, it's more or less the same between H1 and H2, but then you have the growth, and then you have the things that we're working with the scalability.
Thank you. There are no more questions in the webcast chat.
All right. Thank you very much. If there are any things, just reach out to Essi, and we will set up a call. Thank you.
Thank you.
Bye-bye.