Hello, and Welcome to the RugVista Group Audiocast with Teleconference Fourth Quarter 2021. Throughout the call, all participants will be in listen-only mode, and afterwards there will be a question and answer session. Just to remind you, this conference call is being recorded. Today, I am pleased to present Michael Lindskog, Chief Executive Officer. Please go ahead with your meeting.
Thank you very much. Welcome everybody to our year-end earnings call. We're glad that you're all here. It's myself, Michael, and Henrik. If we move to the first page, just to kick it off. Really what we had in terms of 2021 was is really a year where we had a solid end to an exceptional year to speak plainly. I think some of the key messages is really that the financial performance of course was quite outstanding. We achieved all-time highs across multiple metrics.
The 705 or even 706 in net revenues and the adjusted EBIT was 138, of course, is a tremendous achievement for us as an organization. The Q4 numbers, of course, were a bit challenging to beat when we had a really strong Q4 last year. The fact that we ended with a 7% organic growth rate is quite pleasing. Of course, continued solid EBIT margin of about 18.4%.
In terms of the challenges during Q4, the market conditions remained challenging, similar to what we spoke about, especially in Q3. What we saw was continued high activity from across all ad formats, to be quite honest, in terms of both new players in addition to also existing players being quite aggressive and as well as advertisers from other categories seeking the attention from the consumer. All of those factors in combination made the marketing investments that we did significantly more costly versus last year.
That in combination with, I would say, unpredictable and volatile consumer demand, we had a situation where, since we're quite geographically spread across Europe, the way governments were kind of treating the Omicron phase of the COVID pandemic was very different. It's quite challenging to predict how a given market or a given consumer segment would react. We really had to be on our toes throughout the quarter in order to execute.
The other thing I think is really that we are extremely happy to continue to receive excellent feedback from our customers. As we mentioned before, that continues to be our top priority. We are very happy also that we during the peak season, even though there were challenges with some carriers, maintained an overall stable satisfaction level. We've alluded previously about some of the key strategic initiatives we've been working on in the background.
Two of the main or very important initiatives started to materialize towards the end of the year with first us introducing RugVista Essentials and then second the very first version of our new RugVista Webshop that we introduced in Croatia. If we move to page four just to a little bit highlight some of the strategic KPIs that we keep monitoring. If we start on the left-hand side of the page, the Net Promoter Score and the Trustpilot value or feedback we get on Trustpilot continues to be outstanding. Essentially, flat for the full year.
In the middle, in terms of how do we measure whether we're increasing our market penetrations, of course, order count is a good measure for that. We managed to grow almost 32.5% in terms of order count during the year. We continue to attract a high number of new customers. Almost 200,000 new customers joining the, let's say, the RugVista family during 2021. That continues to be a very high number, and a number we're pleased with.
If we move to page five. In our reporting throughout the year, we've often mentioned the category mix as a driver for some of our financial metrics. We wanted to give a bit more background to what's going on there. If we kind of start at the top, which is really the average order value, what we see here is it's been relatively flat during the past three years, so around about SEK 3,600 including that.
If we move to the next page, so page six, what we see here is how the category mix has developed during the past three years from sort of the traditional what we call the traditional hand-knotted compared to the what we call the design rugs, which are the ones that are let's say mass-produced. If we start at 2019, we really see there what share the traditional versus the design was from shipped value. This is looking at money, so shipped value compared to 2021. As you can see, it's a more relatively significant shift in the type of products that our consumers buy.
Our offering has been relatively constant during this entire period. What's happening is that the consumers are actually looking for what we call the design rugs versus the traditional rugs. We've also mentioned, and then if you visited our site, you've probably seen that there is a significant price item value price difference between the traditional versus the designs. If we move to page seven and dig a bit deeper into the average item value in actually three different sub-segments. We have design machine made, we have design handmade, and then we have the traditional hand-knotted.
This slide hopefully gives you a bit of a sense in terms of, number one, the price difference between the different subcategories, but also how the average item value has evolved during these past three years. What we can see is actually if looking within each subcategory, the item value is actually increasing overall. However, with the category mix, that of course is somewhat depressing the average order value. Or one can also say that the average item value is sort of helping the average order, the AOV, though, 'cause the items per order has been relatively consistent.
