Hello everyone. Welcome to the presentation of Puuilo's fiscal year results, which ended in January. I am Juha Saarela, CEO of Puuilo, and with me is Ville Ranta, Puuilo's CFO.
Hello.
We will go through the key results of the fourth quarter, which ended in January, as well as the cumulative figures for the entire fiscal year. After this presentation, you can ask questions by calling the line. We are happy to answer your questions. Here is the agenda for the presentation. First, I will go through the key figures and events of the last quarter and the entire fiscal year. After that, Ville will provide a more detailed overview of the financial development for the same periods. The third point on the agenda, I will continue with our board's dividend proposal for the annual general meeting, which is planned to be held on 15th of May. The fourth point covers the outlook for this fiscal year, including the forecast range for both net sales and adjusted operating profit. Next, there will be a brief recap of our strategy.
The sixth point is a brief summary of our sustainability work. As I said, and as usual, we have reserved time at the end for any questions and answers. Our fourth quarter is from November to January, and here you can see the key results. First, net sales. The quarter's net sales were approximately EUR 85.8 million and grew strongly compared to the same period last year. Total growth was nearly 12%. However, like-for-like sales growth remained modest, as it was in Q3, at only 0.3%. Like-for-like sales growth was still affected by lower average basket size and also by the relatively snowless and unusually warm winter during the last quarter last year. Customer traffic continued to grow in both old and new stores. This helped to offset the impact of lower average basket size on the decrease in sales development.
Sales grew in all months of the last quarter, and it did throughout the beginning of the year. We also faced quite tough comparison figures from last year, so we are satisfied with the sales growth, especially considering other business environment conditions. The gross margin in Q4 also increased, and it was 38.5%, up nearly 2 percentage points from the comparison period last year, which is an excellent performance. The gross margin was particularly improved by the increased sales of private label products and the continuous shift in the sales mix towards cheaper goods. As we know, these have better gross margins than more expensive goods. Even though the lower average basket has affected sales because more expensive goods are not selling so well, we continue to sell higher-margin goods to a growing customer base.
Adjusted EBITDA in Q4 grew by over 33% and was over EUR 14 million, which is 16.6% of net sales. It increased by EUR 3.6 million and was 2.7 percentage points better than the comparison period. Earnings per share were EUR 0.12, which is about 33% higher than the comparison period. We continued our strategic expansion and opened new stores in Äänekoski and Kirkkonummi in Q4. The openings and post-opening sales of both stores have met expectations and also provide further indications of future growth potential. Here are key results for the entire fiscal year. Net sales was approximately EUR 383 million, growing by EUR 45 million compared to the previous fiscal year.
Total growth was slightly over 13%, and like-for-like growth was 1.5%. The growth was mainly due to an increase in customer traffic in both old and new stores. Net sales grew in all months of the fiscal year.
As in Q3 and Q4, the average basket size decreased during the past fiscal year, which slowed down like-for-like sales growth. Gross margin increased by 1.1 percentage points to 37.7%. The same factors that improved the gross margin throughout the past year contribute to this increase, namely the significantly increased sales of private label products and the shift in the sales mix. Customers are buying cheaper goods which have a better gross margin. This is beneficial for both customers, as we offer affordable products, and for us, as we achieve a better gross margin from these products. Our own imports and private label sales have grown well and accounted for 21.7% of total sales last year. This is the main driver of the improved gross margin.
Adjusted EBITDA grew by nearly 24% to EUR 67 million, which is 17.5% of net sales. This is approximately EUR 30 million higher than the corresponding period last year.
