A very eventful quarter with new records
SUMMARY OF THE PERIOD
THIRD QUARTER: JULY 1ST - SEPTEMBER 30TH 2020
Numbers in parentheses refers to outcomes during the corresponding period of the previous year.
- Net revenue amounted to 69 566 KSEK (31 759 KSEK), an increase of 119%
- Organic, currency-adjusted growth amounted to 27%
- Operating profit before depreciation (EBITDA) amounted to 20 870 KSEK (11 311 KSEK), corresponding to a increase of 84% and an EBITDA-margin of 30,0% (35,6%)
- Operating profit after depreciation (EBIT) amounted to 18 642 KSEK (10 995 KSEK), corresponding to a increase of 70% and an EBIT-margin of 26,8% (34,6%)
- Profit after tax amounted to 14 497 KSEK (8 875 KSEK)
- Earnings per share calculated on 17 432 415 shares 0,83 SEK (0,56 SEK)
- As of September 30th 2020, cash amounted to 408 661 KSEK (40 063 KSEK)
- Costs in connection with the acquisition of Nutravet UK and Animal Pharmaceuticals operations amounted to 1 515 KSEK. Adjusted for this, EBITDA amounted to 22 385 KSEK, corresponding to an EBITDA-margin of 32,2% and EBIT to 20 157 KSEK corresponding to an EBIT-margin of 29,0%
FIRST 9-MONTHS: JANUARY 1ST - SEPTEMBER 30TH 2020
Numbers in parentheses refers to outcomes during the corresponding period of the previous year.
- Net revenue amounted to 139 306 KSEK (92 686 KSEK), an increase of 50%
- Organic, currency-adjusted growth amounted to 14%
- Operating profit before depreciation (EBITDA) amounted to 38 724 KSEK (31 286 KSEK), corresponding to an increase of 24% and an EBITDA-margin of 27,8% (33,7%)
- Operating profit after depreciation (EBIT) amounted to 35 027 KSEK (30 331 KSEK), corresponding to an increase of 16% and an EBIT-margin of 25,1% (32,7%)
- Profit after tax amounted to 28 083 KSEK (24 192 KSEK)
- Earnings per share calculated on 16 382 272 shares 1,71 SEK (1,53 SEK)
- Cash flow from operating activities amounted to 20 444 KSEK (24 740 KSEK)
- Foreign exchange losses amounted to 656 KSEK
SIGNIFICANT EVENTS DURING THE THIRD QUARTER
Swedencare AB (publ) acquires operations from a leading Brittish pet health care company.
Swedencare AB (publ) acquires operations from an American pet health care company with a focus
on the veterinary channel.
Swedencare AB (publ) carries out a directed new issue of 2 000 000 shares and is thus provided with approximately 340 MSEK, which after issue costs of 4,7 MSEK, gave a net contribution of 335,3 MSEK to partly finance acquisitions.
SIGNIFICANT EVENTS AFTER THE THIRD QUARTER
Swedencare AB (publ) took, on October 1st, over the businesses acquired on September 24th.
WORDS FROM THE CEO
To say that this Q3 was one of the most eventful quarters in the history of Swedencare is by no means an exaggeration. Many exciting things have happened and here is my attempt to briefly describe recent events.
The revenue of the third quarter was 69,6 MSEK, which is an increase of 119% compared to Q3 2019. The EBITDA results increased by 84% to 20,9 MSEK, corresponding to a margin of 30%. The result was affected by costs amounting to approximately 1,5 MSEK due to the acquisitions of Animal Pharmaceutical and Nutravet. When adjusting to these acquisition costs we reach an EBITDA margin of 32,2%, well exceeding our current long-term goal of 25% - despite the current changes and challenges in the world. As I wrote in my last report, we had a strong recovery at the end of Q2 and it has been maintained all through Q3.
The fact that we produced a record high report as regards to revenues and profits was expected due to our acquisition of Stratford, which is included in the numbers from July 1st, 2020. But delivering a 27% organic growth is truly a proof of strength, particularly in regard to the current situation worldwide. Even when extracting the Stratford addition, we have delivered record high revenues as well as profits.
The currently increasing spread of the Corona virus effects many markets globally, but as of yet we have not noticed any major effects in sales. With exhibitions and events cancelled and most customer meetings held digitally it is difficult to foresee exactly if and how these changes will affect us, but I don't think they will stop our growth to any major extent. When it comes to addressable markets the number of pets has increased in almost all markets and as pet parents now value and spend even more time with their four-legged friends even stronger bonds are made, a factor that is positive for us as a distributor of premium products.
On the marketing side the company's full focus lies on brand building and directed activities to generate sales for us and our partners worldwide. We are in the midst of developing a new brand name platform, new website as well as developing social media brand building, advertising and expanding our cooperation with influencers.
