Welcome to the Synsam Q2 presentation. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star 5 on their telephone keypad. Now, I will hand the conference over to the speakers. CFO, Per Hedblom, Deputy CEO, and Chief Innovation Officer, Martin Daniels. Please go ahead.
Thank you. Good day, everyone, and welcome to Synsam's Q2 2023 report presentation. In summary, Synsam has had a very strong quarter, reporting record sales and earnings for an individual single quarter ever. Very good momentum across all countries, all four countries growing and improving profitability versus last year, and very promising to see that after a couple of quarters, we have now achieved the financial targets, and that is very promising. Lifestyle continues to be a strong driver of growth and success for Synsam. We're seeing strong intake of new customers and also the lowest churn rate we've seen since 2020.
Synsam is continuing to take market share, drive growth and top line, and combining that with an improved efficiency, both on the store level and operational terms, and also a cost and restructuring program, which helps us translate that growth into improved profitability. Deep diving a bit in the high-level figures, we saw net sales of close to SEK 1.6 billion during the quarter, which is an increase of 12% compared to last year. The gross margin improved and reached 74%. Strong organic growth and a like-for-like of 7%. As I mentioned, the cost efficiency initiatives have improved the EBITDA to SEK 401 million, and in terms of margin, increased that to 25.3% versus 24.5% last year.
It's also falling down into earnings per share, which is much better than last, last year. Looking at the segment split, all four countries had strong growth during the quarter. Some differences, of course, in terms of levels. Last quarter, as you may recall, Norway had a slightly lower performance than what we expect. It's glad to see that it's now a very strong performance from Norway. Sweden continues to be strong, and Finland, massive growth continuing quarter by quarter. Denmark also growing in a very tough market, and all four countries reporting stronger or higher EBITDA compared to last year. All in all, a very strong performance across the board. Going into the offering product split, Lifestyle, of course, continues to be a strong, important concept that customers are appreciating.
We saw this growing by 14% compared to last year. As you can see, it is growth across all four countries. Lifestyle now represents more than half of the total net sales of the company. As you've seen in the previous quarters, we've been growing the net number of active subscribers by some 30,000 each quarter for the last couple of years. That continues also this quarter, and that is also paired with the lowest churn rate we've seen in an individual quarter in the last 3 calendar years, at 1.86%. That tells us that the subscription model continues to be strong and attractive, even in terms of economic uncertainty, and in terms of retention, even better this quarter than it's been in the previous quarters and years.
That is the so-called Lifestyle subscription. We also have, as you, as you recall, the pure Contact Lens subscription, which is also continuing to grow year on year and contributing to loyalty and also sales for Synsam. As we mentioned, of course, category gross margin varies a bit. This category has somewhat lower gross margin compared to the overall Synsam business. Strong drivers of like-for-like in these existing stores, and as we mentioned before, the new store rollout plan that we've actively been working on is also a very positive and well-functioning initiative. As you see here, we've started to follow selected stores, as you may recall from, from the previous quarter.
It's, it's good to see that both in big cities, so-called, so-called mega or, or flagship stores, we see strong EBTA, and also in smaller cities, in a, in a stores like Synsam Söderköping, which has only been open for, for four months, we see a, a very strong EBTA margin. That will, will of course be the, the, the future plan going forward will contain a mix of not only big cities, but a lot of smaller cities, where even though the total sales might be somewhat less than a flagship or mega store, the EBTA margin and the ability to, to win in the local marketplace is, is very strong.
To put that new store rollout a bit in perspective, looking back, when Synsam started the transformation in 2015, we had 498 stores, directly owned and also franchise stores. Actually, when we compare it to where we are, at the end of this quarter, we've only added 38 stores in total compared to 8 years ago, which means that we've been able to shift a lot of franchise stores to new stores, and the, the level of rollout has actually not been that aggressive. More importantly, on the right-hand side, we've seen, we've been able to deliver a very strong growth in that store network, and also a very strong growth in profitability.
