Good morning, and welcome to the interim report, January to September 2018. My name is Anna, I will be your coordinator for today's conference. During this call, you will be on listening only. However, in the end of the presentation, you have an opportunity to ask questions. If any time you need assistance, please press star zero, and you will be connected to an operator. I will now hand you over to CEO Pehr Oscarson, your host this morning. Thank you.
Thank you, good morning. I'd like to start with this presentation of the third quarter. With me here is Åsa Källenius, our CFO, who will also take some comments during this presentation. During this quarter, we did a successful acquisition of FTZ and Inter-Team, that has resulted in record sales. We completed the acquisition early September, after that, we also have completed the rights issue, which was also oversubscribed. That has been successful as well. We have a sales growth of 33% that includes 1 month of FTZ and Inter-Team. The old Mekonomen Group has also some increased sales, as we also said in the prospectus for the rights issue, we have earnings, which is broadly in line with last year in the old group.
We have been affected by the unusual warm summer, which led to that the demand from the consumer was somewhat lower during July and August, leading to that a lot of workshops decided to close down, and close down for a longer period than they usually do. We also have an increased number of company-owned workshops where we have all the costs during such a month as July, but not so much income since it was very slow season. 1 comment about the market, I would say that when we look at the quarter month by 1 month, it was much better in September, I would say that the market woke up a little bit after the slow months of July and August.
However, that doesn't increase any huge sales top as for us, because we also have the challenge with the number of mechanics in the workshops and the capacity. It usually, when it wakes up, it leads to longer waiting time in the workshops. September was a much more normal month for us than July and August. With that, I will hand over to Åsa.
Yes. Hello, everybody. As Pehr said, we had record sales during Q3, driven, of course, by the new sales we added from FTZ and Inter-Team. We had +33% in the group. If we exclude FTZ and Inter-Team, the underlying sales growth in old Mekonomen Group was 2% this quarter. Looking at EBIT, I will explain a little bit more in the coming slide about EBIT, but EBIT, excluding FTZ, Inter-Team, and items affecting comparability, was SEK 116 million compared with SEK 120 million same quarter last year, and it is broadly in line with last year, as we said in the prospectus. EBIT margin is lower than we are used to. It is 6%, and we have and will have lower margins from the acquisition because the team has lower EBIT margin than the old Mekonomen Group and also FTZ. Next page is the EBIT bridge explaining the EBIT in Q3 this year.
If we start with EBIT Q3 2017, it amounted to SEK 127 million. We added SEK 13 million from FTZ and Inter-Team, and this is just one month. It is September EBIT from the acquired entities. We have amortization from goodwill, the acquired intangible assets from FTZ and Inter-Team. We have excess gains of -2 other +1, and also still impact from reduced sales from DAF. This quarter, it is approximately -4. Items affecting comparability is -11. We have -4 in this quarter from acquisition costs. Same quarter last year, we had a positive of 7. Altogether, -11 makes the EBIT this quarter SEK 118 million. I proceed on to the segments. If we look at MECA, we have good increase in sales. It is +6% from SEK 442 million to SEK 467 million.
It is impacted by a strong NOK, of course, but it is also impacted by an unusual warm summer. The underlying growth is 2% in this segment. EBIT SEK 48 million, sorry SEK 56 million last year, impacted by our own workshops being closed and also the strong EUR. Mekonomen third quarter increased sales to our affiliated workshops. We have also a positive impact from the strong NOK, but as I said, the extremely hot summer affected all of our companies. Sales growth is 1% and as you see it is -1% in Sweden, but if we compare last year to this year, we have to consider that we sold Marinshopen in the beginning of this year. If we put Marinshopen back in the figures, Sweden is flat compared to same quarter last year. Good cost control in Mekonomen Sweden, making EBIT good. It is SEK 90 million compared to SEK 79 million, same quarter last year.
Sørensen og Balchen, net sales of SEK 180 million compared to SEK 178 million last year, a change of +1%. Underlying sales growth is -5% and of course, still affected by DAF sales. The loss of DAF sales in Sørensen og Balchen this quarter is approximately SEK 11 million. If you adjust for that, we have positive underlying sales growth also in Sørensen og Balchen. Very good cost control making EBIT SEK 29 million compared to SEK 27 million. To FTZ, both sales and EBIT is included only for September and both are in line with last year. We are happy to say that management is intact and very committed. Net sales amounted to SEK 252 million and EBIT to SEK 13 million. Inter-Team, sales and EBIT in line with last year, also included one month in the group, and management also intact and committed.
Net sales is SEK 147 million. EBIT is close to zero. With an EBIT margin, of course, it's amounting to zero impacting the full group. Over to Pehr.
