All right, hi everyone, and welcome to the Q5 report as we're going to present today. We extended the year to 15 months. On my right side, I have Robert with me, CFO, and let's start and jump into the pages. We have now 415 stores in the group with the recent acquisition of Pet City. As you can see here, now we've added 46 stores and 16 clinics, so now totaling up to over 400 stores. The first geographical expansion has occurred, and now we are looking into more geographical areas to proceed into. We can move on and look at the overview. We continue to invest in expansion and also taking market share. Year-to-date, 15-month sales came in with 5% in local currency to EUR 560 million, with an adjusted EBITDA of EUR 81.6 million. For Q5, EUR 122 million with an adjusted EBITDA of EUR 17.2 million.
There were also some non-recurring costs in that figure with about EUR 1.3 million, so like-for-like increased with 1.2% in Q5. Online growth, like-for-like, was on a good level, 8.6%, so still performing well, and if we look at the quarter excluding currency effects, we had a growth of 5.6%. Interesting also to see if we should have been consolidating Pet City for the full quarter, we would have had over 10% growth, so good numbers on that. Gross margin came down a bit, so 44% versus last year, 45.9%. As earlier quarters, it's due to targeted investments in pricing campaign activities and a bit slower sales and discretionary products as outdoor and so on. Own and exclusive brands continued on a strong level, 51.8%, and cash flow continued on a fairly good level at EUR 7.6 million.
So if we move on and look at the quarter in more detail, as I said, Q5 sales growth with 5.6% to EUR 122.2 million. We should also remember it was a quite weak consumer climate during the period and also during the whole 2024. For the quarter, Finland was having a small growth. Sweden had 2.4% growth and Norway 11.7% growth. Online share of sales grew from 23.3% to 23.9%, so online taking a bigger share. Net sales, the rolling 12 months, as you can see, came in at EUR 445 million. And as before, Finland is still the biggest share, even though now we see that new markets coming with 2.6%. So of course, extremely interesting and happy to see that now we are finally having the new markets on the page. If we look more at the gross margin, so gross margin still facing temporary pressure, unfortunately.
Musti's gross margin decreased to 44% from 45.9%. It was mainly three things that were impacting it, so targeted investments in pricing campaigns for gaining and keeping market share, mixed effect both in products and channels, so less discretionary products and a bit more growth online, and then a slight decrease in own and exclusive product sales, but with the levels that we're having of 51.8% in our own exclusive share of sales, I think it's still on a good level as we are now, so if we move on and look at the profitability, so adjusted EBITDA decreased with 16%, mainly driven from slower sales, a bit lower gross margin, and then including a non-recurring cost of EUR 1.3 million, so versus last year EUR 17.2 million versus last year EUR 20.5 million, but if we adjust for the non-recurring cost, it's actually a 10% decrease versus last year.
The biggest impact, as I said earlier, gross margin, and also we see that the slow consumer climate and the targeted investment in price and the sales mix have an impact. However, Musti had good overall cost control, and we believe that the gross margin will come back to more normalized levels going forward. So we hopefully see that the profitability percentage-wise will come up to normalized levels. So with that, I hand over to Robert that will go through the segments.
Yes.
So hello everyone from my side as well. So starting with Finland, Finland had basically a flat sales, a slight increase of 0.1%, now up to EUR 51.3 million. We are still kind of negatively impacted by the weak customer climate and also the kind of product recall from last year's comparable numbers have an impact. All the like-for-like was also more or less stable on a flat level, now - 0.1%. So kind of on a flat level in the development. Adjusted EBITDA decreased by 10.4%, now to EUR 12.8 million, and the margin was 25%. The decrease on profitability is due to the kind of gross margin investments we have done, as David also mentioned earlier, and also the weak consumer climate is impacting.
Also what David already mentioned, discretionary products, we see a kind of slower development now, mainly driven by outdoor products and the fact that this quarter was warmer than the comparable quarter last year. That will impact all the countries. During the period, we closed one directly operated store. Moving on to Sweden, in Sweden we increased net sales by 2.4%, now to EUR 47.1 million. This was driven by more the ramp-up of newly opened stores. The FX rate exchange didn't have any kind of significant impact on net sales during this quarter, and like-for-like sales was also here basically flat, - 0.2%. Adjusted EBITDA decreased by 14.4%, now to EUR 8.8 million, basically driven by the same reasons as in Finland. Gross margin and weaker consumer climate. The adjusted EBITDA margin landed at 18.8%.