If we move to page eight, also another highlight in terms of the related to our product development efforts and our categories and the assortment we carry is us introducing RugVista Essentials. It's been an effort we've been working hard on during 2021 in terms of, okay, how do we attract those that would start setting up their first home? That historically has been a let's say a wide spot in our assortment 'cause typically as a first-time homemaker the size of your wallet may be somewhat depressed.
We really needed to find an attractive collection of items, which of course is a bit more fashion forward or trend right, is attractively priced, but still has a very good price-quality ratio. With those aspects in mind, we developed RugVista Essentials. This page just gives you a bit of a flavor in terms of some of the styles that we've introduced. The number of SKUs is still early. We're still receiving more deliveries over the next couple of months, so this is just the initial deliveries. You also see that it is a significant effort that the RugVista Essentials constitute. With that being said, I'll hand it over to Henrik.
Thank you, Michael. If you go to page 10, we'll start by having a look at our net revenue development. Starting on the left-hand side, you can see the development for the full year, where we broke through the SEK 700 million net revenue level, ending up, as Michael mentioned, at SEK 705 million, with strong growth across all our three segments. Reported net revenue grew by 25.5%, while organic growth was 36.4%, and thus, we ended up well above our mid- to long-term financial target of having organic growth by approximately 20% per annum. If you look at the middle of the slide, zooming in on Q4, as Michael mentioned, we were facing a quite challenging comparable with growth in Q4 2020 of 57%.
Despite of this, we managed to grow the business organically by 7%, with all segments delivering growth, not least the B2B segment, which grew year-on-year by 19%. On a geographical point of view, on the right-hand side, you can see the development across our regions within the B2C segment. As has been the case for the previous quarters throughout the year, DACH has been our growth engine and remains so in Q4 with a growth of 12.1%. Nordic subtracted by 5.1%, but that was mainly driven by lower average order values, with the order intake only marginally down year-on-year.
Then finally, rest of world, which to a large extent consists of rest of Europe, grew by 6.5%, with France and U.K. continuing its positive development that we've also seen throughout the year. If we move to the next slide, a view on our gross margin development, where in the upper left-hand corner you can see that we for the full year ended at 64.6%, nearly up 3 percentage points compared to 2020. For Q4, which you can see in the chart below, we also saw a marked increase in our gross margin up from 61.2% in 2020 to 64.9% in 2021.
It should be noted, though, as also shown on the slide, that 2 percentage points of that uplift was due to an accrual we've made related to a claim towards the U.K. tax authorities for double VAT we have paid since Brexit went into effect on the first of January. Thus, if we look at a pro forma adjusted gross margin, it was at 62.9%. Still, thus, up by 1.7 percentage points to the previous year. Looking at the right-hand side, you can see the development for Q4 on a segment level. You can see that B2C was the main driver for the improvement in the gross margin, with the gross margin increasing from 61.3% in 2020 to 64.6% in 2021.
The drivers being, the two effects we've also alluded to in previous quarters, being the category mix effect with the shift from traditional towards design rugs and a lower average discount, rates towards our, customers. Finally, also, obviously the impact from the, U.K double VAT, claim accrual. If we go to page 12, then a look at our operating profitability. Starting with the full year, in the middle of the slide, you can see that we ended up with an adjusted EBIT margin of 19.5%, more or less on par with, 2020. As Michael mentioned, we believe this is, quite a significant achievement, having meanwhile grown our top line organically by more than 36%.
For the quarter, as you can see on the right-hand side, we saw a decrease in the adjusted operating margin of 2.6 percentage points, coming from 21% in 2020 to 18.4% in 2021. This decrease was driven by three factors. One is higher other external expenses, which is due to increased marketing investments, which Michael also mentioned. Secondly, we continue to invest in the organization in line with our plans, and thus saw an increase in personnel expenses. Finally, in December 2020, we divested the subsidiary ArtGlass i Malmö AB with the proceeds from that sale contributing positively in 2020 with 1.1 percentage point of net revenue.
Irrespective, despite of the headwinds in the online ad space, we remained a highly profitable business and managed to stay well above our mid to long term financial target of having an EBIT margin above 15%. If we move on to page 13, then a view on our inventory development, where we continued to bolster our inventory, adding SEK 16 million worth of goods during the quarter. This resulted in us being well in line with our target of having inventory as a share of last 12 months net revenue of between 17.5% and 22.5%.