Earnings per share were EUR 0.57, which is about 25% higher than the previous fiscal year. Earnings per share have grown faster than our net sales due to improved profitability. During the last fiscal year, we opened seven new stores in Nokia, Ylöjärvi, Forssa, Tampere-Lahdesjärvi, Oulu-Karjasilta, Äänekoski, and Kirkkonummi. In summary, we can be satisfied with last year's results. The year has not been easy for our sector or for us. Last spring, political strikes had a slight effect on our operations, although we managed to mitigate the impact. Customers' confidence in the future is still not very high. The ongoing war in Ukraine and the resulting uncertainty, as well as uncertainty about continuing of job, have led customers to be very cautious and careful with the use of money.
Despite this, we have been able to attract new customers, increase our sales, continue and accelerate our expansion, and improve our profitability at the same time. Therefore, we can be satisfied with this. Good.
Ville, please your turn.
Thank you, Juha. Let's start with the net sales. The net sales in the fourth quarter was EUR 85.8 million, and it grew by 11.8%. At the same time, like-for-like net sales grew by 0.3%, which was affected by the long continued decline in the average basket size. The average basket fell by 3.6% in Q4, which in our view was affected by the continued uncertainty of consumers. This is reflected in the decrease in the share of goods at a higher price point in sales, which of course also affects the size of the entire basket. In Q4, the growth in net sales was also affected by the warm winter with little snow in parts of the country. However, the growth in customer traffic continued at a fairly good rate. In terms of like-for-like, the number of customers grew by 3.8% and a total of 15.9% in all stores.
We are particularly pleased with the growth in customer traffic because it is ultimately the most important driver of net sales for us. During the fourth quarter, we opened two new stores, Äänekoski and Kirkkonummi. Both stores have had a good start, and the trend is now continuing towards the rising spring and summer season. For the entire financial year 2024, the net sales amounted to EUR 383.4 million, with like-for-like growth of 1.5% and all-store growth of 13.3%. Customer traffic grew by 4.3% in like-for-like stores and a total of 16.8% in all stores. The average basket decreased by approximately 3% in the financial year 2024, which was due to the above-mentioned reasons related to the consumers' uncertainty and the warm winter weather at the end of the year. Let's move on to the gross margin.
In Q4, Puuilo's gross margin was 38.5% of net sales, and it grew by 1.8 percentage points compared to the corresponding period of the previous year. The increase in the gross margin level was influenced by the sales mix and the increase in the share of own private label brands in net sales. In addition, the increased purchasing volumes have naturally affected the more favorable purchasing terms for us. The story is the same for the entire financial year 2024. The gross margin was supported by the change in the sales mix to products with a lower price point, which is reflected in the average basket, which was already discussed above. As we have already said before, cheaper products are relatively more profitable for us than more expensive products. The majority of Puuilo's assortment has always consisted mainly of these lower-end price products.
In addition, the increase in the gross margin level was influenced by the aforementioned increase in the share of own private label brands in net sales. Within own private label brands, the sales mix is focused on high-margin products, which means products with the lower price point inside the private labels. I will tell you more about the development of the share of private labels on the next slide. Looking at the time series of the financial years, we are shown on this slide for three financial years, our gross margin has continued to increase in a trend-like manner year after year. In short, we could say that the chosen strategy is working, and our focus has remained firmly on the game all these years. We intend, of course, to continue this in the future.
This slide shows the development of the share of own private label brands over the past five years. The share out of net sales has grown every year, and in the last financial year, the share was 21.7% of total net sales. The growth of the share has continued throughout the years in a trend-like manner, but of course, there are slight differences in the growth rate between the years. In the financial year just ended, the sales of own private label brands grew by a total of 18.8%, which is a stronger growth rate than the growth rate of the company's entire net sales. This lever is one of the main reasons for the increase in gross margin described in the previous slide, and also for the upward trend in gross margin that has continued for years. Puuilo has a total of about 50 so-called own private label brands.
