Mekonomen: Interim report January - June 2016

SEGELTORP, Sweden--()--Regulatory News:

SUMMARY FOR THE SECOND QUARTER, 1 April - 30 June 2016 1)

  • Revenue increased 3 per cent to SEK 1,573 M (1,527). Excluding the acquisition of Opus Equipment, revenue rose 1 per cent. Adjusted for currency effects and calculated on the comparable number of workdays, revenue increased 3 per cent. Sales in comparable units rose 6 per cent.
  • EBITA amounted to SEK 189 M (224) and the EBITA margin amounted to 12 per cent (15).
  • EBIT amounted to SEK 161 M (197) and the EBIT margin amounted to 10 per cent (13). MECA’s export business to Denmark had a negative impact of SEK 4 M (neg: 10) on EBIT. EBIT was negatively impacted by non-recurring effects of SEK 9 M (neg: 1), of which SEK 7 M (0) impacted the gross margin.
  • The gross margin amounted to 53.6 per cent (54.7).
  • Earnings per share, before and after dilution, amounted to SEK 3.02 (3.74).
  • Cash flow from operating activities rose to SEK 228 M (137), of which discontinued operations comprised a negative SEK 2 (neg: 45).
  • Net debt at the end of the period amounted to SEK 1,684 M (1,841), compared with SEK 1,626 M at year-end.

1) During the first quarter of 2015, the last two stores in Denmark were discontinued and the Danish store operations are presented in the 2015-2016 interim reports according to the rules on discontinued operations in IFRS 5. The Danish store operations were previously included in the MECA segment. With the exception of cash flow and net debt, all amounts pertain to continuing operations.

CEO’s comments

The Group continued to grow but the result was burdened by Mekonomen Sweden

The result in the second quarter did not meet our expectations, mainly due to weak profitability in Mekonomen, while MECA and Sørensen og Balchen had a good development in the period. During a period characterised by reorganisation and system changes, Mekonomen Sweden lost revenue and market share and reported a weak gross margin. A package of measures is launched to increase sales and reduce costs. The weakened NOK has also contributed to negative effect on the Group’s profit in the quarter. EBIT for the quarter was SEK 161 M, compared with SEK 197 M in the second quarter 2015.

We see potential for a growing overall market. For Mekonomen Group, the main potential for a stronger market is linked to a growing fleet of cars aged three years and older when the cars enter and become part of our core business model. The growing fleet of cars and completion of changes initiated in Mekonomen Group, particularly those linked to the Swedish operations and the announced group-wide structure projects, provide a solid platform for future profitable growth.

Favourable underlying growth

Mekonomen Group’s total sales rose 3 per cent in the second quarter. Sales in comparable units increased 6 per cent, primarily driven by sales to affiliated workshops. The sales development was particularly strong in MECA’s Swedish and Norwegian operations. Sales of spare parts from our proprietary brand ProMeister continued to perform positively during the quarter.

Mekonomen Sweden affected by organisational changes

The work with the organisational change and the new store data system, initiated at the end of 2015, has not produced the desired effect. This work has taken much energy and negatively impacted sales, resulting in Mekonomen Sweden reporting negative underlying sales growth for the quarter. Now we take powerful action to deal with the changes that we want to implement. We are convinced that the new working methods of increased local responsibility and presence among customers is the right model for the future with the aim to increase the sales.

In parallel with the completion of the organisational change, we also implement an efficiency and cost-rationalisation program for Mekonomen Sweden which is expected to generate annual savings of SEK 25 M from 2017. The cost of the program is expected to have only a marginal impact on EBIT for 2016.

Reduced loss in Denmark

Our focus to cost efficiently driving increased sales in Denmark continued and the loss in the second quarter fell to SEK 4 M. The loss has more than halved since year-end 2015 but it is never satisfying with a loss and we are working impatiently ahead with turning the business.

Focus on profitable growth and innovation

In the second half of 2016 is the growth continued our most important focus area and we see the greatest potential for increased sales in our core business with workshops and other B2B customers. Prioritised is also the implementation of the saving program in Mekonomen Sweden and in longer term the efficiencies to be achieved with the new central warehouse structure.

In Sweden, personal car leasing have had a strong development and the automotive industry itself believes that the proportion of personal leased cars, as part of new car sales, can be as much as 50 per cent by end of the year. Thus, Mekonomen Group chooses becoming the first player in our industry from the independent side to launch our own offer directly to end users, Mekonomen Car Leasing.

I have great reliance to Mekonomen Group is on track with the ongoing change process and in combination with favourable market conditions going forward, I am confident about the future.

Magnus Johansson

President and CEO

This information is information that Mekonomen AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Markets Act. The information was submitted for publication, through the agency of the contact person set out above, at 07:30 a.m CET on 26 August 2016.

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Contacts

Mekonomen AB
Magnus Johansson, +46 (0)8-464 00 00
President and CEO
or
Per Hedblom, +46 (0)8-464 00 00
CFO

Contacts

Mekonomen AB
Magnus Johansson, +46 (0)8-464 00 00
President and CEO
or
Per Hedblom, +46 (0)8-464 00 00
CFO