High order intake - increased demand on several markets
COVID-19: delayed net sales, negative impact on gross margin and profit
Comments from CEO Helena Holmgren
As expected, the start of the second quarter was tough due to COVID-19. Restrictions during primarily April and part of May that limited people's mobility and new temporary rules on store operations had a major impact on retailers around the world. For Pricer, this meant postponed deliveries and store installations while waiting for staff to once again become available and stores to open. The recovery in June was strong, with unusually high delivery activity, but, despite this, some of the net sales were pushed into the third quarter and the profit for the second quarter was a disappointment. However, the high order backlog of just over SEK 900 M at the end of the second quarter is cause for optimism in terms of the full year.
Our cloud-based platform, Pricer Plaza, which was launched during the first quarter of the year has been well received by the market. We are seeing a growing interest in purchasing our system as a cloud service. Having business-critical systems connected to the cloud is highly relevant since it decreases the need for physical presence in the store and simplifies the flow of data between different systems. The modularity of the offer makes it easy to add new functionality as the need arises, which is particularly attractive for customers who intend to use the system as an integrated part of several different store processes.
Order intake in the second quarter amounted to SEK 324 M, which is an increase of 41 per cent compared to the same period last year. A large proportion of the order intake was generated by customers who have chosen Pricer Plaza, including both new and existing customers. The business model in this situation is different compared to the traditional business. The initial hardware delivery with related installation services remains unchanged, but a recurring revenue component related to the management of the system and the applications the customer chooses to implement will be added.
A number of factors have had a negative impact on the gross margin and profit during the quarter. The product mix, with a high percentage of large labels, and the contract mix, with a high percentage of large customer projects, have had a negative impact on the gross margin in the quarter compared to the same period last year. In addition, the appreciation of the Swedish krona in the second quarter, primarily against the US dollar, coincided with high transaction volumes and impacted negatively.
The current situation with the coronavirus has had a negative impact on profitability in a number of areas. Beside the operational challenges to conduct business efficiently, access to logistics solutions has been a particular challenge and resulted in a significant increase in freight costs. In addition, the spring's supply chain challenges in Asia has impacted availability of components which has caused some difficulties in optimizing production flows. Although we see some improvements, indications are that component supply and logistics will remain challenging for some time. We will continue to mitigate the risks and secure our flows.
The times we have just been through, and that we are in part still going through, have been challenging for many people both professionally and in their private lives. It is impressive how the Pricer team has demonstrated loyalty, flexibility, and decisiveness to find new solutions and paths forward with the goal of strengthening our offer and customer relationships. We view order intake and the high demand for our solutions as a sign that we are on the right path. We will continue to prepare Pricer for strong organic growth, in the form of both staff reinforcements and other investments intended to strengthen our position in the market.
President and CEO
Every care has been taken in the translation of this document. In the event of discrepancies, the Swedish original will supersede the English translation.
This information is information that Pricer AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation and the Securities Market Act. The information was submitted through the agency of the contact person mentioned below for publication on July 21, 2020, at 8:30 AM CET.
For more information, please contact:
Helena Holmgren, President and CEO
Susanne Andersson, CFO
Phone: +46 8 505 582 00
This information was distributed by Cision http://www.cisionwire.se/