Hi, my name is David Rönnberg . I'm the CEO for Musti Group. Also, on the line is Robert Berglund, that is CFO for Musti Group. He will take over a little bit later when we're presenting the segments. So, thanks for joining today. We're going to present the quarter report. We're going to have the agenda today that is the group development. We're going to go through the segments, financial and market outlook will we ramp up with, and then we will have some questions. So, strong growth in net sales across all channels and segments.
We are very pleased with the strong second quarter report. Net sales grew with 15.9% to EUR 68.4 million. That was mainly driven through new customers coming in through all segments, both online and stores in all three countries. So, we're seeing that we're taking market share. The market is, as we know before, growing with an average of about 4%. So, we're taking a lot of market share during the quarter. During the first quarter, we grew with 9.7%. So, strong momentum the last six months. And we have been focusing more on growth during the quarter.
There has been a goal to have high availability, fast deliveries through our online verticals, and also to have the right store hours in the store so we can have a good way of shipping out to the customers. Sales was 14.8% like-for-like in total, which is obviously very, very strong. 10% is coming from stores, and online was up 30% like-for-like. So, we are also the last quarter, during the first quarter, we did the platform changes in Peten Koiratarvike in Finland, and we've seen a strong ramp up, especially in the Finland online platform since the platform change.
So, we're very happy that we're seeing the uplift that we expected. Adjusted EBITDA was EUR 5.5 million. That was 15.8% up versus like last year. So, and we saw also profitable growth in all three countries. Adjusted EBITDA margin 8.1%, which was on par more or less versus last year. And that we will probably come back to, but we have been focusing on growth. So, we have been increasing marketing with focus on taking market share, especially after the platform changes that we did. And we have also seen a shift into online sales, especially from March when COVID-19 impact occurred.
So, those two parameters have affected the gross margin and also then the EBITDA margin. Cash flow was also very strong, EUR 4.8 million versus EUR 3.5 million, so 37% up. And also, if we look at the trend the last six months, the cash flow has a good momentum. That takes us to the net debt that ended up at 96.1. That includes a lease liability of 61.1. So, if we remove that, take that out, we have a net debt of EUR 35 million end of the quarter. And the long-term financial goal of being below 2.5 in gearing is then achieved.
We ended up at 2.3. So, happy with that. And as I said in the beginning, the main goal has been to take market share, growing the company that we've seen from taking new customers into the loyalty program. So, we had 1,076,000 customers in the end of the quarter. That's about 13% versus last year, coming through all three countries. So, good momentum. So, let's look at the impact for the COVID-19. So, first and most important, we have focused on staff and customer safety. We have been working shifts in stores and warehouses.
We have adjusted store opening hours to have it more correlated with traffic to the stores. We've also been focusing on store hygiene even more than before. And as I said in the beginning, the goal has been to deliver high-quality service to the customers, be able to have high availability, fast deliveries. And we're seeing that in the customer feedback. We are using the Net Promoter Score that we're measuring every month, and we had all-time high in March in the average in the group that's had been increasing in all three countries. So, very happy to see the good customer feedback.
Our online omnichannel strategy that we've been working hard with, changing the platforms, has served us well during the period, especially when the pandemic impact occurred about the second week during March. We saw a strong shift from stores to online. And we couldn't say that we were prepared, but we increased efficiency in the warehouses, shifted to three shifts, and increased the availability throughout the online channels so we could deliver in fast time.
Similar to groceries, there was a spike also in pet food demand when the coronavirus restrictions were implemented across the Nordics about the second week during March. But the effect was, I would say, limited. It was only a part of the period. The main impact was that we saw a channel shift from more coming from stores into online. And also, very important to say is that after the quarter during April, we have seen the strong momentum being continued through all three countries. So, we can see that the trend during the quarter also into April has continued.
And the pet care market has proven to be resilient in downturns in the past. During the last months, I think we have been tested, and it's now clear that in this downturn, we're seeing the resilience as well. If we go into sales specifically, we can see that net sales increased by 15.9%, ended up with 14.8% like-for-like. We saw strong like-for-like in all three countries. In Q1, we had 7.7% like-for-like. We're seeing a very, very strong trend. I think we mentioned it a bit before that Sweden had a very good momentum last quarter, and we've seen that uplift continued.
