“We have success in our commercial work, which shows in volume and gross margin, in parallel we work with efficiency and cost control considering the challenging market.” Per-Arne Andersson, CEO
- Net sales amounted to SEK 475.7 M (488.1), a decrease of 3 percent, of which -4 percent was organic growth
- EBITA amounted to SEK 64.0 M (73.4), corresponding to a margin of 13.5 percent (15.0)
- EBIT amounted to SEK 61.4 million (70.3), corresponding to a margin of 12.9 percent (14.4)
- Profit before tax amounted to SEK 51.8 M (66.7)
- Earnings per share amounted to 1.19 (1.87)
- Free cash flow amounted to SEK -10.9 M (50.8)
|Net sales, SEK m||475.7||488.1||1,820.5||1,832.9|
|EBIT, SEK m||61.4||70.3||225.6||234.4|
|EBITA, SEK m||64.0||73.4||241.7||251.1|
|EBITDA, SEK m||75.9||85.3||288.6||298.0|
|Earnings per share, SEK||1.19||1.87||4.33||4.90|
|Free cash flow, SEK m||-10.9||50.8||140.9||202.6|
The beginning of the year has been marked by efficiency measures and good cost control in all brand companies, which has meant that we have managed to maintain our gross margins despite a slowdown in the home renovation market. We are successful in our work with contractors, which shows in volume and gross margin. Being able to quickly and effectively adapt to a changing environment, which we have demonstrated the ability to do in recent years, will also be of great importance in the future.
Profit development and growth
Turnover decreased by 2.5 percent to SEK 475.7 m and the EBITA result decreased by 12.8 percent to SEK 64.0 m, compared to the same period last year. In the quarter, we had negative organic growth of 4 percent, excluding acquisitions and currency effects, affected by all brand companies and markets except Roper Rhodes and Great Britain. Roper Rhodes has had a good start to the year where we strengthen our position in the UK market and show a good gross margin. Our position in the English market is developing well and further price adjustments are planned to be carried out by Roper Rhodes in July later this year. During the beginning of the year, the development in our Nordic countries, especially in Denmark and Sweden, has been more challenging. The reduced result can mainly be explained by a weakened demand for home improvements, among other things due to higher interest rates and inflation as well as higher energy costs.
Investment in operational excellence shows results
We have a slightly improved gross margin of 41.4 percent despite a challenging market. This is a result of adapted capacities in production and successful work with price adjustments carried out in the quarter and the previous year. We are reducing our costs successively, but are challenged by higher logistics costs for transport to customers in the UK. Cost of goods sold decreased by 3% compared to the previous year and is explained by our maintained focus on efficiency. Operational excellence is about achieving cost efficiency in the business, and we focus on streamlining where possible while strengthening our product development to invest in the future. During the quarter, Svedbergs has reduced overhead costs in production and energy-optimised operations. We can also state that freight prices in the quarter were stable at the levels that applied before the outbreak of the corona pandemic. Cash flow and working capital are at the expected level with exception of one-off effects.
Mix of sales channels dampens the effect of the decline in the construction sector
Our comprehensive sales channel mix and geographic differentiation contribute to a lower degree of cyclical sensitivity. During the quarter, we have compensated for a slightly weaker demand from the bathroom specialists and building trade in Sweden with a stable, good demand from the sales channel with contractors. The sales channel accommodates sales to construction and projects and is accounted for approx. 15 percent of the group’s total turnover during the first quarter. For housing construction in Sweden, which began to decline already during last year, the decline will continue this year according to the industry and employer organisation Byggföretagen. Given the lead times in sales via contactor agreements, our view is that the lower volumes in construction starts, that Byggföretagen points to, will affect our sales via contractors in Sweden going forward. We continue to see that sales in the quarter were driven by demand for renovations, maintenance and improvements of bathrooms.
Sustainability work in focus
During the quarter, we continued our important sustainability work, where we work on a broad front to become one of the most sustainable bathroom groups in the markets where we operate. For us, sustainability is a natural part of our daily work, and during the quarter we continued our work in taking responsibility for sustainability challenges at all stages of the value chain – from the idea stage of new products, purchasing, manufacturing, sales, use and recycling. Together with the brand companies, we take a holistic perspective on the sustainability work in order to reach the high goals we have committed to.
We are currently in a challenging market situation driven by high inflation and high interest rates in all markets where we operate. We keep a close watch on the development and assess that the macroeconomic terrain will continue to be demanding before we can see an improvement. By being responsive and attentive to these challenges, we work hard to manage the situation effectively and take advantage of the benefits that our operating model enables. Our main strengths – our strong brands, our flexibility and our historical ability to adapt to change will continue to be of great importance. Our geographic differentiation and comprehensive sales channel mix is still important to maintain a lower degree of economic sensitivity. Overall, we are well positioned to develop our position and improve our margins by maintaining our focus on operational excellence, proactive sales efforts and product innovation.