CEO Comments, Q1 2019
Given the volatile market situation I am overall pleased with the results for the quarter. Our cost reduction programme is running according to plan and productivity is gradually recovering in our supply chain. In addition, the successful integration of Bribus is generating solid profit contribution to the Group.
Despite difficult market conditions, sales in the UK remained on the same level as the previous year. Retail sales improved somewhat on the back of a better product mix, while sales through our improved trade concept continued to grow. We have now trialled the new trade concept in 30 stores over a 6-month period with good results, and will thus expand the concept to an additional 120 stores during the year. Project sales were down in the quarter, but by the end of March our London based project business started deliveries to a number of key sites such as Southbank Place, Berkeley’s South Quay Plaza and Canary Wharf Contractors. We expect these to deliver close to SEK 200 million within the next nine months.
In the Nordics our Danish business had good momentum in both project and consumer sales. I am especially pleased with the performance of our consumer sales where the two new kitchen concepts, “New York” and “Nordic Spirit”, have outperformed already high sales expectations. We have also modernised the HTH website and started to roll out a revitalised store concept in Denmark during the quarter. Sales in Sweden declined in the period on the back of a softer project market. We currently estimate our Swedish contracts business, representing 5 per cent of Group sales, to have its largest volume drop in Q2/Q3 and to stabilise going into Q4.
Our reported profit generation was slightly improved versus the same period last year, supported by the Bribus acquisition. In addition, higher order values and continued reduction in our fixed cost base mitigated continued price pressure in raw materials and logistics. Performance in our supply chain has also stabilised after last year’s disruptions, resulting in improved productivity in the quarter.
Looking ahead, we believe the high market volatility is likely to continue, especially as a result of Brexit. We are therefore targeting a reduction in our fixed cost base, but also pushing ahead to make further range reductions and faster supply chain consolidation in line with previous communication. All in all, I feel confident that these measures will support a continued strong balance sheet and stable cash flow in the event of a softer global economy. It will also give us head room for investments in growth opportunities and potential M&As, while still keeping dividends in line with our financial targets.
Morten Falkenberg
President and CEO