Products sold under own private label brands can be found in each main product group. Most of them are in Puuilo's so-called DIY product categories. The number of private label product articles already reaches thousands of products in total. The gross margin of own private label brands is clearly better than the margin of so-called branded products. Increasing the share of own private label brands is a key part of Puuilo's growth strategy, and the figures show that this strategy is working. Work on private labels will continue. Our goal is to increase the share of own brands of the net sales also in the future. There is still plenty to do work for the years to come. Let's move on to profitability. Q4 adjusted EBITDA was EUR 14.3 million, up EUR 3.6 million compared to the last year's Q4.
In percentage terms, adjusted EBITDA grew by 33.6%, and relatively, EBITDA was 16.6% of net sales. We reached an excellent level of profitability at the end of the year. Relative profitability was therefore clearly better than the comparison period and excellent. Q4's profitability was particularly affected by the good development of gross margin and good cost discipline, for which we are already known. Regarding other operating expenses, things are progressing according to the plan. The figures closely follow the plans, and the results are now reflected in the good EBITDA reported. For the entire financial year 2024, our profitability has scaled in a model-like manner towards the target set in accordance with our strategy. In fact, the figure now reported for the full year exceeds the long-term EBITDA percentage target we have set.
The adjusted EBITDA for the financial year 2024 was exactly EUR 67 million, and the EBITDA to net sales ratio was great: 17.5%. This is explained by determined development work in line with the strategy on several fronts, of which the gross margin impact of our own brands is undeniable. The development of the company's operating expenses has been affected by the development projects we have carried out for automation solutions, which have now been put into production and help with the scaling of expenses, as the EBITDA percentage now reported also shows you. This slide shows the development of Puuilo's inventory levels over the last three financial years. The inventory turnover rate slowed down, which is due to the initial inventories of seven new stores and the strong growth in the imports of own private label brands.
With the increase in inventory, we have prepared for the spring and summer season earlier than normally in the past financial year, as well as for the supply chain disturbances in advance. In terms of timing, a relatively large number of new stores will be opened in the first half of the current financial year, five in total during H1 . Products are needed for new customers. In addition, compared to the previous year, the figures are affected by the dismantling of excess inventory at that time, which makes the development appear higher than normal in this sense. We actively monitor the inventory turnover rate, and the long-term trend goal is to improve the turnover rate. However, in the short term, there might be fluctuations for the reasons mentioned above because we want to make sure that the customer gets what they came for, for the stores.
In Q4, Puuilo's operating free cash flow was zero euros, and it increased by EUR 1.5 million. The cash flow was particularly affected by the increase in the inventory value described on the previous slide, which was due to the store openings, growth in imports of own private labels, and preparation for the supply chain disturbances, and also for the future store openings this spring. The operating free cash flow was supported by the good profitability we achieved. When viewed at the level of the financial year 2024, the operating free cash flow was strong but decreased by EUR 10.8 million compared to the previous year. The decrease is due to the increase in inventory value, the liquidation of last year's excess inventory, preparation for the supply chain disturbances, as well as the new store opening this year and items arising from the Hurrikaani transaction.
About the balance sheet, the company's net debt to adjusted EBITDA ratio decreased slightly compared to the comparison period, explained by a strong EBITDA development. The current net debt to adjusted EBITDA ratio is in line with our long-term goals. The middle graph shows the adjusted net debt to EBITDA ratio, excluding the impact of IFRS 16, which remained at the same level compared to the previous financial year. The key figure calculated excluding the impact of IFRS 16 is currently very low. Puuilo's cash and cash equivalents were EUR 18.3 million at the end of the financial year, and the company's financial position is stable. Puuilo's net debt, excluding the impact of IFRS 16, meaning the net sum of cash and bank loans, is currently EUR 31.7 million. The company's absolute net debt is low.
This morning, we announced a new financing agreement between Puuilo and OP Corporate Bank, which will replace the current EUR 50 million loan and moderately increase the share of debt in the company's balance sheet. New debt capital of EUR 20 million will be raised to the company's balance sheet. This is not expected to have a significant impact on the company's net debt to EBITDA ratio in the future, based on our latest outlook given. Here are the figures as a summary, which we already went through in detail. We are very pleased with the performance of the company for the whole year. Juha will tell you about the dividend proposal of the Puuilo Board of Directors to the annual general meeting and outlook for the financial year 2025. Please, Juha.
