Hello, everyone. My name is David Rönnberg. I'm CEO for Musti Group. Today, we're going to present the quarterly report in Helsinki, Finland. We have Robert Berglund, our CFO, and he will soon speak and take over for me. I think, Robert, you're going to show the slides. We can start with the agenda. I don't see the slides from here. If you can show them, is that possible? Perfect. Thanks a lot, Robert. The agenda for today is that we will go through the group development, then we will go into the segments that Robert will go through, and then the financial and market outlook. We will do a summary with a quarter report in the end, going through our financial targets. If we start by looking at the highlights, so a very strong and profitable growth that we're showing in the third quarter.
We're very pleased with the Musti strong third quarter report. Net sales grow with 16.6% to coming up to EUR 68.8 million. That was mainly driven from new customers that we've seen that we are still continuing to take market share in all three markets. During second quarter, we grew with 15.9%, which means that we have a very strong momentum the last nine months. During the quarter, we have been focusing on growth, adapting to the COVID-19 situation, but also focus even more on the profitability that we've seen in the EBITDA development. Sales in like-for-like was 11.5% in total. 5% was coming in stores and online was growing with 36% like-for-like. We have seen a strong ramp up since March when the COVID-19 impact was shown. It was a clear shift from stores into online, and our pure play in online strategy has served us very well.
Focus for us has been to keep high availability and serve our customers. That's why we also seen that the online share of sales has been increasing in the quarter. Important to point out is that in the end of the quarter in June and also in July, we've seen that it has been flattening out to levels that it was before March. Also when we're talking about the profitability, we of course, incredibly happy seeing the Adjusted EBITDA increases to EUR 6.4, a increase of 54%, and it's strong profitable growth in all three countries. Adjusted EBITDA margin came in at 9.3% versus last year, 7.1%. Last quarter, we presented 8.3%. Also here we have a very strong momentum the last nine months. Cash flow from operations was EUR 2.2 versus EUR 11.1.
There is a lot of details behind that deviation that Robert will go through that more later on. Net debt came in at 107.9, including a lease liability of 65.9. Excluding that, we have EUR 42 million in net debt. The last 12 months, Adjusted EBITDA, net debt came in at 2.4, which is below our long-term target of 2.5. I was saying in the beginning that the growth was mainly driven through new customers, and it's proven that our loyal customer base is growing super fast. We had an increase with about 13% versus last year's quarter. Also if we include our online verticals with the registered companies that is still not in the loyalty club, we had over 1.3 million customers. An increase about 18% total versus last year. Let us look at the COVID-19 effects.
First of all, very important that we have been focusing on the staff and customers safe, and also maintaining availability, be able to deliver products to our customers. The goal has been to deliver high quality service, even though we've seen these challenging times. Availability, fast deliveries through our local warehouses into the pure play and omnichannel verticals. As I said earlier, we saw a huge increase in the online sales, especially since March, flattening out, coming back a bit in the end of the quarter in June. In total, share of sales online was 25%, an increase of 36.7% during the quarter. Also important to point out is that the total underlying demand has been very stable, good momentum the last six to nine months, but we've only saw a shift during these months from stores to online, and that we're now seeing coming back.
Musti's underlying growth has continued to be very strong after the third quarter. Something that we've seen is that registered number of new puppies has been increasing rapidly since March. During April to June, we've seen an increase at the kennel clubs of about 14% registered new puppies. Important to point out there is that those puppies, it takes a while before we see it in our numbers. We have slowly seen it since June, increasing the visibility in the end of June and also going into July. Those puppies will, of course, we see it as a long-term effect because they will probably be loyal customers to us the coming 10 to 12 years. Let's look at the sales. Net sales increased by 16.6%, a record quarter in growth. We're of course very happy with that. We had 11.5% like-for-like.
There was a strong growth in all three countries. In Q1, we grew 9.7%. In Q2, we were growing 15.9%, and now 16.6%. Fantastic momentum. Sweden was delivering during the quarter 13% like-for-like, both a strong momentum in stores and online. Norway was doing 45% like-for-like, also strong growth, both stores and online. Finland was doing 6% like-for-like. There was a clear shift here in Finland from stores into online, where especially Helsinki area and shopping center, with the tougher restriction with the COVID-19, was visible. This was also flattening out in the end of the quarter. The increase in online part was more visible in Finland than in the other countries. Net sales, rolling 12 months, EUR 272 million. Per segment, we've seen that Finland are losing a bit of share to Sweden, Norway.