Where on the right-hand side you can see that we started the year at 16.2% and ended up close to 21%, and thus being well positioned to service the demands for the remainder of the ongoing peak season, ending with Q1. Moving on to slide 14, a view on our cash flow and net cash position. As you could see on the previous page, and as we have mentioned in previous earnings calls, inventory heading into 2021 was at the lower end, and thus we've had to invest quite heavily in getting additional goods on stock throughout the year, which naturally has hampered our cash flow generation throughout 2021. Nonetheless, we managed to generate a cash flow from operating activities of nearly SEK 105 million throughout 2021.
As you can see on the right-hand side, we managed to increase our net cash position by SEK 80 million from around SEK 110 million at the beginning of 2021 to nearly SEK 190 million at the end of the year. Moving on to page 15. As a testament to our company's strong cash generation, both historically as well as future expected, and due to the fact that we have no plans of conducting large investments in the near future, the board proposes to pay out a dividend of SEK 2.5 per share.
This is equivalent to approximately 52% of our earnings per share. With that, we more than fulfill the last of our three financial targets for the mid to long term in paying out up to 50% of our net profits to our shareholders. With that, I will hand it back to you, Michael.
Thank you. If we move just to page 16 then for a quick summary before we open up for questions. Again, 2021 was outstanding from a financial performance perspective. All-time high in terms of top line as well as profitability and absolute profits. SEK 138 million in adjusted EBIT is of course a very strong number. We had a challenging Q4 comparable, but despite that, we did manage to deliver 7% organic growth. With maintained profitability despite the ongoing tough market conditions.
The cash generation, as Henrik mentioned, is still very strong, more than SEK 100 million despite the investments in inventory during the year, in addition to us now, or the board proposing a cash dividend or a dividend payout. All of those factors in combination, of course, is a testament to that we are still able to deliver good earnings and cash flow. Personally, I'm also extremely pleased to see that some of the key initiatives are starting to materialize. As we mentioned earlier, RugVista Essentials and important addition to our offering towards the consumer.
Also the very first version of our new website being introduced in Croatia. The new website, of course, will be an extremely important lever for us in terms of how we interact with consumers and how we execute our improved commercial approach moving forward. Finally, if looking into the next year or 2022, we are very well aware of the strong comparable that we're facing in Q1, where last year we had 92% growth. That is of course a very tough number to go up against. Overall, we are working on the right initiatives. We're still very, very confident in the fact that we have the ability to deliver on our mid and long-term financial targets. With that being said, we open it up for questions.
The first question comes from Fredrik Ivarsson from ABG. Please go ahead.
Thank you very much. Good morning, Michael and Henrik. I've got three questions. I'm gonna take them one by one. First one on the Essentials, which presumably attracts some younger people. Do you view these new customers as mostly incremental, or does it sort of cannibalize on your existing customer groups, you would say?
Incremental primarily. That's a little bit what we meant with filling a wide spot in our assortment. We have seen if we you know we have some estimates in terms of the age distribution on our sales, and we've seen that there has been an opportunity for us to attract that somewhat younger consumer better than we have.
Perfect. Do you see any other white spots, and do you have any new collections that you currently work on that we will see during 2022, you think?
Yeah. I mean, part of our historical, let's say, value proposition and then also something we're continuously evolving is our product expertise. That is, you know, one of the key reasons consumers come to us, and we want to ensure that we have something for everybody. That means, of course, yeah, with the RugVista Essentials, having some good selection for those with a slightly, let's say, slightly smaller wallet versus sort of our core assortment historically. There are other opportunities that we're looking at, as well.
Great. Thanks. Second question, on the new website. Can you share any initial learnings from the beta, or the new website? Were you sort of seeing in terms of conversion rates, if you would be willing to talk a bit about that?
Yeah, of course, we have those numbers. I will unfortunately not give any specifics. The reason for that is that the current version of the site is sort of what one would call a technical release. What we've done is a completely new architecture and new code base and we wanted to make sure that all of those things are working. That's the reason the site is live. We're actually not buying any traffic to that site right now. Yes, the conversion rate is up quite a bit.
We're not sort of putting our full marketing machine behind driving traffic to that. Once the site is a bit more mature, we will of course start pushing the sort of go button on marketing investments. Then we can get a more true picture on how it also performs from a sort of consumer-facing perspective. Right now, it's mostly testing and making sure that all of the changes from a technical perspective are working.
