Compared with revenue for the corresponding quarter in the preceding year including Swedol (MSEK 2,499), revenue declined by 8 percent.*
A STABLE BEGINNING TO THE FINANCIAL YEAR - DESPITE THE IMPACT OF THE COVID-19 PANDEMIC
The ongoing pandemic continues to affect the global economy and thus is inevitably impacting Momentum Group, our employees and our customers. The general demand situation over the past quarter continued to be characterised by restraint and caution in all of our main markets in the Nordic region, although with certain variations between customer segments and countries, with the most significant impact experienced in Norway. However, the overall effect on the Group's earnings performance so far during the financial year to date has been relatively limited given the challenging circumstances, with each business implementing decentralised measures based on their specific level of activity and market conditions. The Group's ability to deliver on our customer commitments has remained strong, as all units continued to operate with a high delivery capacity. Our focus on the safety of our employees and business partners has been one of our top priorities during the period, and we can note that our operations have experienced relatively few disruptions due to illness. At the start of the quarter, some businesses were impacted by disruptions to product deliveries and temporary shutdowns at customer production facilities. The customer segments in the automotive and oil & gas sectors were hit hardest by declining demand. However, the effect of these disruptions with respect to the product range and demand gradually decreased during the quarter.
In total, the Group's revenue and EBITA decreased by approximately 8 percent during the quarter compared with the preceding year (including Swedol). Previously implemented measures intended to improve efficiency combined with the various government grants for part-time working thus resulted in a relatively stable earnings performance for several of the Group's businesses during the quarter.
The cumulative effect of the pandemic on our earnings during the remainder of the financial year is currently difficult to predict and depends entirely on the extent and duration of the decline in demand and the effects of the cost-cutting measures that may continue to be taken, with or without the supportive measures implemented in each country.
STATUS AND GOAL FOR THE COORDINATION OF TOOLS AND SWEDOL
The coordination of TOOLS and Swedol was initiated during the quarter and is proceeding well, despite the challenges involved in meeting in person. We were also able to confirm that our initial goal of an EBITA margin of 10 percent for the merged business area remain, compared with the initial margin of just over 6 percent and given the current business volume. This margin improvement is to come from measures to improve the contribution ratio (with improved purchasing terms and increased sales of products under proprietary brands) and from increased efficiency and reduced costs (through store coordination, more efficient logistics and a joint organisation). Linked to our financial goal to achieve annual earnings growth of 15 percent, our ambition is to reach our goals for the acquisition within a three-year period, subject to the impact that COVID-19 may continue to have on our operations.
New Group structure during the year
Momentum Group's decentralised business model entails that business decisions are to be made close to the customer and the operations. In addition, increased focus also generates results, and in conjunction with the acquisition of Swedol, the conditions have now been created to form a "new" Momentum Group with two strong business areas. Each business area will therefore comprise a separate sub-group with its own dedicated senior management group - with the business area Tools, Consumables, Workwear & Protective Equipment under Business Area Manager Clein Johansson Ullenvik and the business area Components & Services under my own management. This will give the business area Components & Services an opportunity to focus on acquisition-driven growth while maintaining profitability in its areas, and allow the business area Tools, Consumables, Workwear & Protective Equipment to fully focus on the ongoing integration of TOOLS and Swedol in order to generate synergies and create an even stronger and more efficient operations for its customers. These changes are further supported by the Group's intention to form a separate subsidiary Board of Directors for this business area during autumn 2020, which will manage and prepare any integration issues. The Board of Directors and Group management are convinced that having two business areas with operational independence, decentralised business responsibility, increased focus and their own management groups will create favourable conditions for continued value growth for Momentum Group and its shareholders.
Stockholm, July 2020
President & CEO
Ulf Lilius, President & CEO, Tel: +46 10 454 54 70
Mats Karlqvist, Head of Investor Relations, Tel: +46 70 660 31 32
The information in this report is such that Momentum Group AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. This information was submitted for publication, through the agency of the contact persons set out above, at 8:00 a.m. CEST on 16 July 2020.
This document is in all respects a translation of the Swedish original Interim Report. In the event of any differences between this translation and the Swedish original, the latter shall prevail.
Momentum Group is a leading reseller of industrial consumables and components, service and maintenance to professional end users in the industrial and construction sectors in the Nordic region. The Group has annual revenue of approximately SEK 9,5 billion and approximately 2,700 employees. Momentum Group AB (publ) has been listed on Nasdaq Stockholm since June 2017. Read more at www.momentum.group.