Thank you, Ville. Puuilo's capital efficiency creates opportunities to consider additional capital return mechanisms for shareholders.
Here is some background on that. These do not change the previously stated profit distribution policy and targets but clarify them. Primarily, we always invest free capital in the current strategy and growth and make sure it is secured. Puuilo's strong profitability generates good cash flow, which allows us to finance current expansion, development projects, and increase the amount of our imports that tie up working capital. These are always the primary uses of capital. Secondly, we can consider additional capital return mechanisms, such as special dividends, due to our efficient and highly profitable operation, generating funds beyond what is required for our current growth strategy. Additionally, the company's net debt and adjusted net debt and adjusted EBITDA must remain below the strategy target of two times.
Our strategy is to distribute over 80% of net results to our shareholders. This has been our practice every year since becoming a listed company.
Puuilo's board proposes to the general meeting that the company pays a regular dividend of EUR 0.46 per share. This would be an increase of EUR 0.08 from the previous year, which is a 21% increase. The regular dividend corresponds to 81% of the company's net profit. In addition, the board proposes that the company pays a special dividend of EUR 0.24 per share. Therefore, if the general meeting approves the board's proposal, shareholders will receive a total dividend of EUR 0.70 per share. Dividends would be paid in two installments as in previous years. Good. The outlook for this financial year. We forecast that net sales will grow and be between EUR 425 million-455 million. We also expect adjusted EBITDA to be between EUR 70-80 million.
There are uncertainties related to the outlook, such as the development of the still uncertain general economic situation, in addition to changes in purchasing power and consumer behavior. Additionally, there are other unusual uncertainties in the outlook, such as the ongoing war in Ukraine, but also other potential geopolitical crises or international tensions that may have a direct or indirect impact, especially on the availability and the price of goods, which can affect sales and profitability. Good. Next, a brief look at our strategy and long-term financial targets. Our current strategy is simple and still workable. The five key elements in our strategy are the first one, opening new stores and continuing our expansion in Finland. For this period, our target is to reach over 70 stores in Finland with the current concept.
Number two, the continuation of LFL sales growth in a market where we have a lot of room to grow and a lot of untapped potential. Third, maintaining further improving our current position as one of the most cost-efficient operators in the sector. An omnichannel customer experience, an easy and fast shopping experience, is an important factor for our current and potential customers. Last one, sustainability work and developing of it. It is as one part of our strategy. This is done under the theme of responsible retailer. Under this, we include the key elements in our sustainability work. Working towards these five objectives will allow us to reach our long-term financial targets, which are presented on the bottom half of the page. By the end of the strategy period, we aim to reach net sales above EUR 600 million.
Regarding profitability, our goal is to reach adjusted EBITDA above 17%. We target to reach absolute adjusted EBITDA above EUR 105 million by the end of financial year 2028. We aim to distribute at least 80% of the company's net results to shareholders. Regarding the net debt, our target is to keep the ratio to net debt to adjusted EBITDA below two times. Some words and look into the further expansion of our store network. We will continue our expansion in Finland with the current concept, and our target is to grow the chain to over 70 stores. Currently, we have 51 stores open, and if everything goes as planned, at the end of this fiscal year, the store count will be 56. When we open five to six new stores annually during the strategy period, we will reach our goal of 70-75 stores by the end of 2028.
This growth strategy also means that we can continue profitable growth for years to come. We have done this before, and last year also showed that that growth company in this sector can be profitable. We can grow profitably, especially because we benefit from economies of scale and do not need to increase fixed costs in proportion to sales growth. Another significant driver of profitability is the gross margin, which we can improve in the future, particularly by increasing the amount of our own private label products. A few words more about store openings. In the last fiscal year, we opened seven new stores, which was a record year for us. All these openings have been successful, as we expected. This year, the expansion continues, and we plan to open seven stores again. Two weeks ago, we opened stores in Varkaus and Savonlinna.