During the quarter, one new store was directly opened, store was acquired or opened, and one third party store was acquired. Then also one franchise store left the chain during the quarter. Moving on to Norway, Norway continued on a solid path, increased now 11.7 percentage points up to EUR 20.6 million, driven by a strong like-for-like growth of 8.9% and the kind of ramp-up of newly opened stores. FX had no significant impact on sales here either, only - EUR 1.1 million during quarter. Adjusted EBITDA increased by 4.6%, now to EUR 5 million, driven by the growth in sales and the scalability, but offset by negative impact from gross margin as in the countries. Adjusted EBITDA margin landed at 24.3%. During the quarter, two directly opened stores were opened.
So, about those quarters. Now those segments. Now, starting from this quarter, we also have a fourth segment called new markets, which now includes Pet City, which was acquired in November and consolidated starting from December. The impact of this was on our number was EUR 3.2 million on sales. Had we owned Pet City for the full quarter, the impact would have been EUR 9.1 million. And if we had owned it for the full year, the impact would have been EUR 42.2 million. Adjusted EBITDA impact from Pet City was EUR 0.2 million positive, which corresponded to EBITDA margin by 5.8%. Number of stores at the end of the quarter was 62. Then, moving on to the financial position, the cash flow from operating activities totaled about EUR 7.6 million during the quarter, which included a negative impact from net working capital change of EUR 6.8 million.
The net cash flow from the operating for the full kind of financial year, which is now then 15 months, was EUR 46.9 million. Gearing ended up at 112.3%. Our net debt at the end of the quarter was EUR 187.5 million, which includes lease liabilities of EUR 95.6 million and then loans and commercial papers of EUR 104.3 million. The leverage, meaning net debt in relation to LTM adjusted EBITDA, landed at 3.1 x. At the end of the quarter, we had cash and cash equivalents about EUR 11.8 million. And investments amounted to EUR 4.8 million during the quarter. And then last but not least, financial targets here, no changes from earlier quarter. The financial targets were withdrawn in April by the board of directors, and since then we have not updated those. Then I hand over to David for a summary.
Thanks, Robert. So if we summarize the quarter and the year, I would say that Musti remains resilient, continuing to grow new customers and gaining market share. I would say that we have particularly seen very good development in Norway and also good performance in Finland the last six months. Some of the negative effects of the Smaak incident have now been fading away, which is very, very good for us, of course. We are back on good growth numbers in Q5 with 5.6% growth. And if we will consolidate Pet City for the full quarter, we will actually have over 10% growth. So good numbers going into the new year. If we look at the adjusted EBITDA ex-current cost, we were at EUR 18.5 million versus last year, EUR 20.5 million. So a 10% deviation that's mainly impacted by a softer GP.
But the headwinds are also coming down, and we believe a breakthrough before summer 2025 in the gross margin. We have been continuing to invest in our omni and pure play online initiatives, and we have also expanded into new markets, which was a yardstick for us. 2024 has been a softer market after some strong years, but we believe that the market will return to long-term average growth during 2025. So when the market returns, our fundamentals are strong with more customers and our strong concept, especially also now entering into new markets. So with that, I think that we are seeing good trends with the business and in the market when we are stepping into 2025. So with that, I would like to hand over to Q&A.
Yes, let's start with the Q&A, and please raise your hand for questions, and I think we got Maria first. Please go ahead.
Yes, good to see you, David and Robert. I just had a few questions, a little bit to get more color that you referred to the market share gains. Where do you get the data from, and does this include the pet food sales also in grocery retail?
Yes, it's including everything, and we are getting the data per country as before.
Then I noticed that you report the total number of customers versus previously, I think we got the number of loyal customers. Is there like a big difference, or are we kind of looking at the same figure?
So earlier we also included the customers that we had in the online verticals, so that you need to add on because they are kind of not in the loyalty club, but they are still loyal.
Okay. And then I wanted to ask a little bit about the competition environment, and you also reported higher sales growth figures in online vertical compared to the stores. Do you currently see more competition arising from these multinational online retailers like Zooplus, or how would you describe the competition environment currently?
I would say that the competition is a bit different from the three countries or the four countries. So I would say that Norway is mostly competition from grocery still, and there we're performing really well, and from the small independents, we're taking market share as well. If you look at Sweden, there is also mostly groceries, a bit more small independents still, and no pure players that we see any big differences from. In Finland, it's also groceries, and especially I would say some specific groceries that have been performing quite well, especially in a more challenging year for us when we had the Smaak incident. And also there we're not seeing anything from pure players.
Perfect. Thank you.
Thank you.
Then it's Mr. Stema. Go ahead.
Good afternoon. Thanks for taking my questions. I have a few ones. The first one is on the top line momentum. On pricing, so you've invested in pricing over the past few quarters. I was wondering, how do you see pricing evolving going forward, or when shall we see it maybe as a tailwind versus a headwind? That's the first question.