Also, when we have done the platform chains in Finland, we've seen the uplift there as well. Sweden ended up at 19% like-for-like, strong growth in both stores and online. During the first quarter, we had 11% like-for-like, so an uplift in Sweden. Norway, the more of a ramp-up country, had 30% like-for-like. There was also strong growth in both stores and online. During the first quarter, we had 22% like-for-like, so an uplift there as well. And then Finland, that stands for the biggest part of the sales, they had 10% like-for-like.
Also, strong growth in stores and online, but a huge shift in the online verticals in Finland after the platform change during the first quarter. And during the first quarter, we had 4% like-for-like in Finland, so a big uplift there as well. Net sales rolling 12 months, EUR 262.2 million. And per segment, we're seeing the trend that Sweden and Norway are taking a bigger part of the total sales. Finland is still the biggest, taking 48% of the total sales. But as said, Sweden and Norway are taking share of the total. We can go into EBITDA.
We are very pleased with the profitability, even though we're seeing a bit lower margin. And the margin that we were talking about is more focused on growth and focused on having high availability and seeing the change from stores into online. And of course, online has a bit lower gross margin and also a bit lower EBITDA margin. We're seeing that that shift has been increasing super, super fast. And we believe that that will also come back a bit now.
And we've seen it already in April. So, but EBITDA, adjusted EBITDA increased by 15.8% to EUR 5.5 million with an 8.8% margin that was in the same level as last year. And we can also say that last year, same quarter, we had a very high EBITDA margin. We've been focusing on growth, that I said, increasing marketing and also the shift into online. There has overall been a very high efficiency during all verticals, and also a very good cost control had continued during the quarter, as we saw in the first quarter.
Adjustment in EBITDA is 1.9, referring to IPO process that we communicated before, and adjusted EBITDA margins in Sweden and Norway continue to converge to Finland levels. That is our target and our goal, and also in line with our expectations, and Robert will tell you more about that in his section coming up.
Hello everyone. My name is Robert Berglund, CFO of Musti Group. I will start by covering the segments and then go into the financial position. If we start with Finland, first of all, Finland delivered a strong sales growth, again with also very high profitability, 13.3% sales growth driven by 9.7% like-for-like. Where part of it was driven by the bounce back of the kind of online sales increase after the platform change in Peten Koiratarvike. Also, the stores delivered strong like-for-like and higher like-for-like than in Q1. Adjusted EBITDA increased by 10.8% driven by the sales increase.
We also had a kind of slightly higher marketing cost this quarter compared to the last year, and then the increased share of online, which then kind of decreased the adjusted EBITDA margin to 22.9%. And on the store side, no significant movements there, one new franchise store during Q2. If we then go into Sweden, as David already said, very strong momentum, like-for-like of 19%. The total growth was 14.8%, actually diluted by the weakening SEK rate and also closure of a couple of stores during 2019. But actually, the like-for-like increase was very high both in stores and online and higher than in Q1.
So, a very strong momentum. And also the adjusted EBITDA margin increased by 21.7% to 9.8% in margin, where we see the same trend as in Q1, good efficiency in campaigning and in supply chain management. However, partly offset by a higher share of online impacting the gross margin mainly. We opened four new stores during Q2, and one franchise store was closed. Then if we go into Norway, there the kind of a ramp-up of the country with strong like-for-like and strong growth continued.
Total growth was 43.7%, 30.2% of that was like-for-like growth, and the rest was then driven by the ramp-up of the stores. The adjusted EBITDA increased and was actually positive this year compared to a negative margin last year, again driven by the operating leverage from the increasing net sales and the increasing store efficiency in the country. However, also here, the kind of share of online increased, which also had a part of a slightly kind of offsetting impact on the margin. We opened three new stores during the quarter, and one store was closed.