Yeah, that's fair enough. Third and last question on current trading, and I appreciate that you can't say too much, but maybe if you could talk a bit about the overall landscape and if you've seen any big changes from Q4, because I think we've heard a few e-com players complaining about lower traffic, so would be interesting to hear what you guys see.
Yeah, I mean, we don't have a completely different perspective on those topics. Like we mentioned regarding sort of the trading environment in Q4, it was rather choppy to a certain degree. From my perspective, what's really happened during the COVID pandemic is that more, let's say, the multi-channel players to a certain degree had been forced to be more sophisticated during COVID, because a lot of the store network was closed.
During 2021, you kind of saw, especially towards the second half, the return of the big brand spenders in terms of the automotive industry, et cetera, seeking again the attention of the consumers, which during 2020 they were not around to a large extent.
Okay. Slightly lower traffic in the first half of Q1 versus Q4 in like-for-like terms. That's how I should read your comments?
Yeah. It's still a challenging environment for sure.
Okay. Thank you. That's my questions. Appreciate it.
Thank you.
Thank you. The next question comes from Carl Deijenberg from Carnegie. Please go ahead.
Thank you, operator, and good morning, Henrik and Michael. My first question is on conversion rates and inventories. I mean, you show that slide also that your inventory has improved gradually here throughout 2021. I know that the sourcing environment has been quite volatile for you throughout the year. I'm just curious, how are you feeling in sort of supply situation at this stage now? Do you feel that your inventory levels are fully restored or do you still see some issues on that side?
Overall, we're pleased with where we stand on sort of our in-stock levels and total inventory position. It is in line with sort of the communicated levels. There are, of course, challenges, especially with the delays out of India. Production capacity is essentially up to full capacity, so to speak, where however, the reliability of the transports is still challenging due to the ongoing container capacity constraints, so to speak. Things are overall quite okay, but it doesn't mean that we are not sort of ongoing having to sort of take care of or do firefighting, so to speak.
Okay, very well. Then my second question is on the marketing spend here. You elaborated a bit on it in the beginning of the presentation. I'm just curious, sort of what are you seeing in the marketing space here looking into 2022? Do you see sort of prices on AdWords gradually coming down from what you reported here in Q4? Or do you see sort of a structurally higher base here that we should expect also going into this year compared with 2021?
I mean, excuse me. It's a bit hard to sort of have a perfect crystal ball to this there, but what we have seen is that across categories, to be honest, the multi-channel retailers, of course, during COVID, had to divert more of their investments to their, you know, their online efforts. I think store network was to a large extent closed. That has undoubtedly made those types of players a tad bit more sophisticated.
What will happen moving forward is hard to say with eventually COVID, let's say, COVID restrictions being removed across Europe, then of course that may or may not affect how those players choose to invest their marketing funds. I think I just saw this morning the E-handelsbarometern of course that is you know very Swedish focused, so only a little bit small portion of our or a portion of our business. Giving an indication that e-com was a tad bit down, but the actual share of total offline versus online was actually higher.
The point being that the stickiness of the new customers trying online during the pandemic, I think, will be quite high. Not all first-time online buyers during the pandemic will not stick around online, but we are seeing indications that a large portion of those first-time buyers will continue to buy online even when restrictions are eased.
Okay. Very well. My final question is on current trading here. I'm not gonna ask on development because I think that question's already been addressed. I'm just curious on the monthly demand you saw in Q1 2021. I mean organic growth accelerated quite substantially quarter-over-quarter, but how did that development go on a monthly basis? Was that quite stable in between January to March, or was it sort of at peaks in the beginning of Q1, or how did that develop?
I think what we can say is that we mentioned before that the holiday season for 2020 was quite unusual in terms of the consumer behavior. With essentially no travel and people spending time doing online shopping, that of course did not happen this year and then early 2021. Then if we look at what happened in January and then Q1 2021, some of that residual effect was definitely there during January. I think it kinda got back to a bit more, let's say, somewhat normalized level towards the end of the quarter.
Okay. Very well. I think that was all of my questions, so thank you very much.
Thank you. Ladies and gentlemen, let me remind you again, if you do wish to ask a question, please press zero one on your telephone keypad. Thank you. Once again, if you do wish to ask a question, please press zero one on your telephone keypad. There are no further questions into this conference call.d ear speakers, back to you for the conclusion.
Thank you everybody for the attention and wish you all a wonderful day. Thank you very much.
Ladies and gentlemen, this now concludes our conference call. Thank you all for attending. You may now disconnect your lines.