Interim report January – March 2020

First quarter 2020 • Net sales for the first quarter decreased by 1% and amounted to SEK 3,445m (3,469). • Organic growth was -2% (-1). • Operating profit was SEK 134m (260), corresponding to an operating margin of 3.9% (7.5). • Changes in exchange rates negatively impacted operating profit by SEK 35m. • Profit after tax amounted to SEK 88m (183), corresponding to earnings per share after dilution of SEK 0.52 (1.09). • Operating cash flow amounted to SEK 212m (241). • The Dividend proposal was withdrawn by the Board of Directors.

Comments from the President and CEO

In March we experienced one of the most disruptive markets in modern times. Even though the kitchen industry was not as severely impacted as many other industries, the lockdown in some of our core markets forced us to temporarily close about half of our store network and half of our factories. A fairly strong order book was postponed to later in the year and our focus had to shift quickly from long term strategic initiatives to implementing health and safety measures to protect our employees and stakeholders, and safeguarding our business short term.

I am very proud of what my colleagues have accomplished. First of all they have over the course of many years shaped this company to become financially solid with strong cash flow and a considerably lower fixed cost base than when the financial crisis hit us. During these difficult times they have again proven their ability to act fast with strong business acumen, excellent teamwork and passion for finding ways to take control over the situation. In only a few days we managed to set up health and safety measures, introduce a large furlough programme, secure our supplier base, roll out new digital tools for remote selling, adjust prices to an accelerated currency headwind and much more.

Due to the widespread uncertainty we decided to preannounce the result for the quarter on 14 April. Organic growth declined by 2 per cent whilst operating profit declined from last year’s SEK 260m to SEK 134m. Despite the difficult market situation and currency headwind, our Nordic region reported solid earnings in the quarter, driven foremost by our Danish operations where sales and profitability improved in all channels. In the UK however, which experienced the worst impact from the lockdown, the earnings declined by SEK 94m on last year. The lockdown had a negative impact of SEK ~50m in the UK alone, and the footprint changes being executed in our Darlington factory charged an additional SEK ~30m. On a positive note, our strategy to grow the UK trade business continued in the quarter.

In light of the uncertainties following the corona impact, the Board of Directors decided to withdraw the dividend proposal for 2019. We have also taken several other proactive measures to strengthen our cash flow and protect earnings, such as furloughs, cutbacks of discretionary spend, discontinued consultants, reduction in capex, working capital improvements etc.

Opportunities also arise with a crisis. Whilst it is important to safeguard our cash flow and liquidity in the short term, we will also make sure that we pursue the opportunities that emerge. Through our intensive work with our new strategic plan we have set a platform from which we can build and be comfortable with fast decisions that will strengthen our position in the market. I am therefore certain that we will overcome short-term obstacles and at the same time capture market shares and reshape this company to become even more efficient and competitive for the future.

Jon Sintorn
President and CEO