Finland is now standing for 46%, and last quarter Finland was having 48%. That's also part of the strategy to grow Sweden and Norway bigger and also converge the margin closer to the Finland levels. That takes us to the increased profitability. From a profitability point of view, Adjusted EBITDA increased by 54.3%, which takes us to the margin going from 7.1 to 9.3. That's an increase about 30%. We have been focusing on growth, taking market share, but also using our operating leverage and our strong platform that we've been working with the last two years. It's clear now that even though we see a shift from stores into online, we can increase the profitability. Very good cost control and efficiency in all three segments and markets. Adjustment in EBITDA of the 0.7 is referring to the IPO process.
What we're also very pleased with to see is that the Adjusted EBITDA margins in Sweden and Norway has converged faster than expected towards Finland levels. This is one of the main strategy that we're having for increasing the total margins in the company. Robert will tell you more of that fantastic development in next section.
Yes. Hello, everyone, also from my behalf. We go through the segments and then the financial position. Starting out with Finland. Finland continue with a strong, stable net sales development. That's also EBITDA improvement by one percentage point during the quarter. Like-for-like was 6.2%, total growth 10%, growth in both stores and online, even though Finland was the country where we saw the kind of biggest impact of the COVID-19 situation, especially in shopping centers in the Helsinki area. That was compensated by the increase in online, but also in stores in other locations than shopping centers. We continue to have the focus on profitable growth, which is also visible then in the profitability improvement in Finland. The Adjusted EBITDA margin increased from 21.9% - 22.9% in the quarter, driven by operating leverage from the growth.
We had lower hours in the stores driven by the switch from stores to online due to COVID-19, and also lower operating costs in general due to, for instance, lower level of traveling during the quarter compared to earlier. We opened one new directly operated store in Finland during the quarter. Sweden, the strong momentum continued also in this quarter. We'd also a clear improvement in profitability. Net sales was 16.8% up compared to last year, and 30% of that was driven by like-for-like, both in stores and online again, and clearly driven by increase of number of customers.
We are also very happy with the EBITDA improvement from 7.3% Adjusted EBITDA margin last year, third quarter, to 10.5% now in this quarter, which is a continuance of the trend we have seen earlier where it's really driven by the scalable platform we have in place and operating leverage that gives us, combined with better campaign efficiency, and also some part of lower cost driven by COVID-19. We also have an offsetting impact from increasing share of online, where we have a slightly lower profitability than in the stores. A very good development all in all. This was also a quarter where we focused on new stores and actually also acquisitions of franchise stores. We opened three new stores and acquired two franchise stores. At the same time, we also closed four franchise stores during the quarter.
Going to Norway, the incredibly high sales growth continue also with now a clear EBITDA improvement. Something we have been visible during previous quarters, but this quarter it was even higher than the quarters before that. Sales increased 62.9%, driven by like-for-like of 44.8%, and then the ramp-up of the new stores. We have a very strong momentum in both the stores that starts to get mature, but also in the new store development. Yeah, the EBITDA improvement from 5.5% in Adjusted EBITDA margin to 15.7% is something we are very happy about, and driven by the fact that in Norway, we start to reach a critical mass where really the impact of the operating leverage start to kick in. That we are very happy about. We opened three new stores in Norway during the quarter, all directly operated by us.
That was about the segments. We go into the financial position and market outlook, starting with the cash flow from operating activities. That was EUR 2.2 million in the quarter. It was actually impacted by a couple of things. First of all, we increased the inventory level to ensure high availability in our network also during the COVID-19 situation. We also then paid a significant part of the transaction costs during the quarter, and then we had a bit of a different timing of payment of accounts payables compared to last year's quarter, and that actually causes the deviation to last year. However, most of these impacts are areas where we see that and expect a normalization during the Q4 this year, as the transaction costs have now been paid and inventory levels are on a level which we can actually secure high availability.
At the same time, gearing was a level of 73.3%, slightly up from last quarter, but still on a very good level. Net debt, EUR 107.9 million, which, as David mentioned, includes EUR 65.9 million of lease liability. The liquidity of the company is on a very good level, EUR 7.8 million in cash and cash equivalents at the end of the quarter. On top of that, we have a credit limit of EUR 4 million and EUR 10 million in undrawn credit facilities. Investments during the period relates mainly to new stores, relocated stores, and then also we did the acquisitions of the franchise stores. Yes. That about the financial position. We go into market outlook, and I hand over to David.
Thank you, Robert. Market is growing with 4%, approximately before the COVID-19 impact of the puppy boom that we're seeing, and we are obviously outgrowing the market heavily with about 12% during Q3. With our financial targets, from a growth perspective, we estimate to reach at least EUR 350 million 2023, which is 9% CAGR. We are at 13.9% the first nine months, so I think we have a good position there. Profitability, 10%-12% Adjusted EBITDA margin, mid to long term. We are now at 9.5% first nine months, so for us, the 10% is more short term as we see it. Capital structure, net debt below 2.5. We are at 2.4, also there in a good position. Dividend policy to pay dividend corresponding to 60%-80% of net profit. Overall, we are in a very good position. We see it.
