Good morning, everyone, and welcome to the presentation of Apotea's Q2 Report. As usual, we will start with a presentation. After the presentation is done, we will move on to a Q&A with spoken questions. Today's presenters are Pär Svärdson, CEO and co-founder, Johan Mårild, CFO, and myself, Sarah Ahnström, COO. We will begin with some highlights of the quarterly figures.
Yeah, hello. I think we have had a good quarter with good profitability and stable growth. Johan, please show us the figures.
Yes. We had revenues of SEK 2.026 billion in the quarter and a growth of 10.9%. We had a strong profitability in the quarter. We increased adjusted EBIT and had an adjusted EBIT margin of 5.2%.
Yeah, if we look at the Q2 , I think we have had good progress on our growth initiatives. It consists of a lot of small projects, from everything from assortment, stock levels, the customer journey, and so on. I think we have a good speed. It takes some time, but we will absolutely see effect on that in the coming year. Please, Sarah, show us a little bit more about them.
Perfect. Exactly. Some examples of these sales initiatives. One is, of course, the launch of apotea.no. At the end of May, we did the soft launch of the site, and we are now selling our beauty and health assortment into the Norwegian market. During this quarter, we have also began with some marketing activities, still in a small scale, and started to scale up the sales. We have went from a few orders each day to a couple of hundreds, and the ambition is, of course, to continue to strengthening our position in the Norwegian market. We have also continued to develop or to scale up, I should say, the production in our new fulfillment center in Varberg. We are working quite a lot with optimizing the operations, and we will continue to do so.
We are quite pleased to see that the higher share of the larger orders are now being handled by this automated facility, which we are very pleased about. We also had a new high score during the quarter, and we are now producing more than 30,000 orders in a day. At the end of May, we also rolled out a company-wide share program of the shares, enabling our colleagues from the office prescription hubs and also the fulfillment center to participate, which we are very happy about.
We had with the revenue in the quarter approaching now rolling 12 months revenue of SEK 7.6 billion and an adjusted EBIT margin for the same period of 4.2%, which was in line with the rolling 12 months number in Q1. Let's take a look on the numbers in more details. We had revenues exceeding SEK 2 billion in the quarter, and as mentioned, a stable growth of 10.9%. We had a slightly higher growth rate in Rx, but we had stable growth in both OTC and traded goods as well as in Rx. Rx continued to increase its share of the revenues in the quarter. To the right, you can see our gross margin development, and we had a stable gross margin in the quarter.
We had a strong profitability in the quarter. We increased adjusted EBIT to SEK 105 million, despite increased depreciation of more than SEK 17 million. We had an adjusted EBIT margin of 5.2%. If you look to the right, you can see our operating cost in percentage of revenue. As expected, the depreciations and amortizations increased, and that is result of the, I shouldn't say new fulfillment center in Varberg, but the fulfillment center in Varberg established last year.
At the same time, we had an improved efficiency, as you can see in decline of personnel and other external expenses in percentage of revenues. The improved efficiency is the result of continuing good cost control, but also we get better cost leverage as we increase the capacity utilization. If you look on year-to-date, we for the first half year had a stable growth of 10.7%. Also looking at the first half year, Rx grew slightly higher than OTC and traded goods and increased its share of revenues.
Adjusted EBIT increased to SEK 206 million, and that corresponds to an adjusted EBIT margin of 5.2%. Also for the first half year, we had also a high increase, as expected, in depreciations. Depreciation and amortizations for the first half year increased roughly SEK 35 million. We had lower operating cash flow in Q2 as well as in year to date. The operating cash flow was impacted by inventory, and the inventory has increased in part due to inventory buildup in Varberg, but also temporary measures to ensure a robustness in the supply chain as we have highlighted before. To the right, you can see our CapEx. We have, following the completion of the fulfillment center in Varberg, had a significantly lower investment pace and half-year, we have very limited investments.
