Earnings Call: Q3 2021

Oct 25, 2021

Welcome to the Ambulance Group Audiocast with Teleconference Q3 2021. For the first part of this call, all participants will be in listen only mode and afterwards, there will be a question and answer session. Today, I am pleased to present Oleg Svensk and CFO, Par Erskott. Speakers, please begin. Right. Thank you. Good morning, everyone. Welcome to Ambulance Group's 3rd quarter presentation. My name is Ole Svenski. I'm the CEO of Ambulance. And with me today is Peri Skold as CFO. Next page, please. So I will start off telling a few words about Ambulance Group. We are a group that acquire, own and develop Strong brands in wallpaper, textile, rugs and adjacent categories. We have the mission to make every day a little bit more beautiful and more inspiring. And we have a vision to be a driving force in the changing wallpaper and interior decoration markets. Next page, please. We have the House of Brands strategy. And today, we have 5 strong brands. We have Borostat Theatre being the largest one. We have Cole and Sam sitting in out of Great Britain, Wall and Deco from Italy, Perjwal, our Pure, the direct to consumer brand. And then Most recently, beginning of this year, we acquired Apelina, the first acquisition outside Wallpaper, which is our home turf, if you like. Apelina is right. Next page, please. Our 3 strategic core areas, that's first of all, to continue leverage on premium And the luxury and the reason for that is that premiumluxury offers better underlying gross margin, but also an interesting market growth. Secondly, we have we are going for further international growth organically and through acquisition. And third element is to through digital toolbox and digital tools, come closer to our core Customers, which is end consumers, but also architects and designers. This we do by launching direct to consumers in new geographies, but also to develop So different tools. Next page, please. A few of the highlights from the Q3. So net sales for the period reached SEK 135,500,000, Small growth, we can record a growth of 3.6%. The quarter itself is one of the is the Smallest one typically for us. And now even more so as the markets were quite soft, affected by the fact that people were traveling more, The traveling restrictions were in most countries listed, but we also had heat wave across many markets in Europe that affected our sales and demand. So net sales after 9 months, we are up 17.1% after 9 months. Adjusted EBITDA, SEK 18.3 billion, this is a decrease compared to last year's same period. Last year, we had a very, very low Cost levels with virtually no traveling at all or any investments or costs and participation in fares. And in general, we were very we had a low cost base. So our adjusted EBITDA of the 9 months now is 69.4%, which It's corresponding to a margin of, yes, close to 15%. Other important events in the period here that We have appointed Robert Scham Smolander as Head of Group Change Management. He will drive different change Projects that we are running right now, but also take care, handle and manage sustainability on a group level. Another point that is we want to mention is also that we are changing the structure the legal structure of The setup in Poros, so Poroska theater responsibility for design, brand and sales will be in one legal entity. And then the factory itself will be another legal entity. And we have recruited an MD for Proskapier Fabrikar, who will join here in November. On the right side, I also want to mention that for Ostapiete, we won the Swedish design Price for motion picture advertising, and we got this prize last week. And we amongst other companies that we're Competing against Volvo. So we did beat Volvo with our advertising team that has been running and has You know, created a lot of attention and traffic into our own pages and web page. Next page please. Okay. And then some more financial numbers then. As already mentioned, our net sales ended up at SEK 135 SEK500,000 in the quarter, that should be compared to SEK 130,800,000, which is an increase of 3.6%. That increase is built up by an organic currency adjusted negative growth of minus 7.5 compensated by growth from acquisition of SEK 9,900,000. Our EBITDA Ended up at SEK 18,300,000 compared to SEK 21,200,000. As Ulla already mentioned, compared to quarter last year, we had some more activities within fairs and marketing activities And also our activities on e commerce that we have Quite some in the quarter three years. Finally, on the cash flow, it's Slightly lower than quarter 3 last year, SEK 16,100,000 compared to SEK 18,900,000. And the main So that is the lower operating income. Next slide, please. Then it's this describes again the growth from Q3 last year to Q3 this year where we had, As already mentioned, the positive effect from the acquisition of Papelina, negative organic growth, but also a positive currency effect of 1.2% Or SEK 1,500,000. Next slide, please. So if we look into specific of Nordic, The Nordic region is represent 47% of the