Let's do a summary of today's quarterly report. We have a very strong third quarter with strong, profitable growth in all segments delivered today. Sales grew with 16.6%, 11.5 like-for-like, mainly driven from new customers. All three segments were showing strong like-for-like. We had a shift from stores to online during the quarter. I think we have adapted the company very well to these challenging times. We have been increasing share of sales online to 25%, with the sales increase of 36% during the quarter. Our scalable and omni platform has served us extremely well. We have been taking market share, and not only taking market share and also increasing growth, we have more or less doubled our EBITDA with 54% to EUR 6.4 million. Very positive also is that Sweden and Norway, their Adjusted EBITDA margins are now converging faster towards Finland than we have expected.
We also, a couple of months ago, went out with a communication saying that we are focusing more on growth because we're seeing a huge opportunity to take more market share. I think today we are proven that we can focus on profitable growth, not only growth. We can also communicate that Musti's underlying growth has continued to be very strong after the third quarter. All in all, I think Musti is in a very good position. We have a lot of things to do ahead of us, and also to keep on gaining market share in all three countries. Thank you very much. We probably have some questions coming up.
Okay, we have a few questions from the venue. First one, what % of sales is spent on marketing, and what type of marketing do you prefer?
The % spent marketing increased a bit last quarter. During this quarter, we went back to a more normalized level. We're spending it on all types of marketing, everything from digital to radio to print, et cetera. Regarding the levels in marketing, maybe you want to voice that over, Robert.
Yeah. The % of sales has been actually fairly stable during the already couple of years, so about 4% of our net sales.
Thank you. Have another question from the venue. Of this strong like-for-like growth you had in Q3, how much is related to COVID, and how much about it is gaining market shares on competitors?
If we look at the COVID-19 impact, we saw a bit of a spike in demand during March, then we saw a bit of a small hangover in April, then it normalized during May and June. From a quarter perspective, I don't think we see any impact of the COVID-19 situation. What we see in the end of the quarter is that we are getting more puppy customers in, seeing in our own figures. That's something that we believe will grow and be stronger going forward, something that we also can correlate with the strong demand after the quarter.
Thank you. The last question from the venue. Can you elaborate a little bit on the normalization of the sales growth in June and July?
Robert, can you
Yeah. Well, we can say that the share of online started to decrease back towards the level that we have had before the COVID-19 situation. That's actually the trend. We are not exactly there on the same level, but started to level out towards the same level.
From a total demand situation, we have seen a strong demand momentum the last nine months, pretty stable, going upwards, also following the growth and numbers that we have been delivering in the quarter reports. It has been a strong shift, as we said, starting in mid of March, and then from stores to online. We saw a peak in April and then leveling out, as Robert said, towards June, and then going forward.
Thank you. There are no more questions from the venue. Operator, we are ready for questions on your side.
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 two to cancel. That is zero one if you would like to ask a question. Our first question is from Svante Krokfors from Nordea.
Yes. Good afternoon, Svante Krokfors from Nordea. Thank you for taking my questions. First one is regarding product availability. Have you seen any problems in supply chain during Q3 or after? Have you seen any signs of price increases from suppliers following the COVID-19 related demand boost that has been in the market?
Robert, you can take that.
Yeah. We haven't seen any significant issues on the availability. The availability has been strong during the whole pandemic, and part of that is due to the fact that we increased the inventory level in order to make sure that we have that situation. That actually also goes for price increases. We haven't seen any kind of price increases due to the corona or COVID situation actually at all.
Okay, that's very clear. Thank you. Then perhaps a comment on the competitive landscape. Can you elaborate a bit on if you have taken more market share online or in stores, at least if you compare to the S Group's growth numbers, you appear to be growing at least double the pace than they are.
Yes. I think overall the competitive landscape is still the same regarding the S Group and also the groceries and the small independent stores. We've seen clear visibility, especially in our online verticals, that we have been taking market share and customers from other online players. I think very important is the local shipping customer service availability that we have been focusing on versus others as S Group, for an example. Then we have seen that we have been taking market share from small independents and groceries that we've done the last couple of two years.
Okay, thank you. Regarding your gross margin, I think you commented in the report that the gross margin was broadly unchanged year-over-year if you adjust for the shipping costs in online. I guess this is quite a good achievement given that your O&E share is also declining and you are probably not concerned that you see a decline there as long as you are able to take market share and will be able to lift that part up later.