As we now are scaling up the production in Varberg and at the same time also evaluating and figuring out what new investments that are best suited for these operations, investments are likely to remain low this year. However, if you look on the longer period between investments related to new fulfillment centers, we're still expecting a yearly average of CapEx over SEK 50 million-SEK 70 million. We had an inventory of slightly above SEK 850 million at the end of June. Over the course of the last year, we have increased the inventory, mainly due to the buildup of inventory in Varberg. As a consequence of the increased inventory turnover have also decreased. We expect to gradually increase the inventory turnover as capacity utilization increases, but also by further optimization.
Let's take a look on the return on capital employed. We have a high return on capital employed of SEK 27 million, although it has declined over the past year as a result of the fulfillment center in Varberg. To the right, you can see our net debt and net cash position, and at the end of June, we continued to have a very strong balance sheet and a cash position of SEK 104 million, and this is despite an increased inventory and also a dividend paid out in Q2 of roughly SEK 62 million.
If we look on our focus ahead, we will continue to focus on growth initiatives, but also to build the pharmacy of tomorrow. When we say building the pharmacy of tomorrow, it means that we have a continuous journey to improve everything, to make it better for the customer. A lot of these small everyday steps, and you can never succeed with them. It's a forever travel. I think to have a goal that says that you want to change all the time is very important in our business, and we will continue to focus on that. Sarah will give us some examples.
Exactly. Growth remains our main focus also going forward. I think we have to look through all parts of the customer journey to make sure that we are excellent in every step. That includes, as Pär mentioned in the beginning, it includes the assortment, the pricing, features on the site, the information regarding the deliveries and so on. We have to be excellent in all aspects and improve even further. We will of course also focus on apotea.no. As I said in the beginning, we have just started with marketing activities, we will continue to increase the marketing activities and step by step also increase the sales. We want to make sure that we continue to develop the customer offering also in Norway to make sure that that's a good offering also on the Norwegian market.
We also want to continue to focus and continue to improve the Rx offering, the offering of prescribed medicine. We want to make it even easier for the customers to order online. We have before said examples such as expanding the assortment of prescribed medicine that demand cold chain, also expanding the deliveries of cold chain. We also mentioned digital inhalation guidance as a pharmaceutical service. Those types of initiatives we will continue to launch to make sure that we are a pharmacy of tomorrow also going forward. That was the end of the presentation, we will move on to a Q&A with spoken questions.
The next question comes from Benjamin Wahlstedt from ABG Sundal Collier. Please go ahead.
Hello. I was wondering firstly if you could elaborate on the organic growth trajectory a bit. You've previously commented that you expect a gradually higher growth rate throughout the year, but also that it takes some time. I was wondering just how should we weigh these statements against each other, please?
I can start a little bit discussing it. A lot of these initiatives are small steps. First you need to build it, or first you design it, you build it, then the customer realizes that it's easier. It takes some time, and I think we can increase the growth with single digits of % every quarter or something like that, but it takes time. Over one year or something, I think you can see a bigger difference, but it takes some time. I think it takes too much time sometimes, but it does. Do you have any more comments on that, Sarah and Johan?
No, I think as mentioned, growth initiatives are our main focus and we're not satisfied with the growth rate.
Thank you very much. Secondly, you comment on a gradual ramping up in marketing spend related to Norway, and I was just wondering what sort of magnitudes are you talking about here? Is this something that you expect to move company profits?
I think these yet-
Yes. Sorry.
Just short, we are still in the very beginning of it. I think the marketing activities are so far in a small scale. We will ramp it up very gradually and step by step, to just make that clear.
Compared to Sweden, it's almost zero. If you take it from a result perspective, it's nothing, but for Norway, it's big step.
Yeah. Perfect. Then, I was wondering about the incentive program structure. I understand this is not something you decide all by yourself. It's a shareholder decision. Again, Pär, you also own quite a large part of total shares, both directly and indirectly. You start receiving EBIT related shares already at a 3% margin all the way until 2028. A 3% margin in 2028 looks like a fairly guaranteed payday. On the other hand, your growth targets look more forward-leaning. Growth incentive shares start kicking in at growth of 15%. Should we expect you to dig a bit deeper into the margins to ramp up growth in your term? Is that how we should interpret the incentive program, or what are we missing?
