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Mekonomen: Interim report January - March 2021

Interim report January 1-March 31, 2021

  • Net sales increased 4 percent to SEK 3,001 M (2,874). Organic growth was 10 percent. Net sales were negatively impacted 4 percent due to currency effects.
  • Adjusted EBIT amounted to SEK 224 M (98) and the adjusted EBIT margin was 7 percent (3).
  • EBIT totaled SEK 186 M (59) and the EBIT margin was 6 percent (2). EBIT was not impacted by any items affecting comparability during the quarter.
  • Earnings per share, before and after dilution, amounted to SEK 1.85 (neg: 0.29).
  • Cash flow from operating activities amounted to SEK 179 M (62).
  • Net debt was SEK 2,733 M (3,928) at the end of the period, compared with SEK 2,673 M at December 31, 2020.
  • Restrictions related to covid-19 impacted the quarter, the comparative period was negatively impacted by the outbreak of covid-19 and the data breach.
  • New financing through the issuance of a senior unsecured bond of SEK 1.25 billion.
  • Capital markets day was held on February 25, where an updated strategy for achieving the long-term financial goals was presented.

Strong organic growth and increased profitability

We began 2021 with strong organic growth, increased profitability and a strong cash flow. The market was characterized by stable demand for our products and services in the first quarter. Covid-19 has had some impact through severe restrictions in several of our markets and generally fewer vehicle kilometers driven. We have further strengthened our financial position through new financing and a maintained low net debt/equity ratio. We continued to develop attractive solutions for our customers and partners with the launch of simple and predictable service agreements in Mekonomen Sweden and a new standard for electric car service in all of our markets. Overall, Mekonomen Group has a unique position - and I am convinced that the timeless need for mobility gives us great opportunities for continued profitable growth.

Strong organic growth in a weak market
We have reached strong organic net sales growth of 10 percent for the first quarter, with clear effects of our efforts to stimulate sales. Currency effects had a negative impact on growth of 4 percent. Market development benefited from a slightly colder winter, but was adversely affected by the continuing severe restrictions in the wake of covid-19 in several of our markets, with closed branches and fewer kilometers driven by the vehicle fleet as a consequence. A shortage of certain components and disruptions in supply chains had some impact on the market development. We benefited from being proactive in purchasing and from our strong relationships with suppliers, which ensured good access to spare parts and accessories, as well as an opportunity to accumulate some stock during the quarter. We expect underlying demand for our products and services to remain favorable, even if market developments and the supply of goods are difficult to assess in the short term.

Continued improvements in profitability
Strong growth and a focused effort to reduce our costs have resulted in continued improvements in profitability during the first quarter. EBIT increased to SEK 186 M (59) and the EBIT margin to 6 percent (2). The year-earlier quarter was adversely impacted by both covid-19 and the data breach the MECA/Mekonomen business area experienced in spring 2020. The robust initiatives and structural measures we implemented last year had a clear positive impact on profitability for the quarter. The gross margin improved to 44.7 percent (44.0), with positive contributions from the previously implemented currency-related price increases and a strengthened Swedish and Norwegian krona. Changes to the product mix with a higher share of seasonal sales, such as starter batteries and loading equipment with lower margins, had a negative impact on gross margin.

New financing and stronger financial position
It is gratifying to see that we diversified and extended our financing during the quarter through the issue of a senior unsecured bond of SEK 1.25 billion maturing in 2026. I consider the major interest as confirmation that the capital markets have confidence in Mekonomen Group and our business model. This financing strengthens our financial position and extends our debt maturity structure, which allows us to focus our core business and deliver on our strategy. During the quarter, our cash flow from operating activities improved to SEK 179 M (62) and our cash and cash equivalents increased. Net debt relative to EBITDA decreased to 2.3 times (4.4) at the end of the quarter, which is within our strategic target range and offers an adequate margin to
our covenants.

Well-attended capital markets day
At the end of February, we held a well-attended digital capital markets day, where we explained our strategy and position as an enabler of mobility. The overall goal is to reach sales of SEK 15 billion and adjusted EBIT of SEK 1.5 billion by 2025. The strategy is based on our four focus areas: operational excellence, concept development for workshops, new customer solutions for car owners and new revenue streams. Together, they form the foundation for our digital and sustainable transformation, where we can make full use of the trend towards greener vehicle technology and new customer behaviors. Everything we do is permeated by a sustainable perspective.  

Attractive solutions for continued growth
In line with the strategy, we are working intensively in our focus areas to identify attractive solutions for our customers and workshops. During the first quarter, Mekonomen launched a new service agreement for Swedish car owners, with clear pricing and simple conditions. The offering makes car ownership easy and predictable, with a competitive fixed monthly fee with no surprises, regardless of whether you drive a new car or one that has been on the road for some time. Another example is the start of the transition to manage a growing number of electric cars, a market where we are pro-actively establishing clear industry standards and enabling workshops. During the quarter Mekonomen Group launched a new standard for electric car service, E+, which guarantees that workshops have theright expertise and equipment to take care of these cars. Our goal is to have 1,500 electric car workshops that meet these requirements
already next year.

Good position for tomorrow's market
I am proud to say that we can look back on another strong quarter. Mekonomen Group today has a leading position in the market
and through our updated strategy, we are now increasing the pace of transformation towards an even more sustainable and profitable
company. Our goal is clear: We will be the best and broadest partner for everyone that services and maintains cars in our markets -
today and in the future. We are well equipped for continued long-term and profitable growth.

Pehr Oscarson
President and CEO


This information is such information that Mekonomen AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Market Act. The information was submitted for publication, through the agency of the contact person set out above, at 7:30 a.m CET on May 7, 2021.
The interim report is published in Swedish and English. The Swedish version is the original version and has been translated into English.

Författare Cision