turnover in the group. We ended up at SEK 64,000,000 Net sales compared to 64.6%, reduction of 1%. As mentioned already, it was primarily effect of increased traveling and a warm summer weather in Sweden. Our result EBITDA ended up at SEK 7,700,000 versus SEK 7,900,000. We have positive effects coming from the increased Share of premium sales, which now is 31% of the total sales in the Nordic, which is 2% higher than last quarter and 10% higher than last year. In but we also have negative effects affecting the EBITDA, which is Input materials to our craft production in Sweden and also, of course, the activities around e commerce and digitalization. Next slide, please. Then if we take a closer look at Europe, our segment Europe, Europe represents 40% of our total turnover. And The net sales ended up at SEK 54,300,000 compared to SEK 51,700,000. Again, of Of course, we have the positive contribution from Papelina. But also Germany, a very important market for us, was strong in quarter 3. But some other key markets in Europe, we saw a slightly negative growth, France, UK and Italy. Our result EBITDA ended up at SEK 8,300,000, which is Lower than quarter 3 last year, where we had SEK 11,000,000. And again, here, It's our activities around e commerce as well as new launches, marketing activities and trade fairs, which we participated in the quarter 3, which we didn't do last year. And finally then, rest of the world, here we see Good increase in net sales. And rest of the world represents 13% of the total turnover, and we ended up at Net sales of SEK 17,200,000, which is an increase of 19% compared to Q3 last year. We had positive organic growth in the region as well as the positive effect from Papelina. Our result ended up at 2.3%, more or less the same as last year, 43%. But also here, we have activities around our e commerce, which drive some cost. And then just recap where we are on our financial targets. The first target is net sales growth, where we say we should double our sales until 2025. We have communicated earlier that means, on average, approximately 15% per year Growth, that should come both from organic and acquisition. The growth in Q3 was, as I said, 3.6 percent. And after 9 months, our growth is 17%, where organic growth For the 1st 9 months, it's 7.4% and acquisition, 10.7%. On The operating margin, we should be at least at 15% EBITDA margin over business cycle. In the quarter, we had EBITDA of 13.5%. And after 9 months, we had 13.2 And our adjusted EBITDA of the 9 months was 14.7%. And then The 3rd target is the leverage where we should not go about 2.5 net debt, compared to EBITDA. End of quarter 3, we were at 1.0 And dividend is not applicable at this stage in this quarter. Next slide, please. All right. Trying to sum up then the Q3. So continued growth in revenue with 3.6 Much softer than the 2nd quarter. That was up 33%. And but it is important for us to really See what is short term variations and fluctuation and what is the long term trend for us. But needless to say, demand was affected by the increased traveling and also by warm weather in some countries that really Had a spike on sales. Good supply is strained, but in better balance now compared to last year. Last year, we had hardly any We bring to our warehouse for Golensalen and Volundeko in the Q2. This year is much more balanced in the second and the third quarter. We have made a very important recruitment here of Robert that will join here end of this year, who will drive our exchange agenda, but also sustainability and will be involved in add on acquisitions. The legal operational change of Rostapeter is something that we're working hard on now and that will fly as of January this year. So summing up more the long term trend of the 9 months then. We are our revenue is up 17%. We are in line with our 5 year plan, even though We have just started only 9 months in the 5 year plan. It's really in the beginning. But we have said that we will double our sales. We will have solid profitability. We are right now in an adjusted EBITDA of the 9 months of 14.7%, which is ahead of last year. We have a high activity level in our digitalization and also in improving our sustainability offering going forward. So thank you very much for this. Now we are ready for any questions for some questions, if there are. Thank you. Ladies and gentlemen, we are now ready to take your questions. There'll be a brief pause or any questions are being registered. Just as a reminder, if you wish to ask a question, that's 1 on your telephone keypad. There are no questions on the audio lines currently, so I'll hand back over to our speakers. All right. Thank you. Yes, As I said before, we are this is a marathon for us. This is not a 100 meter Ran, we are in line with what we have said, that's our long term target to double our sales in 5 years. After 9 months, we are up 17% with an adjusted EBITDA of SEK 14,700,000. So we will continue and we are Should be certain that we have the right strategy. It's just up to us now to execute on it. Thank you.