Resilient performance in challenging environment

Musti Group plc                                        Half-Year Report            30 April 2024 at 8:30 a.m. EEST

Musti Group plc Half-Year Report 1 October 2023 - 31 March 2024

Resilient performance in challenging environment

January  - March 2024           

• Group net sales totaled EUR 107.2 (101.7) million, an increase of 5.5%.
• Group net sales growth excluding the changes in the
• currency exchange rates was 6.4%
• Like-for-like sales growth was 3.1%.
• Adjusted EBITDA was EUR 15.0 (16.6) million.
• Adjusted EBITDA margin was 14.0% (16.4%).
• Adjusted EBITA was EUR 6.6 (8.9) million.
• Adjusted EBITA margin was 6.1% (8.7%).
• Net cash flow from operating activities was EUR 7.2 (9.7) million (including impact of non-recurring items EUR 3.8 million).
• Operating profit was EUR -5.2 (7.1) million.
• Profit for the period totaled EUR -4.8 (4.8) million.
• Earnings per share, basic was EUR -0.15 (0.14).
• Number of stores grew to 344 (342).
• Number of loyal customers grew to 1,563 thousand (1,511 thousand).

October 2023  - March 2024

• Group net sales totaled EUR 222.9 (212.1) million, an increase of 5.1%.
• Group net sales growth excluding the changes in the currency exchange rates was 7.6%
• Like-for-like sales growth was 4.0%.
• Adjusted EBITDA was EUR 35.5 (35.8) million.
• Adjusted EBITDA margin was 15.9% (16.9%).
• Adjusted EBITA was EUR 19.0 (20.6) million,.
• Adjusted EBITA margin was 8.5% (9.7%).

• Net cash flow from operating activities was EUR 22.9 (28.4) million (including impact of non-recurring items EUR 5.0 million).

• Operating profit was EUR 4.2 (17.2) million.
• Profit for the period totaled EUR 1.0 (11.8) million.
• Earnings per share, basic was EUR 0.03 (0.35).

Key Events

• A consortium comprising Sonae, Jeffrey David, Johan Dettel and David Rönnberg announced a recommended public tender offer through Flybird Holding Oy for all shares in Musti on 29 November 2023. On 20 February 2024, the Offeror announced the final result of the tender offer and that it completes the tender offer.
• On 20 February 2024, the Offeror announced that it will commence a subsequent offer period for those shareholders of Musti who have not yet accepted the tender offer.
• On 11 March 2024, the Offeror announced the final result of the subsequent offer period. The shares validly tendered during the subsequent offer period represent approximately 80.65 per cent of the shares and votes in Musti.
• The amount of non-recurring cost items was significant during Q1 and Q2. The costs were attributable mainly to the public tender offer. Also, the product recall of certain SMAAK-products in November caused non-recurring costs. In addition, the Board of Directors decided in December 2023, based on the combination agreement with the Offeror, that the rewards for the performance period 2021-2023 of the long-term incentive plan will be settled fully in cash in January 2024 which had an adverse impact on the cash flow.

The figures in parentheses refer to the comparison period, i.e., the same period in the previous year, unless stated otherwise. Musti Group's previous financial year was from 1 October to 30 September and the current is from 1 October to  31 December.

Key figures

EUR million or as indicated	1-3/2024	1-3/2023	Change %	10/2023-3/2024	10/2022-3/2023	Change %	FY2023
Net sales	107.2	101.7	5.5%	222.9	212.1	5.1%	425.7
Net sales growth, %	5.5%	10.0%		5.1%	9.4%		8.9%
LFL sales growth, %	3.1%	10.8%		4.0%	8.8%		9.5%
LFL store sales growth, %	0.1%	9.0%		1.3%	6.2%		6.7%
Online share, %	25.1%	23.8%		24.2%	22.9%		23.0%
Gross margin, %	43.9%	45.1%		44.9%	45.5%		45.7%
EBITDA	4.7	16.2	-70.8%	23.6	35.3	-33.3%	74.6
EBITDA margin, %	4.4%	15.9%		10.6%	16.6%		17.5%
Adjusted EBITDA	15.0	16.6	-9.9%	35.5	35.8	-0.9%	73.6
Adjusted EBITDA margin, %	14.0%	16.4%		15.9%	16.9%		17.3%
EBITA	-3.7	8.4	-144.3%	7.0	20.1	-64.9%	43.6
EBITA margin, %	-3.5%	8.3%		3.2%	9.5%		10.2%
Adjusted EBITA	6.6	8.9	-26.1%	19.0	20.6	-7.8%	42.6
Adjusted EBITA margin, %	6.1%	8.7%		8.5%	9.7%		10.0%
Operating profit	-5.2	7.1	-173.4%	4.2	17.2	-75.5%	37.8
Operating profit margin, %	-4.8%	7.0%		1.9%	8.1%		8.9%
Profit/loss for the period	-4.8	4.8	200.8%	1.0	11.8	-91.5%	26.5
Earnings per share, basic, EUR	-0.15	0.14	-201.7%	0.03	0.35	-91.7%	0.79
Net cash flow from operating activities	7.2	9.7	-26.1%	22.9	28.4	19.5	79.6
Investments in tangible and intangible assets	3.9	3.1	26.0%	7.9	6.1	29.8%	11.9
Net debt / LTM adjusted EBITDA	1.9	2.1	-10.5%	1.9	2.1	-10.5%	1.9
Number of loyal customers, thousands	1,563	1,511	3.5%	1,563	1,511	3.5%	1,543
Number of stores at the end of the period	344	342	0.6%	344	342	0.6%	342
of which directly operated	339	327	3.7%	339	327	3.7%	330