That's about the segments. To the next, we go into the financial position. We had, as David said already, net cash from operating activities that increased by 37% to EUR 4.8 million in the period. And then the capital structure was highly impacted by the IPO and the refinancing in connection with IPO. So, gearing ended up at 67.8% compared to 123.6% in Q1 and 135.4% end of last financial year. Net debt amounted to EUR 96.1 million, including EUR 61.1 million of lease liabilities.
So, the leverage, meaning net debt in relation to latest 12-month Adjusted EBITDA, was 2.3, which is in line with our financial target of below 2.5. We had also a very strong liquidity at the end of the quarter, EUR 14.5 million in cash and cash equivalents compared to EUR 8.7 million at the end of the financial year.
As said, this was impacted by the IPO and the share issue in connection with the IPO, where we raised EUR 45 million in equity and also refinanced the company with a new loan agreement of EUR 60 million, out of which EUR 50 million has been drawn and EUR 10 million is still undrawn. I hand over to David to continue with the market outlook.
The market outlook and the financial targets. The market is growing with about 4%. As we presented, we are now growing even faster than the first quarter. We could say that if the average is 4, we were outgrowing the market with about 12% during Q2, taking a lot of market share. Looking at our financial targets, growth is to reach at least EUR 350 million 2023. That's about 9% CAGR. We are at the first six months delivering 12.7% growth. Profitability, 10%-12% Adjusted EBITDA margin, mid- to long-term. We are at 9.6% the first six months.
And capital structure, as Robert talked about, net debt below 2.5 and we are at 2.3. We have a strong cash flow, which takes us to the dividend policy, 60%-80% to dividend of the net profit. So, overall, we are seeing that we are good in line with our financial targets. So, if we do the summary for the quarter, it's that we're seeing that we have a very strong growth sales quarter with profitable growth in all three countries. Sales grew with 15.9%, and I think the 14.8% like-for-like figure is maybe the one that is standing out most, and that's mainly driven by new customers coming in.
All three segments delivering to that like-for-like. Sweden and Norway Adjusted EBITDA margin is continuing to converge to Finland, which is our strategy. We were also seeing after the good performance in Sweden and also the platform change in Finland, focus on growth, taking market shares, which were proven, and a very strong momentum during the quarter that has continued into April.
Cash flow from operative activities has continued to be strong during the quarter, and as said before, the momentum the last six months has been very positive, and we've seen that that has continued during April. So, I think we hand over to questions with that.
Thank you. If you would like to ask a question, please press zero one on your telephone keypad. If you wish to withdraw a question, you may do so by pressing zero one to cancel. Press zero one if you would like to ask a question. Our first question is from Svante Krokfors from Nordea. Please go ahead. Your line is open.
Yes, good morning, and thank you for taking my questions. First, can you elaborate a bit on the footfall in your stores during March and how it has developed after that? And has that affected the sales mix in stores? Do you see that high-margin products like accessories are less sold now?
Yes. What we've seen is that when the pandemic impact came, second week of March, we saw a shift more into online. We also saw that specific stores were getting lower traffic, whereas other stores getting more traffic. So, for example, shopping centers getting lower, and retail parks close to groceries are getting higher. So, we had to adjust quickly during store opening hours, also changing the shifts in the stores, as well as it was important that we shifted from two to three shifts in our warehouses, first to have the high efficiency, but also from a security point of view, not getting the diseases, etc.
We saw a small hoarding effect, limited, I would say, and that was mainly driven to food and litter, but after the hoarding effect, we've seen that accessories and other products have been growing even faster, like treats, etc., when you're more at home with your pets.
Okay, thank you very much. Then, regarding your new customer acquisition, does the low footfall impact that, or do you see that you get loyal customers online even in more growing share?
Yeah, exactly. We're not seeing, if we look at it from a total perspective in stores and online, we don't see any drop in footfall. We're seeing actually the opposite, that we're taking market share, especially in the online verticals, where probably international players have a hard time doing fast deliveries. We have been focusing on delivering in 24 hours. That has been communicated before, and also maybe up to 48 hours in specific areas, and no one except us, more or less, can deliver so fast, so that has one unique selling point for us, of course, to take market share from other international onliners.