We are on page 11 for you who has the presentation, I want to talk a little bit about synergies when we of our acquisitions. As we have said before, the majority of the synergies will come from purchasing synergies. That work started already the same week as we had closing, has been going on for some time now. We still believe that there is a good possibility to reach our goals. We have a good focus and a large commitment both from the existing group companies as well as from the acquired companies. I will switch over to market growth, we have page 13, market trends. This is only for Sweden and Norway, the car fleet is only for Sweden. Of course, we hope in the future to give some more about the market even in Denmark and Poland as well.
As you probably know that we have had the last couple of months, in especially Sweden, a large drop in sales of new cars. That doesn't lead to that the car fleet has decreased. It's still increasing, this should not affect our business in the short term. We still believe that the years with very high car sales should give some positive effect in a couple of years when those cars reach our market, or let's say get to the age when they become more common in our workshops. The stores and affiliated workshops, of course, that has increased a lot now with four in Denmark and two brands in Poland, leading to that we have 3,413 affiliated workshops. When we compare to, especially in the old group, that's pretty much the same level as last year.
Number of workshops is of course important, what is even more important to have somewhat larger workshop with more mechanics and thereby more capacity. We have a focus on numbers, even more focus on the size of the workshops. When it comes to number of stores or branches, in the old group, it's not so many changes. Here we mostly added the branches from Denmark and Poland. I'm going to slide 15. When we talk about the merge of the central warehouses in Sweden. Strängnäs, who is the old Mekonomen warehouse, is now up and running in the automated solution. The automation will take care about 80% of the volumes, now we are already up at the volume of 65%. We will soon reach the goal in that part.
We still stick with the plan that we will have SEK 50 million in savings as from 2020 going forward. During next year, there will be migration from MECA's warehouse in Eskilstuna to this new one in Strängnäs. We have also rebranded the wholesale business. We changed name one year ago from Mekonomen Grossist to Bileko Car Parts, to be a more neutral wholesaler selling to more than one chain. So now we have also started the rebranding of the full wholesale business. I also want to talk a bit about training competence center. ProMeister Education had upper secondary schools already started last year. Secondary classes started this year, and we have expanded to a new facility in Malmö, which besides having this upper secondary school, also have the ProMeister Academy, which is training for existing mechanics in existing workshops.
We also have the technical support team, and we also run a fully operating workshop in that facilities. It's very exciting to see how we can reach good synergies between those different parts of the company, and it's all focused on competence and new mechanics. Tonight, there is an industry gala, Motorgalan. This is the first time this industry in Sweden gathered such an event. It covers all automotive, so it's both independent and authorized parts of the market, and it's totally 12 categories, where it will be winners who get prizes. And I'm very happy to see that Mekonomen Group has seven finalists in these different groups. So we are really looking forward for tonight and hoping to get some good prizes.
But just the fact that we have seven finalists is really a proof of that we are focused on the right thing when it comes to the development in this industry. Last page, focus 2018. Just a couple of months left, but we will continue to focus on our strategic projects, which is the spare parts catalog and the merging of the warehouses. We will continue to focus on workshop quality, and especially, I would say, competence recruitment education, which is very important. We have still a huge need of new mechanics into the industry and into our workshops. Further on, of course, continue to focus on the organic growth in our core business by improving our customer offerings all the time. We want to retain and redevelop entrepreneurship.
And we will continue to focus on new business areas, and also continue with our acquisitions ambition, even though when it comes to larger ambitions, are not planning anything more this week, at least. That was all, and we will open up for questions.
Thank you. Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. Do remember there are some people in the room that have not entered their name, so we're going to have to take your name for the question.
Ladies and gentlemen, if you would like to ask a question, please press star one now. We have a question from Mikael Löfdahl from Carnegie. Please go ahead. Your line is now open.
Hi. Thank you. Could you perhaps put some more color on the performance for FTZ in this quarter? First of all, perhaps the seasonality of FTZ. Is there a different seasonality in Q3 versus the other quarters? Also, whether or not September as an isolated month is hampered by anything in the OpEx versus revenue that you were aware of? The margin obviously in this quarter was much lower than the full year pro forma numbers that was given in the prospectus.
We only have FTZ and Inter-Team included one month. I can say that much, that both companies are in line with last year. September is usually not the best month for either of the companies. You can't really make too much analysis from just one month. The EBIT margins are better a full year in FTZ than this September, of course. You have the prospectus numbers. They are correct. September isn't the best month, but it's in line with last year.
Is there anything in the mismatch between revenues and OpEx in September as a month? If you look at Q3, I guess Q3 typically is impacted by summer vacations and so on, which can have an effect on OpEx if you were to look at just one single month for.