"The second quarter of the year came in slower than expected with the timing of Easter, its additional discounting and trading impact compounding challenging consumer confidence. Positively, operating efficiency, online growth and cost control performed in line with expectations" - David Rönnberg, Musti Group CEO  

The business environment embossed by inflation and somewhat weaker consumer confidence affected the pace of growth. Despite the challenges, in relation to the broader retail sector, Musti, once again, performed best in class.

Net sales in the quarter increased by 5,4% to EUR 107.2 million (EUR 101.7 million). Growth was supported by the expansion of the store network and the strengthening online business which amounted to 25.1 % of total sales. Adjusted EBITDA decreased to EUR 15.0 million (16.6) mainly due to currency exchange rate fluctuations, and pressure on gross margins from mix movements and additional discounting. Margin is expected to return to long term trend levels over the coming quarters.

The expansion and optimization of the store network continued. We opened 12 directly operated stores year-on-year. During the quarter we acquired one franchise store, and four franchise stores left the chain. We are on good path and in line with the plan to open 20 to 25 stores a year, primarily in Norway and Sweden.

Our online business continued to perform very well. Like-for-like online sales grew by 11.6 % to EUR 27.0 million and accounted for 25.1% of total net sales. These numbers show that our online customers appreciate our broad offering and delivery options.  

During the quarter the public tender offer by Flybird Holding was finalized, resulting in a new major shareholder.  Our partnership with Flybird and in particular Sonae has started well, and the team and I are excited about the benefits that our collaboration with them will bring.

As we move into Q3 our focus remains to deliver great value to our Pet Parents, expand the business and improve profitability. Tight monetary policy conducted by central banks have kept interest rates high and restricted economies getting back on the track of growth. As financial conditions eventually ease and growth picks up, Musti is in a great position to exploit the opportunity. We are confident that our ability to combine a growing portfolio of products, services, and advice into convenient propositions for Pet Parents is unique and will be the key enabler of future success.

To our team members - on behalf of our shareholders, our Board, our Group management team and myself, thank you once again for your tireless commitment to support our customers and their pets.    

David Rönnberg,   

CEO

Financial targets

Following its review, the Board of Directors of Musti Group Plc has decided to withdraw the company's long-term financial targets, updated by the Board of Directors on 3 May 2021. With the new majority owner, Musti Group is now in a new strategic phase with need to focus on sustainable growth to create value to its pet parent customers, owners and other stakeholders. In addition, the Board of Directors has resolved to amend the company's dividend policy as follows: The company's net profit shall be used towards financing the company's growth and investments, and the company does not expect to distribute dividends. The Board of Directors may however assess dividend distribution annually.

Webcast for analysts and media

A webcast for the analysts and media will be arranged on 30 April 2024 at 11:00 EEST via Teams. To register in advance, please send an email to [e-mail]. The event will be held in English. The report will be presented by CEO David Rönnberg and CFO Toni Rannikko.

Helsinki 30 April 2024

Board of Directors

The information in this Interim Report is unaudited.

Further Information:

David Rönnberg, CEO, tel. [phone]

Toni Rannikko, CFO, tel. [phone]                                                                                                                 

Distribution:

Nasdaq Helsinki

Principal media

www.mustigroup.com

Musti Group in brief
Musti makes the life of pets and their owners easier, safer and more fun. We are the leading Nordic pet care company, and we operate an omnichannel business model to cater for the needs of pets and their owners across Finland, Sweden and Norway. We offer a wide, curated assortment of pet products. We also provide pet care services such as grooming, training and veterinary services in selected locations.

Musti Group's net sales were EUR 426 million in the financial year 2023. At the end of the financial year 2023, the company had 1,643 employees, 1.5 million loyal customers and 342 stores.

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