On the right track
April – June 2023
- Net revenue decreased by 2%, totalling SEK 441 (450) million.
- EBITDA totalled SEK 17 (1) million. Adjusted EBITDA was SEK 21 (3) million, equivalent to a margin of 4.7% (0.6%).
- Operating profit (EBIT) was SEK 2 (-11) million. Adjusted operating profit (EBIT) was SEK 6 (-9) million and the adjusted operating margin was 1.5% (-2.1%).
- Cash flow for the period was SEK 64 (-10) million.
- Profit/loss for the period amounted to SEK 26 (-1) million.
- Earnings per share before and after dilution was SEK 0.33 (-0.01).
January – June 2023
- Net revenue decreased by 10%, totalling SEK 786 (870) million.
- EBITDA totalled SEK 9 (2) million. Adjusted EBITDA was SEK 13 (3) million, equivalent to a margin of 1.7% (0.4%).
- Operating profit (EBIT) was SEK -19 (-23) million. Adjusted operating profit (EBIT) totalled SEK -15 (-21) million and the adjusted operating margin was -1.9% (-2.5%).
- Cash flow for the period was SEK 31 (4) million.
- Profit/loss for the period amounted to SEK 15 (-15) million.
- Earnings per share before and after dilution was SEK 0.18 (-0.38).
|SEKm (unless stated otherwise)||2023||2022||2023||2022||Jun 2023||2022|
|Growth in local currencies (%)||-7%||-3%||-14%||3%||-8%||1%|
|Profit after variable costs||88||69||142||132||262||252|
|Operating profit (EBIT)||2||-11||-19||-23||-65||-68|
|Adjusted operating profit (EBIT)||6||-9||-15||-21||-47||-53|
|Profit/loss for the period||26||-1||15||-15||-28||-58|
|Gross margin (%)||42.1%||39.5%||41.1%||40.2%||39.7%||39.3%|
|Profit after variable costs (%)||20.0%||15.3%||18.1%||15.1%||16.6%||15.1%|
|Adjusted operating margin (EBIT) (%)||1.5%||-2.1%||-1.9%||-2.5%||-2.9%||-3.2%|
|Cash flow for the period||64||-10||31||4||144||117|
|Net debt (+) / Net cash (-)||-179||176||-179||176||-179||-136|
Significant events during the reporting period
- On 12 June 2023 Göran Dahlin was appointed as new CEO of Pierce Group AB, replacing Willem Vos, former Acting CEO.
- On 16 May 2023 the Annual General Meeting approved to introduce a long-term incentive program in the form of a performance share program for the Company’s CEO, Group Management and key employees. A maximum number of 950,000 ordinary shares can be issued in this program.
- On 16 May 2023 the Annual General Meeting resolved to elect Lottie Saks as new ordinary board member and chair of the audit committee. Board members Gunilla Spongh, Shu Sheng and Thomas Ekman declined re-election.
- The Group has a credit facility with one of the larger Swedish banks. During the reporting period the available credit facility, which is not utilized, was reduced by agreement from SEK 200 million to SEK 150 million.
Significant events after the end of the reporting period
No significant events took place after the end of the reporting period.
It is now a little more than two months since I became CEO of Pierce Group. I have taken on this new role with a great deal of enthusiasm. The Company has an enviable position in a market with attractive underlying fundamentals including, amongst other things, a consistent year-on-year annual growth in the number of newly registered motorcycles. Furthermore, I believe we will see a continuing shift from offline to online sales, as the markets in which the Company is active are exceptionally well adapted to e-commerce due to the wide range of products and parts and relatively low cost of shipping. Our team is strong and our roadmap towards increased profitability and accelerated growth is well anchored in the Company. Taking these factors into consideration, I am convinced that we are on the right track to bring Pierce back to growth and prosperity, fulfilling the full potential of its operations. In the second quarter, market demand continued to be relatively weak, even if we saw a certain improvement compared with the first quarter. After a very tough period, we can again report both positive results for the quarter and very good liquidity.
Margins continue to improve, at the same time liquidity has strengthened
The significantly improved liquidity since the end of 2022 has been maintained to ensure that we can focus on margin-improvement measures. We now see, for the first time in more than two years, an improved gross margin compared with the same period last year. However, the outlook for the forthcoming quarters is demanding. We will therefore continue to prioritize margin reinforcements, operational excellence and strong liquidity, primarily through a conservative approach in our go-to-market initiatives.
Net revenues decreased by 2 percent during the quarter versus the corresponding quarter last year and totalled SEK 441 million. Excluding exchange rate fluctuations, this represents a 7 percent decline, which we estimate to be in line with the online market’s development, as offline competition is now normalizing post-Covid. During the quarter, we continued to raise consumer prices and, compared with the same quarter last year, this resulted in an increase in net revenue of slightly more than 5 percent.
Increased consumer prices, together with lower shipping costs, resulted in an improved gross margin of 2.6 percentage points versus the previous year, coming in at 42.1 percent. Compared with the first quarter, the increase was 2.4 percentage points. Shipping costs in relation to net revenue totalled 4.9 percent, which was a decrease of 1.8 percent compared with the second quarter 2022. Shipping prices are at a low level and we expect gradual further cost reductions during the coming quarters. However, these positive effects were to some extent offset by increased purchasing prices from previous year – the cost increases affected inventory value directly but filter into cost of goods sold only as we sell the products.
The strengthened gross margins, together with lower direct costs, resulted in an adjusted EBIT of SEK 6 million, compared with a loss of SEK 9 million in the same period last year.
Net cash increased by SEK 74 million during the quarter, totalling SEK 179 million. The end of the second quarter coincides with the end of the high season, implying a relatively strong cash position. It is reasonable to expect a decrease in the cash position at the end of the third quarter due to seasonal effects. Our focus on reducing tied-up capital resulted in a decline in inventory value of 6 percent compared with the second quarter 2022. Inventory value at the end of the quarter totalled SEK 459 million. At the same time, the number of articles has been reduced by 17 percent.
Uncertainty in the forthcoming quarter
The market continues to be difficult and uncertain. The uncertainty means that our cautious approach is intact when planning our go-to-market initiatives and we prioritize continued margin strengthening over sales volumes. At the same time, we are concentrating on implementing the profitability improvement program which was launched last year in combination with ongoing cost controls. The effects of these measures can be seen in our results, primarily through increases in customer pricing but also through reduced direct costs for marketing and distribution chain. Direct costs in relation to net revenue decreased by 2.0 percent compared with the second quarter 2022.
Number of newly registered motorcycles continues to grow
In the longer perspective, we believe that the prospects for sustainable market growth will persist. In spite of inflation and challenging macro conditions, both 2021 and 2022 saw an annual increase in the number of newly registered motorcycles in the five largest countries in Europe (ACEM.eu). Every day, we see firsthand our customers’ passion for motorcycling. Compared with June last year, we have increased the number of followers on social media by 5 percent, and we now have more than 1.7 million followers.
In addition to our focus on improving profitability in the near term, Pierce’s strong liquidity and the positive effects yielded by our profitability improvement measures give space to work with enhancing our customer offering and the effectiveness of our operation through a post-Covid re-assessment and re-calibration of the strategy.