Lockdowns Hit Nobia's Q1 UK Performance

• Organic growth for the Group was 3% (-2), driven by 9% increase in Nordics and
  20% increase in Central Europe.
• Net sales for the first quarter decreased by 2% impacted by negative currency effects, and amounted to SEK 3,373m (3,445).
• Operating profit improved to SEK 196m (134), corresponding to an operating
  margin of 5.8% (3.9).
• Changes in exchange rates positively impacted operating profit by SEK 15m.
• Profit after tax amounted to SEK 132m (88), corresponding to earnings per share after dilution of SEK 0.78 (0.52).
• Operating cash flow amounted to SEK -69m (212).
• Revised financial targets, see page 7. 

UK region

Net sales in the UK region declined to SEK 1,205m (1,405). The organic decline was -8% (-6). Retail activity was hampered by all kitchen stores being closed due to the corona lockdown until April 12. Magnet brand sales to the trade segment increased while consumer segment sales decreased. Sales to the social housing segment continues to be heavily impacted by the corona restrictions.

The end of the first quarter 2020 was negatively impacted by temporary factory closures due to the coronavirus outbreak. 

Gross margin decreased to 35.0% (35.9). Operating profit decreased to SEK -47m (-21) and the corresponding margin declined to -3.9% (-1.5), mainly because of the volume decline.

Revised financial targets

To reflect the ambitions in Nobia’s updated strategy, the Nobia Board of Directors has adopted revised long term financial targets for the Group:

• Growth: Average organic growth is targeted to be 3-5% per year. (previous target: organic and acquired growth of more than 5% per year on average)
  
  
• Profitability: The operating margin is targeted to be greater than 10% over a business cycle. (target unchanged)
  
  
• Capital structure: Leverage, defined as net debt (excl. IFRS 16 Leasing)/EBITDA, shall be below 2.5 times (previous target: net debt/equity ratio below 100%)
  
  
• Dividend policy: Dividends to shareholders shall comprise at least 40% of net profit after tax (previous target: dividend of between 40-60% of net profit after tax)

Jon Sintorn, President and CEO, said:

"It has been a solid start to the year, driven by strong performance in the Nordic and Central European markets. The lockdown in the UK, which resulted in a closed store network during the winter sales season, burdened sales and profitability in the UK region, however our performance is estimated to reflect the market development. Operating profit for the Group increased to SEK 196m (134), primarily on the back of organic sales growth of 3% and a favourable segment mix.

"The demand for home improvements and investments in property is continuing across our markets. Wherever we have been able to operate normally, we have capitalised on these trends, such as in large parts of the Nordics and Central Europe. We have also kept all manufacturing sites open in the period albeit with rigorous health and safety measures.

"In the Nordics, our new organisation has delivered above expectations, with Denmark and Sweden being the main contributors to both sales and profitability improvement in the quarter. The strong retail market following the home improvement trend contributed to a positive segment mix and increased average order values. In Finland the project market remains soft.

"Despite temporary closures of our UK store network, we have continued to build the order book by digital sales meetings carried out by our store sales staff and through our new department for remote selling. I am very excited about how fast consumers have migrated from physical to digital design appointments, and even though they want the comfort of touch and feel at some point in the sales journey, this will create opportunities for our go-to market strategy in the future. I am also optimistic about our growth in the UK trade segment which continued in the quarter. We will continue to focus on our trade business through e.g. the launch of new products and increasing product availability in our trade store network. The stores in the UK re-opened on April 12 and we are now pushing ahead with the retail spring campaign.

"The positive momentum is continuing in Central Europe, supported by pent-up demand in Austria and a strong housing market in the Netherlands. However, year-over-year growth was impacted by the Austrian lockdown last year, and thus we expect the growth rates to return to more normal levels over the course of the year.

"A few weeks ago, Nobia’s management team and I had the pleasure of presenting our strategy for the coming years at an online capital markets day. At the event, we outlined our key initiatives for growth, realising structural efficiency and employee engagement – aiming for sustainability and design leadership. I am very excited about the journey Nobia has embarked on and encourage you all to watch the recording at www.nobia.com/ir.

"Finally, I would again like to sincerely thank all our employees for their strong commitment and hard work during these ever-evolving times."

Source : Nobia

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