Matas accelerates the ‘Growing Matas Group’ strategy in record-breaking quarter

Company announcement no. 31 2023/22
Allerød, 10 February 2023

Interim report – 9M 2023/22

(1 April – 31 December 2023)

Matas accelerates the ‘Growing Matas Group’ strategy in record-breaking quarter

• Matas grew revenue by 5.0% to DKK 1,378 million in Q3 2023/22 – a new quarterly record – on the back of growth in both online and physical store sales. Expansion of the product range in the Professional Hair Care and Dermatological Skincare categories combined with stronger Mass Beauty sales to drive growth in spite of a slight drop in sales of COVID-19-related products.
• Gross profit was up by DKK 38 million, while the gross margin increased to 44.5% from 43.8% in the year-earlier period due to the recognition of a DKK 20 million payment from the Danish Tax Authorities. The underlying gross margin was down by 0.8 percentage points compared with Q3 2020/21, of which about 0.5 percentage points was attributable to Web Sundhed, which as a wholesaler operates with lower margins than the Group’s other business areas.
• EBITDA was up by DKK 9 million to DKK 301 million in Q3 2023/22. Based on the strong sales growth and the extraordinary income from the Club Matas VAT case, Management decided to accelerate and intensify measures under the new five-year growth strategy, ’Growing Matas Group’:
  • About DKK 7 million was allocated towards initiatives to promote and raise awareness of the expanded product range in, among other categories, Health and Professional Hair Care and towards a branding campaign.
  • Additional resources and competencies were added to the organisation for purposes of driving the planned assortment expansion and testing international sales of Matas’ house brands.
• Impacted by the stepping up of activities related to the new strategy, EBITDA before special items came to DKK 283 million, down by DKK 9 million on the year-earlier period. The EBITDA margin before special items was 20.6% against 22.3% in Q3 2020/21.
• Matas maintains its FY guidance of revenue in the DKK 4,250-4,375 million range and an EBITDA margin before special items of between 18.0% and 19.0%, as announced in the Q3 Trading Update. Matas is adjusting its overall CAPEX guidance marginally as CAPEX is now expected in a range of DKK 215-235 million before potential M&A activity, from the previously expected range of DKK 195-215 million.

Gregers Wedell-Wedellsborg, CEO of Matas A/S:

“Customers returned to our physical stores during the Christmas season quarter, while at the same time online sales were stable at the high level witnessed last year. The record-breaking sales have given us the financial leeway to accelerate our long-term growth strategy. In the third quarter, we allocated additional resources towards reinforcing our organisation and raising awareness of the many new products now available to our customers on matas.dk.”

Q3 2023/22 highlights

• Revenue grew by 5.0% to DKK 1,378 million. Retail sales in own stores and webshops were up by 3.0% to DKK 1,351 million, while the acquired activities in Web Sundhed contributed the rest of the improvement. Underlying sales were up by 2.8%.
• Up by DKK 28 million, or 2.8%, physical store sales recorded the largest absolute increase, while online sales delivered the largest relative increase, at 3.4%.
• The number of transactions increased by 7.3%, to 6.6 million, while the average basket size fell by 4.0% to DKK 204.
• Wholesale sales etc. grew by DKK 26 million, supported by a DKK 23 million contribution from the acquired activities in Web Sundhed.
• Gross profit was up by DKK 38 million, while the gross margin increased to 44.5% from 43.8% in the year-earlier period due to the recognition of a DKK 20 million payment from the Danish Tax Authorities. The DKK 20 million has been recognized in the gross profit as it was expended likewise when the Danish Tax Authorities claimed the case. The recognition impacts the gross margin positively and is categorized as a special item. The underlying gross margin was down by 0.8 percentage points compared with Q3 2020/21, of which about 0.5 percentage points was attributable to Web Sundhed, which as a wholesaler operates with lower margins than the Group’s other business areas.
• EBITDA was up by DKK 9 million to DKK 301 million in Q3 2023/22. EBITDA before special items was down by DKK 9 million to DKK 283 million, taking the EBITDA margin before special items to 20.6% against 22.3% last year. Besides the underlying decline in the gross margin, the lower EBITDA margin was attributable to an increase in other external costs to 7.1% of revenue compared with 6.0% last year, while staff costs remained stable at 15.6% of revenue.
  • The increase in other external costs was attributable mainly to costs related to the marketing of the expanded product range on matas.dk and variable logistics costs driven by growing sales. In addition, an extraordinary DKK 7 million was spent on marketing initiatives aimed at raising awareness of new product groups and on the “Tættere På” branding campaign.
  • The stable staff costs, as a proportion of revenue, should be seen relative to the DKK 12 million recognised as extraordinary COVID-19-related trainee subsidies and the DKK 10 million paid as extraordinary bonus in Q3 2020/21. Underlying payroll costs attributable to physical stores dropped further in Q3 2023/22.
• Cash generated from operations was an inflow of DKK 320 million in Q3 2023/22 against an inflow of DKK 515 million in Q3 2020/21. The decline was attributable to an exceptional working capital improvement of DKK 221 million last year, as opposed to a DKK 17 million improvement in Q3 2023/22.