Exactly. I think that's an important discussion. We look at that gross margin one that has been on the same level, and then gross margin two that we're reporting includes distribution and freight cost. That's why it's coming down a bit. Overall, even though we've seen a channel shift, we have been able to keep the margins, which it's a couple of reasons behind it, but supplier efficiency, pricing, campaigning, and those things is behind it. I think it shows that we are not diluting the margins by lowering prices. I think the opposite.
Okay. Regarding the EBITDA margin improvement in Finland and Sweden, you noted that part of that was driven by lower working hours and lower volumes related to that. Is that a material impact on Q3 numbers?
It's a material. If you look at only the stores, it's a positive effect. You need to have in mind that the volumes has been coming down also at the same time, and at the same time, we have seen a shift into online. From a country perspective, it's not a one-off positive effect.
Okay, perhaps the last one regarding Norway. Surprisingly strong EBITA margin at 16%. Is this now the new floor level? Are we only going up from this or how should we interpret it?
It's a very strong margin. Let's see how it looks going forward. It's proven that we can deliver very strong margins in short term, but let's see how it looks going forward.
Okay. Just one final. Regarding the currencies, can you elaborate a bit on how that impacted your operations and also the positive net financials impact?
Yeah. We saw a stronger development now especially in the Swedish krona during the period, and that has a positive impact on the sales figure, but of course also the cost increases and the kind of impact on the EBITA level is not significant actually due to natural hedge and other hedging activities. The impact and the kind of exposure to foreign currencies we have is really on the financial items where we saw in the previous quarter a weakening Swedish krona that then kind of ended up in a negative unrealized currency loss in the quarter. Now when the krona again got stronger, then we got a kind of a gain on that. That is the kind of area which fluctuates, and also area where we look into measures to kind of mitigate that even more. It's mainly relating to the Swedish krona actually.
The other currencies are not significant.
Okay. That's all from me for now. Thank you.
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 Olli Vilppo from Inderes. Please go ahead. Your line is open.
Hi. I was thinking that how does this puppy boom affect the overall market growth? Do the owner of the puppies spend more money? How long do you see this boom continuing?
When we look at the market growth of 4%, 1% is number of new pets, and the 3% is usually the up spend going from lower quality products to more premium. It's also proven that puppy customers are spending a bit more. Puppy phase for us is super important. Not only taking in the customers and get them into our system for long-term revenue, but also for the more up spend that they are doing. What we've seen is that registered puppies is increasing rapidly from about 2% every month to now 14% the last quarter. How that will affect the market growth is not 100% clear for us, but it's obvious that the market growth will go up, and we believe that we are in a fantastic position to gain more puppy customers than our competitors.
Okay. Thank you.
Our next question is from Sampo Juhola from Nordea. Please go ahead.
Yes, thank you. One follow-up questions on the tax position that you have. It appears you have a tax rate close to 20%, just looking at the headline numbers. Can you give some guidance on how we should look at that going forward?
Yeah. We have unutilized tax losses outside of Finland, that now during the quarters, we haven't really kind of looked into the full year impact of that and taken a position on that. In that sense, more kind of a stick to the kind of effective tax rate based on the kind of tax rates of the countries. Current assumption is that we will have a slightly lower tax rate than in the last quarter once we have the full year numbers in place. Exactly how much is today quite hard actually to kind of give exact guidance on due to the fact that it's a bit different.
It's kind of not yet exactly clear how the kind of a profit divides between the countries with all the kind of central warehouse operations we have in Sweden and so on. I expect it to be lower than in the quarter so far.
Okay, that's clear. Thank you very much.
Just as a final reminder, if you do wish to ask a question, please press zero one on your telephone keypad now. There seem to be no further audio questions, so I will hand the word back to the speakers.
We have two.
Okay.
We have two more questions actually from the venue. First one, could we have more details on the impact in basis points of margin related to the different effects given on the margins, less travel expenses, more COGS, fewer opening hours, et cetera?
I think we don't share those details, but I think overall there's been a cost improvement through the lower cost that we just talked about. There have also been a volume impact in Finland, specifically regarding the COVID-19 restrictions. In net, I don't think it's an impact that has gained us.
Thank you. A follow-up for that, any reversal effect to expect for Q4 and into next year?
Yeah, Robert.
Of course, the measures we have taken are actually based on how the customer behavior have changed and the channel shift that we have seen, and that we will continue to adapt to also now. If that changes with the COVID-19 situation, then the impact of travel cost of those, they are not that significant compared to the full impact, fully with the figures.
From the venue.
If there are no more questions, we'd like to thank you, everyone that was joining and listening, and hope to speak more soon.