We tried to correlate the incentive program with the financial targets. I think it's important to have financial or incentive programs that correlates to what we tell the market, because we want them to be correlated. Otherwise, it sounds very strange. That what we have tried to do, and this D share program that we also launched was just normal shares, but with some kind of technical construction so it's easier to buy them. I think it's important that our employees have shares as well and share the same goal that the market does, because then we can have the same targets. Johan and Sarah, do you want to add something to that?
No, just as mentioned, the D share is a hurdle share construction. We're following more or less the same structure that I had before with the C shares. They were also offered then company-wide, as we've done in the past.
All right. We should not take the levels of the targets as suggesting a change in strategy from here on out?
No.
No.
No, they just follow the financial targets.
All right. Perfect. That's all I had for now. Thank you very much.
Thank you.
Thanks.
The next question comes from Amina Ashraf from Danske Bank. Please go ahead.
Good morning, thank you for taking my question. I'm actually very interested to hear more about your beauty and health assortment. You mentioned that there is significant upside potential in the expansion in Norway, maybe you can shed a bit light on how different the consumer behavior is within the beauty consumption in Norway versus Sweden?
I think it's actually too early stage to discuss the differences too much. I think we're too early on to make any assumptions based on the consumer so far. What we can say is that we see great potential in Norway, and we also see great potential both in the pharmacy market where we present through apotea.no, and also through the beauty and health assortment through apotea.no. I think it's great potential in the Norwegian market, and we're still quite small, and we expect to have a growth path on the Norwegian market.
Yeah.
It's quite fair. It's only been
No, yes.
I'm sorry, go ahead.
Just to add to that, we have a pharmacy offering in Norway. With the soft launch of apotea.no in end of April, we're also complementing that then with the beauty and health assortment that is available to the Swedish customers. We have a fairly large beauty and health sales and strong positioning those segments in Sweden. Of course, we see a potential to further leverage that strength in the Norwegian market that we regard as attractive
No, I completely agree. My market research shows that Norway is a very attractive market as well. If I ask you then with regards to how much beauty contributes to your total revenue, if I go scrape your website in Sweden, correct me if I'm wrong, but approximately 41% of your online assortment is beauty and health. Are you expecting that to be the same in Norway as well?
It is a fair share of our total sales, and we see great potential in it, both in the Swedish market and the Norwegian market. I think we have two different offerings in the Norwegian market currently. One, a very specific pharmacy offering with the assortment related to the pharmacy industry, and the other one is a pure beauty and health assortment that we ship currently from our Varberg facility. It's a related assortment to the Swedish one. If that answers your question.
All right. Given that information, could you shed any light compared to your total revenues, how much beauty and health makes up of that?
We haven't disclosed that in specific. We have done it historically a couple of years, I would almost say, before, and then we stated that it was past SEK 1 billion. We haven't shared that number since then.
We can say that it's a healthy growth in those segments, and just to be clear, it's not one segment. It's a lot of different categories that make build up of these. It's a natural part of being a pharmacy and also Apotea for a long time being a front runner in expanding and strengthening the role of the pharmacy and including health and beauty products in that offering.
Yeah, absolutely. That historical number you shared, what % of the total sales was that?
I think it's not fair to say because I'm not sure exactly when we released that figure, it's a press release that you can find, we have disclosed it.
All right.
But it is-
Would it be fair?
Sorry.
I was just going to say, would it be fair to assume that it's in line with the percentage of the assortment? I mean, the 41% that my scraping talents tells me.
I think it's difficult to look at the assortment number because a mascara and a lipstick has a lot of SKUs. I would say that it's difficult to say that. I don't have the % on top of my mind, actually.
Johan.
Yeah?
You said 41% of the total number of SKUs. When we said this SEK 1 billion, it was maybe more like half of that in relation. On the pharmacy side, you have painkillers, you have this OTC product that sells a lot. I think you can more divide it by 2. That's a very rough number. Then you have something.
All right. Well, thank you so much. That was very exciting to hear about the beauty and health assortment.
Thank you. That was also the last question for today. Thank you very much for listening in to the presentation, despite the very sunny and warm weather in Sweden, and thank you for today.
Thank you very much.