9M 2023/22 highlights

• Revenue for the first nine months was up by 5.7% to DKK 3,374 million, while underlying (like-for-like) sales grew by 3.4%. High-End Beauty sales were up by 5.2%, and Mass Beauty sales grew by 4.6%.
• Online sales via matas.dk and Firtal were up by 6.8% to DKK 821 million to account for 24.3% of 9M revenue compared with 24.1% in the same period of 2020/21.
• Physical store sales were up by 2.8% to DKK 2,480 million to account for 73.5% of 9M revenue compared with 75.6% in the same period of 2020/21.
• The gross margin was 44.4% against 43.8% for the first nine months of 2020/21, driven mainly by the recognition in the third quarter of DKK 20 million resulting from the National Tax Tribunal’s decision in the Club Matas VAT case.
• Other external costs were up by 20.7% to DKK 236 million, while staff costs increased by 9.1% to DKK 612 million. Overall costs accounted for 25.1% of revenue against 23.7% in the first nine months of 2020/21.
• EBITDA before special items fell by DKK 10 million to DKK 635 million for the first nine months of 2023/22. The EBITDA margin before special items was 18.8% against 20.2% in 9M 2020/21. The declining EBITDA margin year-to-date is primarily attributable to the lower margin in Q3.
• Cash generated from operations came to DKK 537 million in 9M 2023/22 against DKK 935 million in the same period of 2020/21.

Matas maintains FY 2023/22 guidance but makes a minor adjustment to the expected CAPEX

• Revenue is expected in the range of DKK 4,250-4,375 million, equivalent to a growth rate of between 2% and 5%.
• The EBITDA margin before special items is expected in the range of 18.0%-19.0%.
• Overall CAPEX is adjusted by DKK 20 million to a range of DKK 215-235 million before potential M&A activity, from the previously expected range of DKK 195-215 million.

Video conference

Matas will host a video conference for investors and analysts on Thursday, 10 February at 11:00 a.m. CET.
The video conference and the presentation can be accessed from Matas’ investor website: https://investor.en.matas.dk.

Video conference access numbers for investors and analysts:
DK: +45 78 15 01 10
UK: +44 333 300 9268
US: +1 631 913 1422 PIN: 53306942#

Link to webcast: https://streams.eventcdn.net/matas/q3-report/

Contacts

Gregers Wedell-Wedellsborg                        
CEO, tel +45 48 16 55 55

Anders Skole-Sørensen
CFO, tel +45 48 16 55 55                

Klaus Fridorf        
Head of Communication, tel +45 61 20 19 97

Forward-looking statements

This interim report contains statements relating to the future, including statements regarding 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 this report. Forward-looking statements are subject to risks and uncertainties and a number of other factors, many of which are beyond Matas Group’s control. This may have the effect that actual results may differ significantly from the expectations expressed in the report. Without being exhaustive, such factors include general economic and commercial factors, including market and competitive conditions, supplier issues and financial and regulatory issues as well as any effects of measures to contain the spread of COVID-19 that are not specifically mentioned above.

Attachment

• Matas_Q32021-22_UK