Okay, that's very encouraging to hear. Regarding the online sales and the O&E share in online sales, do you have any comments on that? Your O&E went down, but how has that developed if you only look at online isolated?
Yeah, I think we should look at this. We should look at the quarter as a very specific period where the shift from stores to online increased extremely much during mid-March, I would say. That is, of course, and we believe that this will come back, and we're seeing it already now when the restrictions are loosening up. We're seeing it in Sweden.
The shift hasn't been as strong. Finland, we've seen a quicker shift. We're seeing it also that's coming back. The O&E online is lower than stores, so that's why the total O&E in the group are coming down, I would say. But the O&E, if we look at stores in countries, are still going the same trend, the same positive trend that we've had the last two years.
Okay, thank you. And then one question regarding new store openings. Has that view changed in some way, and do you see opportunities that there could be new opportunities as there's probably quite significant rental pressure in good locations in shopping centers and other good locations?
Yeah, yeah. So, exactly. I think what we communicated in the first quarter was that Sweden is one of the countries that we're seeing the biggest potential in sales uplift from the group. We saw during the first quarter that growth and also profitability, efficiency was converging a bit faster than we expected. So, what we've done is that during that momentum, we have increased growth, taking market share, also looking at new location. And then on top of that, the pandemic came, and you can think that all small independent stores that are still out there, they don't have an omni or a pure play strategy that we have.
So, of course, we're seeing a potential of taking more market share by opening stores, which also have been speeding up now, especially in Sweden, which means that we're seeing a bigger opportunity now in Sweden, taking market share than we did before, I would say, March.
Okay, thank you. I might have a couple of questions left, but I think I can take them if there's more time.
All right, thank you very much.
Thank you.
And just as a reminder, if you do wish to ask a question, please press zero one on your telephone keypad. Our next question is from Manon Coulon from Bryan, Garnier & Co. Please go ahead. Your line is open.
Hello. Thank you for taking my questions. I have three, if I may. The first one would be, did you have to try to estimate how was your like-for-like sales, excluding the kind of COVID-19 boost you had, because I guess customers kind of stopped stockpiling at the end of March? And then I have two questions on margin. Maybe first, the first one.
Yeah, I think we haven't calculated the specific hoarding effect we've seen. So, you could say that Sweden has been least affected because of the restrictions. The like-for-like has been very flat in trend. If I should say something, maybe a couple of percent, but what's the positivity is that if the hoarding effect will be massive, then we will see a hangover in April, which we haven't seen.
So, that tells us that the underlying demand has probably been growing during these two months just because you're more home with your pets, and that we've also seen in accessories and treats, especially during the period and after the period.
Okay, thank you. My two other questions were regarding what you said on Adjusted EBITDA margin. You talked about more marketing expenses. How should we think about that going ahead? Is it a special boost for this year? Is it the new normal?
Yeah, exactly. So, we planned this before. We saw that after the platform change, and during that quarter, we also decreased marketing spend, especially online in Finland during the platform change. And when we saw the positive effects, we increased it in Google or other digital areas. On top of that, we have seen a very good trend in Sweden in top of mind, so we also increased marketing for increasing the awareness in Sweden.
When the pandemic hit the market, we took a decision to actually increase it even more, which has been proven to be right. And those kind of marketing areas could be everything from radio, TV, print, etc. We don't believe that this high marketing spend will be the same during the year, but if we're seeing the potentials that we've seen during the quarter, we're happy to keep it to increase market share.
Okay, thank you very much. Regarding online margins, we can see from the financials that the gross margin is lower on online, but can we have a sense on what is the EBITDA margin of online? And maybe how should we think of it going forward? Do you think it's going to be flat, or should we incorporate some economies of scale?
Maybe I hand that over to you, Robert.
Yeah, so in terms of the online margin, I mean, first of all, gross margin is lower due to the fact that the sales mix is different online, less O&E products, less accessories, but also due to the fact that the gross margin includes the distribution costs of the online business, which is, of course, higher there. On the other hand, the online business doesn't have any store costs, which then, of course, offsets the difference. Marketing costs are slightly higher as well online than the stores. So, all in all, it's a bit lower, not kind of a huge much lower than the stores.