What we're doing is not only opening new stores, but also improving the existing stores, expanding some areas, and also relocating stores to, to better locations. As other retailers are struggling, we're getting into more attractive spaces. As you can see here on the, on the left-hand side, the old Synsam, in a, in a, mall and a very visible right-hand side picture of, of an exterior of, of one of our new stores. We see that there's a lot of white space in the Nordic market, and our ambition to roll out an additional 90 stores in the years 2024 to 2026 remains, and we're seeing that we're able to grow these stores to profitability quickly, and we see a significant potential going forward with this initiative. With that, I hand over to Per to go through the financial development.
Thank you, Martin. Just reiterating what was mentioned previously, we had had a strong growth in the quarter, 12% normal growth. I want to highlight, though, the growth in our profit growth, EBTA, 15.5% increase, and EBITDA, 14.7% increase faster than sales there by resulting in a higher margin. Martin mentioned the EBTA margin. we have EBITDA margin increasing from 15.8 to 16.2%. So, it's a quarter where we have improved on, on relevant parameters in the income statement. want to highlight the like-for-like growth, 7%.
You could see, of course, when we talked about the, the different segments that we grow or grow in each segments, of course, we have a strong like-for-like growth as well, but in the group, and it's a combined organic growth and 12% net sales growth, it's a strong quarter. Also want to highlight the stable gross margin. We have 74%, compared to 73.7% last Q2. Q2 being affected always by sun, more or less. It's a relevant comparison with Q2 last year, and we have achieved this gross margin, although there's been, of course, high inflation, and the measures we put in place from end of last year has worked and, of course, contributed, the stable gross margin has, of course, contributed to our result.
The cost and restructuring program is developing according to plan, and this purpose of this program is to balance out the increase in OpEx, and to some extent, the increase in interest cost. We have achieved the savings enabled, which then reduce the impact of the high inflation, which is important. This program is continuing according to plan, and we stick with our goals for 2023 and 2024. Even more important is that we have started, this is a reduction program one point zero, and we have started now cost reduction program two point zero, which will provide additional effects in 2024. This is being developed as we speak, and that will, of course, help us mitigate any further cost inflation. That's important for us to be even more streamlined.
Long term, we've had a strong financial development, growth-wise, of course, as you can see, growing by every year more than 10%, part, of course, from the pandemic year, and 13% increase versus LTM Q2 versus previous years LTM. We also see now an increase in profitability, so we are 12.95 EBITDA LTM, and also EBITDA is increasing once again. a quarter and sort of also an LTM development which points in the right direction. That's promising and also, of course, help us regarding cash flow, because that supports profitability is one part of cash flow. Cash flow in total has been positive, and we have increased cash flow from operating activities to SEK 386 compared to SEK 345 for the Q2.
The investment activity has been, according to plan, somewhat lower in the quarter and during the half year, since we have reduced establishment of new stores. We are rather focused on, on upgrading and moving stores during the quarter and the H1. We had 37 new store openings in 2022; we saw an opportunity to actually focus more on upgrading and moving stores during this Q2 and half year. That has also helped us reduce investments. Also, compared to last quarter a year ago, we do not have the same kind of investment activity in Östersund. We built up our production facility last year. According to plan, we're moving, we have reduced CapEx, which is good, help us cash flow-wise.
It's important to note that we have paid our dividend SEK 253 million during the quarter. Even though we've done that, we have a stable net debt, IFRS 16, of SEK 2.985 billion, and that's very stable compared to year, and although we have paid dividends, of course. This, IFRS 16 net debt is, as you know, inc- that includes the effect from, from, from these contracts for premises and so forth. Strong cash flow in addition to good development of profitability and sales. By that, I hand over to Martin again.
