Strong market despite unstable environment
Summary of the period
Numbers in parentheses refers to outcomes during the corresponding period of the previous year.
Third quarter: July 1st – September 30th, 2022
- Net revenue amounted to 483.5 MSEK (221.1 MSEK), corresponding to an increase of 119% (218%)
- Operational EBITDA amounted to 97.0 MSEK (57.0 MSEK), corresponding to an increase of 70%, and an EBITDA-margin of 20.1% (25.5%). The adjustments refer to an accounting adjustment of acquired inventory of 13.2 MSEK
- Organic, currency-adjusted, growth amounted to 8% (-1%)
- Operational EBIT amounted to 84.3 MSEK (58.0 MSEK), corresponding to an increase of 45%, and an EBIT-margin of 17.4% (26.0%)
- Profit after tax amounted to 24.3 MSEK (10.8 MSEK)
- Earnings per share calculated on 158 111 805 shares (118 038 475 shares) 0.15 SEK (0.09 SEK)
- Cash flow from operating activities amounted to 67.7 MSEK (33.5 MSEK)
- As of September 30th, 2022, cash amounted to 194.3 MSEK (138.1 MSEK)
First 9 months: January 1st – September 30th, 2022
- Net revenue amounted to 1332.1 MSEK (515.2 MSEK), corresponding to an increase of 159% (270%)
- Operational EBITDA amounted to 310.4 MSEK (141.9 MSEK), corresponding to an increase of 119% and an EBITDA margin of 23.2% (27.4%). The adjustments refer to acquisition costs amounting to 11.2 MSEK (15.9 MSEK) due to the acquisition of NaturVet and Innovet and to an accounting adjustment of acquired inventory of 30.7 MSEK (40.4 MSEK)
- The organic, currency-adjusted, growth amounted to 7% (21%)
- Operational EBIT amounted to 273.4 MSEK (139.1 MSEK), corresponding to an increase of 97% and an EBIT margin of 20.5% (26.9%)
- Profit after tax amounted to 127.2 MSEK (34.9 MSEK)
- Earnings per share calculated on 154 275 661 shares (109 862 347 shares) 0.82 SEK (0.32 SEK)
- Cash flow from operating activities amounted to 133.7 MSEK (89.5 MSEK)
- Exchange rate gains amounted to 8.9 MSEK (8.2 MSEK)
Significant events during the third quarter
Swedencare has executed the earn-out payment of 290.4 MSEK (27.5 MUSD) connected to the acquisition of NaturVet.
Nutravet has extended a long-term agreement with Europe's largest veterinary group to supply the premium supplement range, VetPro, in the UK and Ireland until 2029.
Significant events after the third quarter
An extraordinary general meeting took place on October 19th, 2022. The extraordinary general meeting decided, in accordance with the board's proposal, on an incentive program for key employees in the Swedencare group, comprising a private placement of a maximum of 415,000 warrants to the company and transfer of the warrants to the participants in the incentive program. 415,000 warrants corresponds to a dilution effect of a maximum of approximately 0.26 percent, based on the number of shares and votes in the Company after the utilization of the warrants. The transfer of the warrants to the participants in the incentive program shall take place at market value.
Words from the CEO
The pet industry remains stable despite the chaotic global situation, which unfortunately seems to remain unruly for some time to come. Some glimpse of optimism can be discerned with the fact that the inflation peaks seem to be ebbing out during next year and that there are experts who expect Ukraine to succeed to free itself from the Russian invasion in 2023. Despite all uncertainty,I remain confident that our industry, and we as a company, will continue to develop since the strong demand in the market continues.
The third quarter shows a net revenue of 484 MSEK which is a 119% increase compared to Q3 2021. The operational EBITDA increased by 70% to 97 MSEK, equaling a margin of 20,1%. The lower margin, compared to the first half year, is caused by large sales campaigns of both new and existing product lines, new design of the ProDen PlaqueOff®-line with scrapping costs of old designs, final extra ordinary preparatory costs for the new Vetio manufacturing facility in Florida as well as a retroactive price adjustment for our largest customer in the European veterinary sector, whom we have signed a new 7-year contract with. Our organic growth of 8% was lower than I had anticipated, this is due to some of the earlier mentioned reasons above but also to a devastating hurricane in Florida that froze deliveries to our customers in the last week of September. I expect Q4 to be our strongest growing quarter of the year with improved margins and have strong confidence in the outlook for 2023.
