Company announcement no. 4 2018/19 Allerød, 22 August 2018

Interim report – Q1 2018/19

(1 April – 30 June 2018)

Digital build-up drives growth in sales and footfall in Q1 

“The 2018/19 financial year has started off on a strong note with increased footfall and growing sales. In total, 120,000 more transactions were completed compared to Q1 last year, and growth was driven primarily by the digital initiatives launched in respect of matas.dk at the beginning of the calendar year. In addition, the sunny summer triggered a strong increase in sunscreen sales. The quarter also benefitted from a positive calendar effect. Revenue for the first quarter of the financial year was DKK 843.8 million, a year-on-year increase of 1.6%. Underlying like-for-like revenue growth was 1.1%”, says Gregers Wedell-Wedellsborg, CEO of Matas A/S, and adds:

“Due to one-off severance costs in connection with a management reshuffle, the Q1 profit after tax was slightly down on Q1 2017/18, while the EBITDA margin adjusted for exceptional items was in line with the first quarter of 2017/18.

At the beginning of the year, we launched the Matas 4D digital growth plan, setting out, among other things, to make shopping on matas.dk faster and easier. As part of this plan, we have introduced nationwide next day delivery, while in Greater Copenhagen we offer same day delivery for orders placed by 3 p.m. Our customers have really responded well to this initiative, and online sales grew by 50% in the past quarter.

Customers have also embraced our measures to add competitive power, including ‘Fair prices’ on a selection of everyday products. Mass Beauty sales grew by 0.4% in the past quarter, supported by the relaunch of the Sun Stripes range and the introduction of a green sunblock series within the Matas Natur range.”

Q1 2018/19 highlights

  • Management presented the Group’s updated strategy going forward to 2023, “A renewed Matas”, at its capital markets day on 30 May 2018, which was held in connection with the presentation of the Group’s financial statements for financial year 2017/18. The work to implement the strategy is progressing according to plan, and a range of measures was launched in the first quarter to enhance customer satisfaction, grow revenue and sustain earnings.
  • Q1 2018/19 revenue came to DKK 843.8 million, up 1.6% on the DKK 830.8 million reported for Q1 2017/18 (restated, see note 1). Underlying like-for-like sales, i.e. sales in stores operated by the Group in both Q1 2018/19 and Q1 2017/18, were up by 1.1% in Q1 2018/19. The positive calendar effect contributed with around 0.5% of the underlying growth in sales.
  • Revenue was supported by increased sales in all shops-in-shop except the MediCare shop, which reported unchanged sales. The High-End Beauty and Vital segments reported the strongest sales growth. The average basket size grew by 1.6% to DKK 157.6, and the number of transactions was up by 2.3% from 5.2 million in Q1 2017/18 to 5.3 million in Q1 2018/19.
  • Online sales were up by 50% year-on-year. More than half of all orders were picked up at a Matas store.
  • The Vital and High-End Beauty segments performed satisfactorily, reporting sales growth of 7.4% and 4.5%, respectively. Supported by higher sunblock sales, Mass Beauty revenue was slightly up on the year-earlier period.
  • Q1 2018/19 gross profit was DKK 381.7 million, taking the gross margin to 45.2%, a slight 0.4 percentage point decline from 45.6% in Q1 2017/18.
  • Total costs increased by DKK 5.8 million relative to the year-earlier period. Adjusted for non-recurring costs incurred in connection with a management reshuffle etc., costs were up by DKK 0.8 million.
  • Q1 2018/19 EBITDA came to DKK 133.3 million for an EBITDA margin of 15.8%, as compared with 16.4% for Q1 2017/18. The EBITA margin was driven down by exceptional items in the form of the above-mentioned non-recurring costs in connection with the management reshuffle.
  • Q1 2018/19 EBITDA before exceptional items came to DKK 138.3 million for an EBITDA margin of 16.4%, unchanged relative to Q1 2017/18.
  • Q1 profit after tax was DKK 70.8 million, and Adjusted profit after tax net of amortisation not related to software and exceptional items was DKK 89.7 million, compared with DKK 74.0 million and DKK 88.9 million, respectively, in Q1 2017/18.
  • Cash generated from operations grew to DKK 105.3 million in Q1 2018/19 from DKK 76.7 million in the year-earlier period. The free cash flow was an inflow of DKK 72.9 million against an inflow of DKK 33.3 million in Q1 2017/18.
  • Gross debt stood at DKK 1,593.7 million at 30 June 2018. Net interest-bearing debt was DKK 1,399.4 million at 30 June 2018, equivalent to 2.5x LTM EBITDA before exceptional items and unchanged relative to the end of Q1 2017/18.

Outlook

We reiterate our guidance for financial year 2018/19:

  • Underlying revenue unchanged relative to 2017/18 (like-for-like growth in the -1% – 1% range).
  • An EBITDA margin above 14.5%.
  • CAPEX between DKK 110 million and DKK 130 million.

Our financial guidance for 2018/19 is based on assumptions of slightly growing consumer spending, a continuing decline in physical store footfall and persistently intensive competition in the health, beauty and personal care market.

Our guidance includes costs for implementing Matas’s growth strategy.

The 2018/19 financial year contains an extra trading day compared to FY 2017/18, which is expected to have a slightly positive effect on revenue.

 

Conference call

Matas will host a conference call for investors and analysts on Wednesday, 22 August 2018 at 10:00 a.m. The conference call and presentation can be accessed on our investor website: www.investor.en.matas.dk.

Conference call access numbers for investors and analysts: DK                                                     +45 35 15 81 21 UK:                                                    +44 (0)330 336 9411 US:                                                    +1 929-477-0402 Event code:                                     3298039

Link to webcast:                             https://edge.media-server.com/m6/p/w5q3r742

Contacts

Gregers Wedell-Wedellsborg                                                             Anders T. Skole-Sørensen                                            CEO, tel +45 48 16 55 55                                                                     CFO, tel +45 48 16 55 55               

Elisabeth Toftmann Klintholm                                                                Head of Investor Relations & Corp. Affairs, tel +45 48 16 55 48     

Forward-looking statements

This interim report contains statements relating to the future, including statements regarding the Matas Group's future operating results, financial position, cash flows, business strategy and future targets. Such statements are based on management’s reasonable expectations and forecasts at the time of release of the interim report. Forward-looking statements are subject to risks and uncertainties and a number of other factors, many of which are beyond the Matas Group's control. This may have the effect that actual results may differ significantly from the expectations expressed in the interim report. Without being exhaustive, such factors include general economic and commercial factors, including market and competitive conditions, supplier issues and financial and regulatory issues.

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