Annual report 2019/20 and update of the Copenhagen stock exchange: MATAS

Company announcement no. 01 2020/21 INTERIOR INFORMATION
Allerd, May 27, 2020

2019/20 Annual Report and transaction update

2019/20 Annual Report Highlights and Trading Update for the period of April 1, May 17, 2020

• Growth and solid profit performance for 2019/20: 4.2% growth at the top and 0.7% underlying growth (at constant scope). EBITDA before special items and before effects of IFRS 16 amounted to DKK 518 million
• Estimated impact of the corona pandemic on 2019/20 performance: DKK 50 million in lost sales, DKK 20 million in lost revenue, DKK 75 million in negative cash flow effects
• The Board of Directors recommends the suspension of the dividend for 2019/20. No guidance for the 2020/21 fiscal year. Long-term financial growth and profit ambitions continued despite increased uncertainty about market conditions.
• Online sales increased approximately 300% in the weeks following the lockout
• Strong comeback between April 1 and May 17, 2020: 7% growth in mind, physical store sales are recovering quickly after the reopening, moderate pressure on margins and normalized cash flows

2019/20 annual report: growth despite the crown boosted by the online boom
Matas generated total turnover of DKK 3,688.5 million in the 2019/20 financial year, up 4.2% year-on-year. Sales of stores operated by the Group in 2019/20 and 2018/19 were up 0.7% (underlying growth). EBITDA before special items and before IFRS 16 amounted to DKK 517.9 million compared to DKK 548.6 million last year, and profit for the year after tax was DKK 206 million (before IFRS 16) .

Management estimates that ramifications of the corona pandemic reduced revenues by approximately DKK 50 million and profits by approximately DKK 20 million in the last three weeks of March 2020, when Denmark was locked out . Online sales increased sharply throughout the crisis, and customers quickly returned to physical stores when Denmark reopened.

The crown-induced foreclosure inflicted an immediate and noticeable loss on Matas, but it also made our role in society crystal clear: Danish consumers used Matas in a different way during the crisis than usual. Most of our stores remained open throughout the period and our online sales explodedsaid Gregers Wedell-Wedellsborg, CEO of Matas A / S.

In the fourth quarter, online sales via matas.dk increased by 85% and online sales, including Firtal, accounted for 19.3% of total sales. During the lockout, Matas offered an online shopping service four days a week and launched a new advisory service allowing customers to interact with video-trained materialists. Sales on matas.dk increased by 76% over one year in 2019/20.

Taking into account Firtal’s revenues, 14.7% of sales were made online, compared to 7.1% in 2018/19.

DKKm	After IFRS 16 2019/20	Before IFRS 16 2019/20	Before IFRS 16 2018/19	After IFRS 16 Q4 2019/20	Before IFRS 16 Q4 2019/20	Before IFRS 16 Q4 2018/19
Returned	3,688.5	3,688.5	3,541.3	817.0	817.0	827.7
Gross profit	1,640.4	1,640.4	1,588.8	373.8	373.8	377.2
EBIT	292.9	297.4	363.3	10.8	10.4	49.4
EBITDA	678.4	496.4	529.7	116.2	68.8	92.6
EBITDA before special items	699.9	517.9	548.6	119.1	71.7	95.7
Profit for the period	191.2	205.9	263.1	1.5	0.2	33.3
Adjusted after-tax profit	282.6	297.3	343.2	23.0	21.7	52.7
Cash flows from operating activities	446.8	264.8	472.8	32.6	(14.8)	49.2
Special items	21.5	21.5	18.9	2.9	2.9	3.1
EBITDA margin	18.4%	13.5%	15.0%	14.2%	8.4%	11.2%
EBITDA margin before exceptional items	19.0%	14.0%	15.5%	14.6%	8.8%	11.6%
Increase in income	4.2%	4.2%	2.2%	(1.3)%	(1.3)%	7.6%
Growth in underlying revenue (at constant scope)	0.7%	0.7%	0.5%	(2.2)%	(2.2)%	2.1%

Performance compared to 2019/20 financial forecasts hampered by the corona pandemic
The company estimates that the foreclosure of the Danish economy, which has forced a number of shopping centers, and with them some 35 Matas stores, to close temporarily, has reduced revenues by around DKK 50 million over the past three years. weeks of March 2020. By the end of March 2020, 235 Matas stores were open and by May 11, 2020, all of the Group’s stores had reopened.