Due to the current Corona related restrictions the integration of Stratford had to be made over distance, but the process has gone just as well as expected. Our main focuses have been sales co-ops, product training and the transfer of some of SwedencareUSA's veterinary customers to Stratford. By the end of the quarter the full range of powder products were delivered to Stratford, who will be launching them to the veterinary segment all over the US. We have also picked out some of Stratford's best products to be launched under the Swedencare brand name to certain important "Pet Specialty" customers of SwedencareUSA.
As previously stated, this quarter was strong and in the North American market both our subsidiaries had record quarters with growth amounting to over 30%. The inflow of new B2B customers was strong and SwedencareUSA added amongst others Woof Gang Bakery with 130 stores and Mondue with 60 stores to their customer list while Stratford added a new veterinary chain with 75 clinics to theirs. We keep expanding within online sales, which is to be expected as many clinics and physical shops have limitations in regard to opening hours and number of simultaneous visitors.
In the UK we see the same trend as in the US with over 30% growth and an increase in online sales. Our production facility in Ireland were quick to adapt to the Irish COVID restrictions which resulted in a temporary decrease in production during Q2 but are now back to full production and scheduling capacity. During Q3 the team has produced ProDen PlaqueOff® for a large number of internal markets and also supplied the demand amongst our external customers in the UK, Germany and the BeNeLux. The team has worked hard to meet the market demands and I am proud that Swedencare has such an effective production facility and organization in Ireland.
Our other subsidiaries keep developing strongly with high growth and record high months both in Spain and Greece. In France and the Nordics we see a slightly lower growth rate, but the trend is positive with a high number of pending orders and favorable prognosis for the next quarter. All subsidiaries had a larger demand than could be met for the products Dental Bones and Dental Bites. The pandemic caused us some production and delivery challenges, but as the quarter came to its end that situation was again going back towards normal.
In the rest of the world we have delivered to all large markets - Australia, Brazil, Russia, South Korea, Japan and China. We have received very encouraging reports from the first four countries where Q3, especially September, showed fantastic sales numbers for ProDen PlaqueOff®. The highest quarterly and month sales results shows that our targeted online marketing activities have had great impact. Our Dental Bones keep conquering new markets and in October we sent our first orders to Japan, a market in which we have very high expectations.
Not only did we experience a strongly increased "normal" business sentiment during Q3 - we also had some extraordinary intense activities when ending the quarter! The acquisitions of UK based Nutravet and American Animal Pharmaceuticals, both companies with strong positions within the veterinary sector, were made at the same time, both with take over from October 1st. The financing was mainly made by a directed new share issue where a large number of Swedish and international institutions took part. Our acquisition strategy is based on a simple prevailing rule - we seek companies that are similar to ours in that they should be entrepreneurial, profitable with high growth rate and with owners/management that share our goal in creating a world leading group within the Pet Healthcare market. We have made a thorough review and I am certain that these two acquisitions will prove to be extremely successful when we look back a few years from now.
With Nutravet we gain the market leading nutraceutical company within Pet Healthcare in the UK, with an enormous potential for export. The founder, Matthew Shaw, who now is a major shareholder of Swedencare, has built an impressive product line, organization and network. Nutravet also has a unique agreement with the largest veterinary chain in Europe. Thus far product launch has been made to the UK clinics and the next phase includes launch to clinics in the other ten countries where the veterinary chain operates.
Animal Pharmaceuticals provides us with yet another veterinary focused company in the US which will have many synergies with Stratford with regards to organization, fulfillment, finance and sales. Jason Brown, who now is a major shareholder of Swedencare, founded the company and has run it successfully for 17 years. We have with these two American acquisitions reached a new level having added agreements with the three largest veterinary distributors in the US with sales adding up to almost 30 000 veterinary clinics. Brian (Stratford) and Jason (AP) will alongside Martin (SwedencareUSA) and their respective teams, represent a major part of Swedencare's revenues with the US being our largest market, which is well in line with our ambition as the US is by far the largest Pet market in the world.
Given all of these changes in the company the only thing I find frustrating is not being able to travel and meet my new colleagues in person and not being able to have meetings with our customers, suppliers and other partners. I very much look forward to doing so when the situation allows it.
I am grateful for and equally humbled by the trust that the capital market has shown Swedencare and me as its CEO. I will continue to do my utmost to supersede your expectations and I am encouraged by working in such a fantastic and dynamic organization.
Håkan Lagerberg, CEO
Malmö October 22nd 2020
The complete interim report is attached to this press release and is available at www.swedencare.se
Swedencare invites shareholders and analysts to a presentation of the Q3 report where CEO Håkan Lagerberg and CFO Jenny Graflind will comment on the report. The presentation will be held today at 10:00-10:30 CEST and can be followed via live webinar.
Please use this link to join the webinar:
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