For us, as earlier communicated also, the strategy is really to increase the share of O&E exclusive brands and the share of accessories online, which is the one kind of really two factors that drive the margin online as well, and that we will continue to work with.
Thank you very much. No more question on my side. Thanks.
And just as a final reminder, if you do wish to ask a question, please press zero one on your telephone keypad now. Our next question is from Juliane Badon from Oddo BHF. Please go ahead. Your line is open.
Hello. First of all, congrats for the very strong performance in this very difficult environment. I have a couple of questions. The first one is on the recruitment of new customers. Something is you recruited a little bit less loyal customers than I would have expected in this period. So, can you remind me what your definition of loyal customers is, and would you and are you sure that the customers you recruited in this, let's say, strange period are loyal, let's put it this way, and they're not there just because they needed food and they went to your website?
Exactly. First of all, all our online verticals are not included in the loyalty program yet. So, when we're seeing it, the group sales, we're seeing that the biggest part is, of course, into the loyalty program, but there are still online verticals that are not included there yet. So, I think that will probably be the difference. Maybe Robert, you can add in that.
Yeah, yeah. So, I mean, loyal customers are the one customers that are kind of a part of a loyalty program, which are in the kind of main banners are Arken Zoo ,Musti ja Mirri . Peten Koiratarvike and VetZoo doesn't have loyalty programs today, so the customers that register online of that are not included in the kind of loyalty, the definition of loyal customers. And of course, now increasing the share of online, a lot of new customers have been customers registered in these online banners that are not included in the loyal customer definition.
Would you dare to say that the April momentum was in line with Q1 or, let's say, March, I think? Would you say that you would expect your period to be in line with Q2 in terms of growth, or is it too soon?
The trend in growth has been in a very good momentum. There was a bit of a spike in March, but if we take an average over the last six months, for example, from a group perspective, April was very strong.
Would you dare to say how much marketing spend have you increased? Because we can see that in the overline, the non-allocated cost line in your EBITDA split, the number increased fairly. The number increased quite a lot. So, is that the reflection of your increased investment in marketing?
So, in general, we don't go into the exact details how much we're spending more and less, but on the specific question, Robert, do you want to add something on the P&L view?
Yeah, I can add that actually the marketing cost, the main part of the marketing, actually calculated out of the segments, meaning it's part of the segment EBITDA. And actually, the increase of group function is just driven by the fact that we have strengthened the organization in different parts in order to, for instance, the warehouse, in order to make sure that we are fit for the growth. And of course, also in other areas, partly relating to us being now listed, but also partly to kind of customer services and other parts where we want to continue to have a very high quality.
Okay, great. Maybe the last two questions. The first one on the IPO cost total. Can you remind me, because last year you already had EUR 2 million roughly IPO cost, at least that's what you disclosed as an exceptional item. This year you already had another 2 or something, well, even EUR 3 million almost in the first half. And then there was also the cost of the listing that was reported in the cash flow statement, which is another EUR 3 million. So, will there, I mean, can you remind me what you put under IPO cost categorization? And will there be some items in H2 as well?
IPO cost as such, I mean, are the costs that are directly relating to the process and to the preparation of that process in terms of kind of fees to different advisors for that part. Also, the costs that are included in the, or kind of deducted directly from the equities is part of that is then the costs that are relating to the share issue of EUR 45 million that we did. Yeah, so those are the costs. So far, I mean, most of the costs are now also, so to say, in the books.
Okay. Okay, great. Thank you very much.
Thank you.
It's from Svante Krokfors from Nordea. Please go ahead. Your line is open.
Yes, hi again. A question regarding: can you comment on inventory levels and how sourcing channels are working, product availability, transportation costs, and stuff like that?
Robert.
Inventory level end of March, it was EUR 35.2 million, and we actually increased inventory levels slightly, not that much, but slightly in order to make sure that we have availability. So far, we haven't seen any significant kind of impacts from COVID-19 on the availability in kind of any product groups. Smaller delays from Far East, but they are limited compared to the total. So, so far, availability has been on a good level.