It's nothing like that. It's in line with last year, of course both FTZ and Inter-Team, they have both other fiscal years than our group. There can be perhaps not September being that representative for the quarter. It's just one month, and it's usually not a quarter end for FTZ and Inter-Team. The important thing is that what you see in the prospectus is real figures, September is just one month out of 12, and it's too early to say anything else than that.
Okay.
It's in line with last year, it's nothing strange in the result. Also what you can say is that the gross margins in both FTZ and Inter-Team are lower than in the old Mekonomen Group. We will see a shift both in gross margin but also in EBIT margin, caused by Inter-Team presently having such a low EBIT margin. FTZ are normally in line with Mekonomen Group when it comes to EBIT. It has performed higher than Mekonomen Group if you look historically, a couple of years at least.
Yeah. I guess you have the numbers for last year and how the full quarter of 2017 looked like for FTZ. Isn't it possible to provide more information on that? If there's a seasonality, if you have roughly 5% margin on the EBIT level in one month, what does that say to the other months? Also then for the quarter?
Well, we took over the company 3rd of September, so I can only say what's included from 3rd of September.
Okay. You have the numbers. I guess you made a due diligence, and then I guess you got the numbers and the full year figures, and from that there should be monthly statements, I guess, for-
Yes
2017.
Yes.
That you have looked at.
Yes, of course. You also have the figures in the prospectus. You see the full year and you see the first half of this year. You also have the figures there. In this report, we have one month included, and that's from closing and onwards. September is in line with last year for both FTZ and Inter-Team.
Assuming a double-digit margin for FTZ going forward, that's nothing strange to do so, even though it was only around 5% in this month alone.
Yes.
Okay, thanks. On the PPA or the acquisition-related amortizations in this quarter.
Could you say, or is it fair to assume that they will be this amount times three as a run rate per quarter? Or was it higher than normal in this quarter?
The amortization of the.
Yeah, the SEK 6 million of amortization.
Yes.
Is that a normal monthly rate or a normal quarterly rate?
It's a normal monthly rate. The intangible assets for customer relations is SEK 800 million in the PPA, and that makes it SEK 6. If you take that over 10 years, it's SEK 6.6 something every month.
Okay. Thank you. Regarding MECA, is it possible to say anything about this quarter and how much actually the proprietary workshops did impact the margin? Perhaps also versus Q2. Also whether or not you've seen in that aspect, if it was the summer months or the warm summer months that hampered earnings in the fully-owned workshops. Has that come back in the beginning of Q4 to a more normal profitability for the workshops?
Well, first question, I think the reasons for what we see in MECA is exactly as you described, it's the warm summer and that we have more competition on workshops. I can't comment on October, but as I said, we saw a much better market already in September. That should also mean that the effects from the competition on workshops is not that significant, at least in September.
Okay. You're mentioning also purchasing prices being higher due to FX and so on. What is the lag here in terms of your own price increases because you tend to push that forward in your prices?
It's almost impossible to answer on that question. We try to keep the lag as short as possible. We also want to have good, let's say, we always need to see how the market is developing and what are possibilities. We made some price increases in the beginning of the year, which helped somewhat. During the year, we analyze every day, week, and month. We've analyzed different categories and different products, and we will evaluate if it's needed to have another more general price increase in the beginning of the year. It's no such decision taken yet. We also need to follow the currency development and see how it's going on forward. At the moment, it's quite stable at this level, anyways.
Okay. Regarding your balance sheet now and the loan structure as the share issue is completed and the bridge loan is paid back and so on. First of all, will there be any one-offs in the net financials in Q4 related to the bridge financing or anything like that? Secondly, what is the run rate, call you could say, on a monthly basis then now when the new financing structure is in place and the balance sheet has been sort of changed with the share issue?
Your first question is if there will be any one-offs from the debt structure, the answer is yes, it could. The great item you have this quarter is from the revaluation of the debt, the bridges, and they are all in EUR and will not be representative going forward. There was a high debt when we ended the quarter, and the EUR moved a lot towards the SEK. Therefore, we have this big one-off in Q3. We have lower loans now in EUR, but we have still loan in EUR. That could be one-off in Q4 as well, we are looking over our debt structure and if we should hedge in according to cash flow or equity or how we should handle the debt structure going forward. This is something we discuss currently within the board. In Q4 it could be some one-offs. Yes.
The normal run rate then if we exclude the effects and these kind of items?
Well, since we not give prognosis for coming quarters, I pass on that one right now.
Okay. Thank you. From me.
Ladies and gentlemen, if you would like to ask a question, please press star one on your telephone keypad. Thank you. Ladies and gentlemen, there's nobody in the queue at the moment. If you would like to ask a question, please press star one now. Thank you. I will hand the call back to you. Thank you.
Thank you. Thank you all for listening from us. Goodbye.
Goodbye.
Thank you for joining today's conference. You may now replace the handset to end this call. Thank you.