Thanks, Per. Yes, to summarize then, the, the key findings from the quarter, very good for us to see that the sales growth continues to be strong and that we are able to translate that into, as Per mentioned, an even better growth in, in our earnings. Also promising to see that during the quarter, all four segments both continued to grow and improved the EBITDA. Strong cash flow during the quarter, from continued operating strong cash flow and efficient investment allocations. We're achieving the financial targets. Good to see that we are now above the 25% EBITDA, which we mentioned a few quarters ago, was the plan to first get back to. Lifestyle and import, one of the important concepts that we have in the market continues to be attractive for consumers.
Despite the economic uncertainty, we're actually seeing the churn being the lowest in the measurable period since 2020, which is very good. We're seeing good customer retention. We're also seeing the efficiency initiatives, both in terms of store operations and also cost control, translating to strong EBITDA profitability. Our initiatives to meet consumer needs, changing slightly through a focus on lower price points and price guarantee is paying off. We're seeing good customer traffic, and as we said, the cost reduction program one point zero is, has, has had an impact.
... and, most importantly, we're seeing that we're continuing to gain market share, grow the number of Lifestyle subscribers, and being able to maintain them. That translates into good performance and a good outlook going forward. With that summary, we open up for a Q&A session.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Veronika Dubajova from Citi. Please go ahead.
Hi, guys. Good morning, and thank you for taking my questions. I have three, please. One, just, just curious, Per, obviously, given where the margin is already in the H1 of the year, what your thoughts are around seasonality? Is there anything unusual we should be factoring in to as we think about the H2? Are there any unusual expenses or mix that we should be bearing in mind? I'm just looking at, you know, where you are year to date versus the expectations that I think consensus has for the full year, and it would certainly, given the strong performance year to date, imply some pretty meaningful margin deterioration in the back half of the year, which has not been the case historically. That's, that's my first question.
My second question is on the new, cost restructuring program, the 2.0. Curious, should we be reading this as a sign from you that you expect the inflationary headwinds to remain elevated as we head into 2024? Any initial thoughts on the size, and, you know, what are some of the areas that you are exploring here? Then I have a follow-up after that, but maybe we can get these two out of the way first.
Yeah. I'll try to answer. I hope I, I got, I, I will answer sort of all aspects of your questions, otherwise, please remind me. With the gross margin, yes, I mean, there is, now, well, yeah, it's a seasonality in the Q2, and that's nothing new. That happens every year because the sun season affects the Q2 very much every year, but it differs from year to year, of course, but that's why it's important to compare Q2 with Q2. That's one thing. We...
That being said, I mean, we, I mean, if you look at the components of that gross margin, we have had higher purchasing costs due to the inflation environment, but we have acted upon this from end of last year. As you may recall, we waited with, with price adjustments, and then we took measures at the end of last year, and this has been necessary, and such actions as, of course, helped us to mitigate the purchasing cost increase. We also, we also have mixed effects. Of course, the contact lens subscription effects to some extent, not very much, but it has a lower gross margin than the group in total. We like the lens, the contact lens subscription business anyway because it's quite OpEx efficient.
If you look specifically gross margin, that's a negative mix effect. But otherwise, I would say, I mean, we, we not giving forecasts for, for the full year, but, I mean, we, we. Last year, we, we didn't take any action during Q, which impacted Q3 regarding price adjustments. As you know, this started in Q4 last year, now we, we have a process where we act upon this in a very precise way. That's a difference between last year and now, I would say. But I mean. Otherwise, it's difficult to speculate on the inflation development. We, we maybe you are more than expert than we are regarding the general inflation environment.
That's quite difficult to forecast, of course. If you look at the cost program, I mean, when we say, I mean, we need, I mean, although we cannot make forecasts on inflation, how the inflation will develop in the world, but we need to be prepared for continued high inflation. And interest costs, of course. That's why we are adding this two-point zero cost program in addition to the one point zero, which we are communicating now, which is developing according to plan. That two point zero program, it's, I mean, structurally, it's quite similar to the one point zero.