We are still affected by the trimming of stock levels by large retailers, veterinary companies as well as large online platforms. For the majority of our customers the sales growth for our products is over 20%, which is considerably higher than what we have delivered to them. Our end customers, the pet owners, are increasing both by the number and by how much they spend which is reflected in our strong online sales. Pet MD Brand grew by more than 35% and NaturVet´s Amazon sales increased with more than 40% and during this quarter we also launched two brand new D2C (Direct-to-Consumer)-sites for NaturVet and Nutravet. An investment that is timed perfectly to market behavior. Until now all Nutravet® sales have been made through physical veterinary clinics but our new strategy, which has been greeted by the veterinaries, is to also offer our base-products online while maintaining physical sales of the more advanced products. Both sites were launched in September and had a flying start.
During this quarter our sales of ProDen PlaqueOff® products increased by 30% compared to the same quarter last year. The ProDen PlaqueOff®-line has been extended with a number of new Soft Chew products produced by the NaturVet-team which hit the market in October. Several of our American subsidiaries are now working on introducing ProDen PlaqueOff® to new customers so I am counting on a continuation of the strong sales in the upcoming years.
Vetio and Innovet are some of our subsidiaries that have had a strong quarter. Vetio has increased on both sites. Vetio North grew by more than 70% and Vetio South by only 6% mainly due to a large customer project which was planned for September, was moved to October. The turnout for the quarter for Vetio South would otherwise have been over 20% growth. Italy is a strong market in an otherwise somewhat slow Europe. Innovet in Italy had its best month ever in July and with a number of new product launches this fall the future looks bright.
Both Nutravet and Stratford had negative growth mainly due to contract negotiations with their largest customers, which we now have or soon will finalize. During this quarter we have published a press release regarding the new seven-year deal Nutravet has signed with the largest veterinary group in Europe, a deal which is expected to have a significant effect on our future. Even though we only had a small delivery in Q3, the veterinary customer’s sales of our products were very strong, over 20%, which means that the deliveries are returning to the expected high level already by this quarter. During 2022 we have, as previously mentioned, focused on structure and building the foundation for strong continued growth in the years to come. We proceed with a sharp commercial organization, strong and comprehensive collaborations/deals with important players as distributors, large retailers, veterinary companies, and the most vital online platforms. We will be able to share information about some of these deals going forward, but for a number of them you will instead have to suffice with information about increased sales numbers in our upcoming reports.
The export operations were strong this quarter for several of our brands like ProDen PlaqueOff®, Nutravet®, RX Vitamins® and NaturVet®. The most prominent markets were Brazil, South Korea and Japan. Worth mentioning is that our various pet food collaborations are all developing well and that several prospective cooperations are on the table. For the first time since 2019 we will again be able to partake in exhibitions in Asia, starting with the Pet Fair South East Asia exhibition which takes place at the end of October. We have received much interest beforehand and we have already a large number of meetings prebooked especially in regard to the brands within our group that have not yet been introduced to this region.
Even though we have not made any acquisition since Innovet in March rest assured that we will keep adding important pieces to our puzzle when the right opportunity presents itself. We also keep developing our ESG-efforts including measurements, improvements and the development and implementation of new governing documents. Other more concrete measures include for instance solar panels that have been installed at our Irish plant and will soon be operational as well as whistleblower function for our employees and other interested parties.
I would like to take the opportunity to thank our shareholders for their support for our warrant program for key employees, which was voted through close to unanimity. This program is extremely appreciated by the participants, and I am convinced that it will spur on the organization even more and that it will assure us reaching our impressive financial goals 2026.
Håkan Lagerberg, CEO
Malmö October 27th, 2022
The complete interim report is attached to this press release and is available at www.swedencare.com.
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 am CEST and can be followed via live webinar.
Please use this link to join the webinar: https://swedencare.webinargeek.com/swedencare-live-presentation-of-q3-report-with-q-a/join/senqdcde