Svedbergs

"We start 2024 by delivering increased net sales and an improved result in a continued challenging market."

First quarter

• Net sales amounted to SEK 571.7 M (475.7), an increase of 20 percent. Organic growth was -4 percent
• EBITA amounted to SEK 83.7 M (64.0), corresponding to a margin of 14.6 percent (13.5)
• EBIT amounted to SEK 79.5 M (61.4), corresponding to a margin of 13.9 percent (12.9)
• Profit before tax amounted to SEK 67.1 M (51.8)
• Earnings per share amounted to SEK 0.95 (1.12)
• Free cash flow amounted to SEK -58.2 M (-10.9)
  

Significant events during the quarter

• Svedbergs Group carries out a rights issue and adds SEK 391.2 M after deduction for issue costs
  

CEO comments
A strong start to the year
We start 2024 by delivering increased net sales and an improved result for the first quarter in a continued challenging market. Behind the development is the acquisition of Thebalux, a strong development in Great Britain and focused work with cost control and price adjustments. At the same time, we continue our future investments in customer offering, product development and value chain.

Net sales in the quarter amounted to SEK 572 M (476), equivalent an increase of roughly 20 percent compared to the corresponding quarter last year. In addition to the acquisition of Thebalux, growth was driven by increased sales volumes in the UK and exchange rate effects. Other segments had a lower turnover than the previous year and that sums the organic growth to -4 percent.

Gross profit increased to SEK 255 M (197), corresponding to a gross margin of 44.6 percent – an increase of +3.2 percentage points compared to the corresponding quarter of the previous year. The EBITA result amounted to SEK 84 M (64), corresponding to an EBITA margin of 14.6 percent (13.5), which is a clear improvement that brings us closer to our financial target of 15 percent. The driving factors include the acquisition of Thebalux, strengthened earnings in Roper Rhodes, lower freight and material prices, implemented price adjustments as well as a consistently large focus on cost control.

The free cash flow during the quarter amounted to SEK -58 M (-11), a result of increased volume after the turn of the year and thus increased working capital.

Strong development for Roper Rhodes
If we look at the individual brand companies, the picture continues varied. Despite our view of a clear general slowdown in the market in the UK, Roper Rhodes continues to increase sales as well as to improve the result. The organic sales growth amounted to 6 percent. Our view is that we are taking market share and strengthens our market position through further focus on continuously improving the product offering.

Challenging market in the Nordics
The brand company Svedbergs continues to experience the challenging market conditions, where the tougher economic situation, especially for Swedish households, is clearly reflected in the decreased demand for bathroom furnishings. The sharp slowdown in the project market also contributes to this. This resulted in Svedbergs reducing its sales and experiencing weaker earnings performance during the quarter compared to the corresponding quarter of the previous year. The earnings performance was also affected, as planned, by increased operating costs due to adjustments to the new production line in Dalstorp. Macro Design experienced a slight decrease in turnover but strengthened the result, which is an effect of insourcing the assembly of furniture production and price adjustments. Cassøe in Denmark was in line with the corresponding quarter of the previous year. Within all operations, there was active and focused work on product launches and sales, as well as operational efficiency. This was all done also to be prepared when the market eventually turns.

High profitability in Thebalux
Our latest acquisition in the Netherlands, Thebalux, is progressing as planned. Net sales in the quarter amounted to SEK 105 M and the EBITA margin to 24.8 percent. Five months have now passed since the acquisition was completed. The company continues to work on securing and developing its market position. Together, efforts are being made on integration, focusing on collaboration within our group's internal areas of cooperation—purchasing, sustainability, and digitalisation.

The acquisition is an important step in our continued journey of change and towards our goal to become the leading bathroom group in northern Europe. In addition to creating new growth opportunities, this also helps to reduce risk related to dependence on individual geographical markets. When we began our growth journey in 2016, sales outside of Sweden accounted for 24 percent of the revenue. During the first quarter of 2024, the corresponding figure was 78 percent, spread across several markets, providing us with risk balancing as a group. This is a significant strength.

Strong focus on sustainability
During the quarter, we continued our focused efforts to integrate sustainability. We work across the entire operation and cover a wide range of activities. Particularly prioritized efforts for all brand companies include work to reduce carbon emissions. All our companies have also continued the process of environmental product declarations for their respective product portfolios. In addition to increased clarity towards customers, architects, housing developers, and end consumers, this helps us further to develop our product portfolio and manufacturing process, which will ultimately contribute to enhanced competitiveness.

Outlook
Here and now, we are particularly affected in Sweden by a weak economy with a financially strained situation for many households, compounded by a significant decrease in housing construction. We have adapted and closely monitor the market information. We think long-term in our strategy, and our positive belief in the European bathroom market remains firm. The market holds exciting opportunities, driven by a continued strong need for new housing, ongoing renovation requirements, and a significant and growing interest in the home.