Strong start to 2021
- Net revenue increased by 20% to SEK 369 (308) million. The increase in local currencies was 25%. Growth was good within both Offroad and Onroad.
- EBITDA was SEK 19 (10) million. Adjusted EBITDA was SEK 29 (10) million, equivalent to a margin of 7.9% (3.4%).
- Operating profit (EBIT) totaled SEK 8 (1) million. Adjusted operating profit amounted to SEK 18 (2) million and the adjusted operating margin was 4.9% (0.6%).
- Cash flow for the period was SEK 345 (-33) million, with this improvement primarily explained by the new share issue proceeds received in conjunction with the stock exchange listing in March.
- Earnings per share before dilution was SEK 0.01 (-0.39) and SEK 0.01 (-0.39) after dilution.
- Profit/loss for the period amounted to SEK 0 (-13) million.
Significant events during the quarter
- Pierce Group AB (publ) was listed on Nasdaq Stockholm Mid Cap on 26 March 2021.
- During the quarter, the Company entered into a new financing agreement with one of the major Swedish banks amounting to SEK 300 million, which, after the end of the period, replaced the previous financing structure.
Financial development during the second quarter 2021
- During April and May 2020, the Company had very strong growth in net sales, almost 50% in local currencies. The growth was clearly positively impacted by Covid-19 related effects. So far, around halfway into the second quarter, profit after variable costs is aligned with previous year while net revenue in local currencies are marginally lower.
|SEKm (unless stated otherwise)||2021||2020||Mar 2021||2020|
|Growth in local currencies (%)||25%||13%||27%||24%|
|Profit after variable costs||88||65||380||358|
|Adjusted operating profit (EBIT)||18||2||113||97|
|Items affecting comparability||-10||-1||-26||-17|
|Operating profit (EBIT)||8||1||87||81|
|Profit/loss for the period||0||-13||13||-1|
|Gross margin (%)||47.8%||44.9%||47.3%||46.7%|
|Profit after variable costs (%)||23.7%||21.1%||24.0%||23.5%|
|Adjusted EBITDA (%)||7.9%||3.4%||9.9%||9.0%|
|Adjusted operating margin (EBIT) (%)||4.9%||0.6%||7.2%||6.4%|
|Cash flow for the period||345||-33||359||-19|
Strong start to 2021
After several years of successfully building a customer base and a strong position in the European market through a significant growth in sales, the strategy since the end of 2019 has been to focus on increased profitability together with a more controlled growth and improved operative cash flow. Developments in the financial year 2020 and first quarter 2021 have shown very positive results from this change in strategic focus.
During the first quarter, net revenue for the Group increased by 20 percent, i.e., 25 percent in local currencies. Adjusted EBIT, EBIT excluding items affecting comparability such as IPO costs, grew significantly from SEK 2 million to SEK 18 million, equivalent to a margin of 4.9 percent. The result improvement was driven by good sales development within both Offroad and Onroad, improved gross margin, and continued scalability effects on overhead costs. In conjunction with the stock exchange listing, we refinanced the Company, meaning that we will now have both a significantly lower level of debt and lower interest expenses.
Within the Offroad segment, net revenue grew by 22 percent to SEK 221 million during the first quarter, corresponding to about 27 percent in local currencies. The main drivers behind the growth were the markets outside the Nordics, which accounts for around 80 percent of total net revenue within Offroad, and sales of private brands. For instance, we launched our new Raven Verve collection which is a further step in our work to broaden our own brand offering and reach target groups in a higher price segment.
In the Onroad segment, net revenue grew by 20 percent, equivalent to approximately 26 percent in local currencies. For some time, we have worked to strengthen the assortment within Onroad which is a less mature segment for us than Offroad. The aim is to make the XLMOTO store even more competitive throughout all of Europe. During the quarter, we expanded the assortment by entering into agreements with further external brands, such as Shark, RAM, Turtlewax, X-lite and Nolan. Additional brands are incoming. We are also working on strengthening the assortment of our private brands as we see a strong demand for these products. For example, sales of our private brands within Onroad grew by 35 percent during the first quarter.
The segment Other is comprised of Sledstore, our online business for snowmobile riders, and our only physical store located at the headquarters in Stockholm. Net revenue grew by 12 percent with a notably higher gross margin than the same period last year as the relatively positive access to snow during portions of the quarter decreased the need to offer reduced prices, and, in addition, we had a higher portion of sales of private brands. However, the segment was somewhat hit during the quarter by stock shortages.
Our KPIs also developed well during the first quarter. Customer satisfaction, which we measure through Trustpilot, is stable at a good level (4.2/5). We have undertaken a number of process and systems improvements but still have more to do in these areas in order to further improve customer experience. The number of customers grew to 1,174,000, an increase of 30 percent compared with Q1 2020. An increasing active customer base is, of course, important for continued growth. The average order value (AOV) was stable at SEK 864 compared with 2020.
We continue to take steps forward in our sustainability journey. In March, we published an upgraded Sustainability report which can be found on our website.
Pandemic impacts and high Q2 comparative figures
Looking forward, we see that the Covid-19 pandemic continues to affect the operations. During the last year, we took several measures to ensure the personnel’s health and well-being and we follow recommendations of local authorities; hence a large portion of the personnel continue to work from home. We also see the continuation of certain disruptions in the flow of goods, such as stock shortages, delivery delays and increased cost for shipping to our distribution warehouse in Szczecin due to the global shortage of containers.
The pandemic also makes it more difficult than usual to plan for sales. During April and May 2020, we had very strong growth in net revenue, almost 50 percent in local currencies, which drove the Q2 growth of 39 percent. The growth was positively affected by the outbreak of the pandemic in combination with a number of internal decisions to increase short term sales volume.
All in all, this made the second quarter 2020 an exceptional period historically and the comparative figures for net revenue during the second quarter 2021 will therefore be challenging. So far, around halfway into the second quarter, profit after variable costs is aligned with previous year while net revenue in local currencies are marginally lower.
We continue to be confident with the underlying growth and the long-term focus — our customer offering is stronger than ever, and we are working intensively to strengthen both the customer experience and to achieve further economies of
scale to continue to deliver profitable growth.
Beginning of the Stock market journey
On 26 March, we began our journey as a listed company on Nasdaq. This is, of course, a major event for us and is the result of preparatory activities which have been ongoing for a relatively long time. I wish to thank all the fantastic personnel and advisers for their hard work in this context, which has also helped us to become a stronger and better company. At the same time, I wish to welcome all new shareholders (which I note with pleasure are rapidly increasing in number) and promise that we will do everything we can to live up to your trust.
Stockholm, 26 May 2021
CEO, Pierce Group AB
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