I mean, the one point zero contains most element of OpEx, where personnel cost is one important part, but where we look at all small details that make up OpEx. That's what we are doing here as well. I mean, we have learned during the one point zero process to how to identify even more areas that we could be somewhat more efficient. I would say we are digging somewhat deeper. We are looking at new areas, and which will affect most part of OpEx, I would say, where personnel cost is one area, but not the only area.
It has begun indeed, and it will give effect 2024, but it's ongoing, so that's why we choose not to communicate the effect at this stage. It's very much to, to, balance out, future cost increases, in case inflation would continue, inflation rate would continue.
That
I hope that answers some of your questions, at least. Hope that.
Yeah. I actually, my, my question on the margin was not really on gross margin, but it was on EBITDA margin.
If I look at you have a 24% EBITDA margin year to date. Normally, if I look at the history of your business, the H2 margin tends to be pretty similar to the H1. In fact, in some of the prior years, the H2 margin was better than the H1 margin. I'm just looking at that 24% EBITDA margin you've delivered year to date and comparing that with sort of the 23 that I think consensus has. My question was really, is there something unusual this year about Q2 or something unusual about the H2 of the year that means we shouldn't look at that historical seasonality in terms of margin progression through the year?
No. I, I, I would say. Well, I, I, I, it's basically what the, the, the, the Q2 I mean, this is obvious. We have, but I therefore I repeat it, because that, that might not be remembered. We, we, we, we took costs of 30 plus, I think it was like SEK 34 million in Q4, ahead of the one point zero, Q4 2022. As, as restructure, sort of preparation, I would say, preparation costs. These weren't-- I mean, this didn't, we call-- this won't qualify as sort of true one-offs because we didn't, we didn't adjustment them in the EBITDA. They were-- I mean, they, they affected all parts of EBITDA.
That being said, we said that these were costs that we took in Q4 2022, around SEK 34, if I remember right, so that we could deliver efficiently on the one point zero cost program. These SEK 34 will not appear again this year. That we have said several times, and I repeat that. That, of course, you could look at that as, as being unusual then, if you want to. Yeah.
If I may just add one thing, Veronika. As Per mentioned during the financial deep dive, we opened more stores last year compared to what we've done this year so far. There are, there are sort of, fewer stores in, in the immediate initial ramp-up phase, which, which could, theoretically, have, have reduced the EBITDA margin slightly. That's also a difference from check compared to last year.
Okay. No, that's very clear. Actually, that was going to be my, my final question for you, Martin, which is, I, I know you're sticking to the 90 stores between 2024 and 2026, but I wonder if you can give us a little bit your thoughts on the 2023 store opening number and what you think that might look like. Obviously, you have pretty good visibility into your plans for the rest of the year, so maybe just give us some steer on what the number we should be expecting for 2023 in terms of new stores.
That's my final question.
Yeah, as a gen-- I mean, generally, I mean, we said that the H1 would be a period when we looked more at upgrades and moving stores rather than new stores. If you look at the H2, I mean, we have more stores in the pipeline that will be openings. I mean, it's reasonable to assume that there will be more store openings in the H2. Some have already started, actually. That being said, we want to be-- we want to act in a smart way and not opening stores just to reach a certain number.
Whenever we see that it's a better business proposition for us to, to focus on, on moving or upgrading a store instead of rushing and, and, and opening a new store just to get a certain number of stores, we will choose what is most commercial attractive for us at each point. We want to rush or sort of dramatically increase the number of store openings 23, just to, to, to reach a certain number. We will do what is smartest for the business and for our customers in as a whole. I repeat, we have somewhat more stores in the pipeline now in the H2 than we had in the H1. Yeah.
Okay. Thank you, guys.
As a reminder, if you wish to ask a question, please dial star 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Well, thanks for listening in. We look forward to meeting you next time. Bye-bye.
Thank you very much. Thank you.