We have announced new upcoming store openings in Lohja, Mäntsälä, Jyväskylä, Keljo, Iisalmi, and Heinola. For next year, we have announced the opening of a new store in Espoo, which will be located next to the S-market in Espoonlahti. We have room for growth in the market, and we are using it in a controlled and managed manner according to our strategy. Sustainability. A few words about it. In our strategy, sustainability is separate under the theme responsible retailer. The three main targets of our sustainability work are supply chain, a good workplace, and environmental and social responsibility. Under each of these, there are several key subtopics of sustainability work, such as value chain employees, working conditions and employment relationships, operational emissions, and, for example, data security. We have made progress in almost all areas, but there is still much work to be done in the future.
We know that we are still in early stages of our sustainability work, but we are on the path and moving forward. We are improving the responsibility and transparency of the supply chain in various ways. Already, 85.5% of purchases from high-risk countries come from suppliers that operate according to the BSCI or other similar sustainability programs. This year, we also include the environmental responsibility of the supply chain and suppliers as part of the cooperation of suppliers and selection of them. We can measure the emissions from the transportation of goods we import ourselves because their transportation is done under our own contracts. The volume of these goods is increasing, and at the same time, the relative emissions are decreasing compared to the emissions from transportation from traditional and local wholesalers and suppliers. In Finland, we have centralized warehouses, which has led to an increase in cargo sizes.
As a result, Puuilo's goods are transported with relatively lower emissions. Regarding Puuilo as a workplace, we are still a happy exception in that approximately 74% of employment contracts are full-time. The results of the annual employee satisfaction survey are still above the industry average. There is still work to be done in this area as well, and we will continue our determined efforts in training, onboarding training, and creating career paths. This was a brief summary. The first CSRD sustainability report will be published with the financial statements, where more information on the topic can be found. Thank you. Now we have time for questions. Moderator, please open the line.
To ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad.
Hi. Can you hear me? Yes, we do. Yes. And congratulations to the good results, and also congratulations to reaching above one billion in market cap today. My first question relates to the operating, and especially personnel costs. Could you elaborate a bit? I mean, the increase year on year was insignificant, you could say, in absolute terms, and in relative terms came clearly down. Could you give some color on how you managed to keep those costs so low? Yeah, thanks.
Yeah. If you look at the costs as a whole, the biggest explanation there is the personnel expenses, which came down. Like we have said before, we have done balancing actions there. Nothing radical.
We have fine-tuned our plans in some store units, and of course, doing the balancing actions, because of course, it varies store by store how effective from the personnel costs point of view they are. Now those variations between the stores have been fixed, and that's the main reason for the good improvement last year, what we have done. What comes to other expenses than personnel expenses, there is a bunch of a lot of different kinds of costs, for example, marketing costs, IT costs, store site costs, and so on. Maybe the main reason inside the other operating expenses was that we have bought less external services last year than in the comparison period. We used external services less than in history.
Yeah, I would like to add one thing.
As we said in our presentation, we try to scale this business, and it means that we do not need the extra or more resources, for example, to headquarter when we are doing expansion in Finland. That is one driver also.
Okay, thank you. Regarding your top-line guidance, what are your expectations behind that? I guess consumer confidence has an impact on that. Probably if consumer confidence returns, then there could be more purchases of higher price point products, and we could be at the higher end, or if the market continues weak, then perhaps at the lower end. The dynamic regarding the gross margin also lives based on that. Could you elaborate a bit on the expectations on the guidance range?