Yeah. So because of the inflation and so on, we needed to also increase prices, mostly increase prices. But we have also then in a bit weaker consumer climate that occurred afterwards, we needed to do more targeted investments, which meant pressure on the gross margin. And we believe that that's easing out now. We see that we believe that the market is, yeah, it's a bit more growing a bit more now than it did six months ago.
Okay. And so the second question I did was on the market. I feel you've been more confident than a few quarters. So you always look for 2025 seems a bit more ambitious. Can you give us a hint at your expectations in terms of pricing and volume contribution? I mean, your pricing and then in volume, what's the market growth? What are your market share gain assumption for 2025?
So I think the market growth in the peak years in COVID and directly after COVID was probably double-digit, like 10% growth, and then it has been coming down. The biggest reasons why we've seen a negative impact was first, less registrations of puppies and kittens. Second, it was inflation. Third, the consumer climate overall being under pressure. We have also had some kind of internal problems, especially with the food impact we had with Smaak. But all of those four things we're seeing easing out now. So with that, we believe that the market will start to grow again now in 2025.
Okay. So when I look at your like-for-like in this quarter, it's 1.2% for the group, much higher in Norway, sorry. Can we assume that 3 %- 5% is a realistic assumption or ambition for the year?
Yeah. So we don't go out with any numbers for kind of a forecast, but we believe that we will be growing faster than the market.
And on the competitive environment, you spoke about competition and market shares, but do you see any competition from Amazon or local competitors? What are they doing with pricing? Are they more aggressive on pricing or not?
No, we're not seeing anything from them.
Okay. Two last on my side. And working capital, it was negative this quarter. You had some outflow. Anyone of you, or can we expect an improvement on the cash generation from working capital?
We had a bit of a problem to hear. Can you repeat?
Yeah, sorry. I was asking about the working capital dynamics this quarter. We had some outflows. Should we expect any reversal going forward?
Yeah. I mean, it's more a question about timing in our case. When we buy in stuff, and especially when we then also pay kind of our accounts payable. So it's actually normally fairly flat from our side and not a big issue. So it's more kind of temporary swings and timing questions.
Okay. On the balance sheet and M&A, so you're investing in clinics, so vet clinics in Sweden and Norway. You mentioned on the call today that Baltics was the beginning of international expansion. Could you elaborate on the priorities? New vertical with vet clinics, new geographies, what are your priorities with capital allocation, and how do you think about the potential leverage of your company?
Yeah, of course. I mean, we see opportunities in the vet business now in the current markets. I mean, we have a good presence here in Baltics, but in the other markets, not that much. Only kind of now two clinics through this partnership that we invested in Norway and then some clinics in Sweden and then in Finland less. We see clear opportunities to expand that and something that we are really looking into as well as we are also looking into kind of geographical expansions. I wouldn't say that we have any clear kind of priorities between those. Both are kind of areas where we really want to kind of expand and actively looking into opportunities.
In terms of leverage, do you have a ceiling in mind, or are you comfortable with current levels?
I would say that when we start to, we don't have a ceiling as such in mind. However, we also recognize that already 3.1x starts to be on kind of a higher side. We want, of course, to make sure that we keep leverage on a decent level.
Okay, and the last one on Baltics. So, you had a good contribution, I mean, small contribution in terms of accounting, but when I look at your numbers, it was, let's say, potentially 7% incremental top line for the quarter, which is roughly in line with the numbers you disclosed when you acquired the business because it was EUR 31 million -EUR 32 million. So, is it a fair assumption going forward, as you say, 7% incremental contribution from the Baltics business? And can you just comment on the top line and margin ambition for this year?
Yeah, and of course, I mean, we are at the moment in the integration phase of that business, and that will take some time. We see, however, huge opportunities to both grow top line and the profitability by kind of rolling out our assortment, our kind of store concept, and our kind of methodology into that business. Of course, we don't disclose any exact kind of targets for that, but we clearly see kind of a room both in sales and profitability for this area.
But it should be profitable this year, or do you need to invest?
I mean, we actually need to do some investments, and of course, the kind of, I would say, so that the full potential of the business will not be during this year. However, we kind of, I mean, it was profitable from the first month we actually kind of included in our business, and on an EBITDA level, we expect it to be profitable going forward as well.
Okay. Thanks a lot. Have a good day.
Any other questions?
Seems like no. In that case, from my part, I thank you very much for this, and I wish you a great afternoon.
Thank you very much.
Thank you.
Bye-bye.
Bye.
Thank you.