And you haven't run into not being able to sell products because they are out of inventory or?
No, no kind of a significant or kind of abnormal kind of issues on the availability.
Okay, then perhaps a final question about your targeted marketing efforts. How are those proceeding now in this environment? Any changes there?
Do you mean specific levels or channels?
Basically, in the IPO, you said that you want to put more efforts on targeted marketing based on customer needs that you could also increase the share of O&E.
Yeah, okay. Yeah, yeah. Sorry, yes. Yeah, we're working with it, and I think that also is a part of the good growth that we're seeing. The targeted marketing, it's a bit more cost in the beginning, and then when we're taking the cost also from the platform changes and other internal work with consultants, etc., over time, that cost structure will go down, but the effect will go up when we can work more with the targeted offers.
We're seeing it. I would say that we're seeing a very good uplift specifically in Finland since we did the platform change. I think that was before platform change, then the platform, and then adding the targeting offers. So, those two things combined have delivered a very strong growth during those verticals.
Okay, thank you. That's all from me.
Thanks.
Thanks.
Our next question is from Tommy Ilmoni from Carnegie. Please go ahead. Your line is open.
Yeah, good morning. Have you done any changes to your plans regarding store openings for the current year, and how many have you already decided for the current financial year? Thanks.
Yeah, I think we haven't done any changes in the numbers. Maybe on the upside, I would say, we're receiving the potential specifically in Sweden. The exact ones, maybe Robert, you can voice over more.
Yeah, I mean, so far, I mean, we have opened actually 12 stores and increased the total number of stores by 10. And we said that our target is to open 15-20 stores. As such, we haven't changed the plan for that, and we are kind of committing to that.
And maybe we even can say that we are close, we'll be closer to the estimated, be closer to the upper part of the range than the lower parts, given the fact that we have opened already 10 stores or opened 12 and increased the total number by 10. So, no changes there, and we have actually already during the Q2 kind of committed to many stores. So, for good trend continued then.
Okay, thank you.
And maybe also good to mention that during this pandemic, we've seen also even more the specific locations that we want to open stores in, and also the possibility has increased for us to find those locations. All right.
At the moment, there are no further audio questions.
There was a question from Mikko Lasko here. Is that answer already taken, or are you seeing the diluted profitability effect on the acceleration shift online has had? What plans do you have to mitigate this considering a more permanent shift? I think that one we haven't answered right. So, there has been an extreme shift in very, very short notice. Of course, we were not seeing it coming.
We hadn't planned for it. Because of that availability and customer service has been the key thing, we have been adding maybe more cost, etc., during the period because of delivering those high service levels and the three shifts, for example, in the warehouses, etc. We believe that the share of sales will come down, and we're seeing it already now. There are also other things in our project list that we're working with, consolidating warehouses and increasing efficiency in the warehouses that will help out with the lower cost in the online verticals. Any more questions?
There are currently no further audio questions.
Okay.
In the chat, maybe we should look.
Okay, we're at the chat. We have there from Caroline.
Yeah.
Congratulations. Can you talk about your O&E penetration in each country given increase in online sales? You mentioned an increase in marketing. By how much and what types of marketing, please? Yeah, I think the first question there, Robert, do we reveal the O&E penetration in each country?
No, we don't disclose that information, but I mean, we can say that, of course, the increasing online share has an impact on the O&E penetration in the different countries and led to the overall decrease and due to the channel shift mix as such.
And marketing, it's in channels. It's digital marketing. It has been more or less all the marketing channels that we're using. So, digital, radio, TV. From a group perspective, when we're coming to the online channels, it's more digital. The levels of the increased marketing is something that we are not going out with exactly, but we can say that the percentage-wise has been more during the quarter than usually. From a positive perspective that we have decided to focus on growth and taking market share. Then we have one more question coming in here.
Any idea when the first dividend will be paid? No, that's nothing that we are communicating. All right. I think those are all the questions here in the chat as well, right? So, if not anything more, I'd like to thank you all for joining and happy to probably see you face-to-face in the 4th of August when we're presenting the next quarter report.