If I start what is coming this year, we see the weak signs of the better consumer confidence, and we think that it may happen in the second half of this year when customer confidence is better at the moment. As all of us know, there are the same kind of story in Sweden and other Nordics already. That is why we are waiting for the better times in Finland also, but it is coming in the second part of this year. If you would like to comment about our sales and—Yeah. Like
you have said, what we have assumed there, or how we have built our forecast and outlook, of course, we are expecting now a recovery for the consumer confidence. That will hopefully help us this year in form of average basket size. That's one.
Of course, we have a big amount of new store openings there. Of course, those have been calculated in also. We expect a recovery also in the like-for-like sales. Last year, the like-for-like sales for the full year was 1.5% development. Of course, we are expecting a bit stronger number for the full year level this year. What comes to a gross margin, the main drivers behind the gross margin are already explained in our presentation. I would like to say that it's a simple business that way, that what we are doing, we are continuing to increase the private labels, of course, in our assortment. That is the main lever to push up the gross margin in the future as well.
Of course, there might be changes in other than private label sales mix this year, but it depends on the consumer confidence and how the more expensive products start to move again. We will see that along the year. Difficult to say at this point.
Okay, thank you. That is all from me.
Hello, this is Kalle Loikkanen from Danske Bank. I hope you can hear me.
Yes. Yes, we do.
Yeah, good. I just wanted to continue on the previous topics on the operating expenses. If we look at the OpEx to net sales, that ratio decreased quite a lot in both Q4 and also the full year. I was just wondering that is this rate of decrease sustainable also in 2025?
Yeah, thanks. We think so, yes. Of course, it can vary year by year.
I assume that you are now talking about other than personnel expenses. Is that correct?
Yes, yes. Yes, OpEx in total, yes.
Yeah. Like we said in our presentation, we push the automation, for example, that helps us to save, of course, the other operating expenses. That is one. Of course, it depends what kind of other projects or actions we have ongoing in the company. If you compare the other operating expenses between the years 2024 and 2023, one item which is there is, of course, the Hurrikaani transaction, what we have done in 2023. That actually increased a bit the other operating expenses. If you look at our numbers, if there is a difference, a few hundred thousand euro, it already affects the ratio percentages if you compare to the net sales.
But of course, we forecast and assume that if we grow this year, our net sales, the ratios will dilute somehow, even if we decide to buy something more or whatever. Yeah, we are a strict cost control company, and we try to keep the operating expenses on the same level or even lower if possible.
Okay, thank you. That makes a lot of sense. That is all the only question I had. Thank you very much.
Thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Hello. It is Arto Heikura, analyst . Can you hear me?
Oh, yes, we do.
Okay. I have one question about the refinancing the loans. You have EUR 50 million of loans left, and you decided to raise EUR 70 million of loans.
What is the reasoning behind additional loans?
Yeah, thanks. If we go back a few years in time when we listed this company, we had a EUR 70 million bank loan then. During the years when the interest rates peaked and the operating environment was really uncertain, we decided to pay down the debt by EUR 20 million in 2023 autumn. Now the interest rate environment has settled down, and the company's other figures are of course stronger. We decided to raise our debt capital a bit in connection with this new financing agreement, which we have to do in any way. We are just returning to the same point that we were in two years ago. This is not any dramatic change here.
Like I said in my presentation, based on the outlook we gave, we believe that this year cash flow will be also strong, and it does not have any major effect on the company's net debt to EBITDA ratio or any other big consequences at all.
Okay. I'm just wondering if you really need that money because of good cash flow.
Yeah. Like Juha said in his presentation, if we have excess cash, we will distribute it to the shareholders by the end of the day. Let's see how this year goes. Of course, we are seeking at the same time the optimal capital structure in the company's balance sheet. I want to highlight here that our debt ratios and debt level are low compared to the company's other figures.
Yes, thank you.
There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Good. Thank you for the questions and joining us today. Lastly, I want to thank all our customers for trusting us. Also, I want to say special thanks to our employees for your hard work, commitment, and adaptability. Happy spring time to everyone.