Total revenues for March 2020 were at index 86 compared to the period of the previous year, while sales for the last full quarter reached index 99 compared to the previous year.

Turnover for the whole year amounted to DKK 3,688.5 million, up 4.2% year-on-year. The growth in underlying revenue (at constant scope) was 0.7% and the EBITDA margin (EBITDA before special items as a percentage of revenue) was 14.0% (before IFRS 16 ).

Management estimates that, had Denmark not been affected by the crown pandemic, overall revenue growth for the 2019/20 fiscal year would have exceeded 5.5% and that the growth in underlying revenue (at constant scope) would have exceeded 2%.

The EBITDA margin before special items and before IFRS 16 would have been well over 14%, since profit was affected by DKK 20 million in the last weeks of March due to lost sales and costs extraordinary.

In view of the corona pandemic, our 2019/20 performance was satisfactory. We were on track to meet our growth and profit expectations when the crown crisis started, reducing revenues by DKK 50 million in a matter of weeks. We realize, however, that other sectors of the retail industry have been hit much harder than us, said Gregers Wedell-Wedellsborg.

Cash flow was affected by the corona outbreak, partly due to the deficit of DKK 50 million in March and partly due to the build-up of stocks of corona-related items.

Trading Update: strong return with sales growth of 7% for the period from April 1 to May 17, 2020
Matas increased its sales by more than 7% over one year during the period from April 1 to May 17, 2020. Matas quickly recovered from this part of the crisis in phase with the gradual reopening of Denmark and recovered a part of the loss of income suffered in March. As a result, Matas has already recalled all of its employees, has left the salary compensation system and has decided to reimburse the salary compensation already received.

Sales growth during the period from April 1 to May 17, 2020 was driven by exceptionally strong online sales. Together, online sales via matas.dk and Firtal have tripled from year to year.

A higher proportion of campaign sales compared to the previous year combined with the high proportion of online sales and extraordinary costs for running matas.dk and delivering online purchases to put income under pressure moderate.

By recording strong income growth in April and the first half of May, Matas recovered some of the ground lost in March and escaped fairly unscathed from the crisis. In this context, we decided to fully reimburse the salary allowances we received from the government. The wage compensation system helped us close the gap when sales fell in the first few weeks and helped preserve hundreds of Matas jobs. The parties behind the agreement are to be commended for their swift action to protect our employees and allow management to focus on safe leadership of the crisis, said Gregers Wedell-Wedellsborg.

Free cash flow normalized during the period from April 1 to May 17, 2020.

Financial goals and ambitions
The health, financial and structural consequences of the COVID-19 pandemic are serious and could affect the behavior of consumers and society as a whole for a long time.

As a result, the current uncertainty regarding the retail business in particular and economic developments in general has increased, and in this context Matas has decided not to provide specific financial guidance for the 2020/21 fiscal year.

Matas’ long-term financial ambitions for revenues and profits by 2022/23 are reiterated. Financial ambitions for 2022/23 are based on continuous and sustained market growth and moderately increasing competition. In addition, the current channel change from physical shopping to online shopping is expected to continue throughout the strategy period. It should be noted that the assumptions are subject to increased uncertainty.

The implementation of IFRS 16 led to a technical adjustment of the 2022/23 ambition of the EBITDA margin before exceptional items, which was raised by around 4%. The underlying ambition of the EBITDA margin before exceptional items remains unchanged, the increase from 14% to 18% being purely technical.

The underlying long-term ambition of the Company’s debt ratio (net debt bearing interest on EBITDA before special items) has been revised. The objective remains gearing of between 2.5 and 3. This effectively corresponds to a tightening of the previous objective, since the technical effect of the implementation of IFRS 16 on gearing is an increase of approximately 0 , 3 percentage point (for a 2019/20 gearing of 3.6 after IFRS 16 against 3.3 before IFRS 16).

Finally, the annual level of CAPEX was lowered for the remaining three years of the strategy period, as investments were biased over the first two years of the strategy period.

The financial ambitions for the period up to and including 2022/23 are as follows:

• 2022/23 global turnover of around DKK 4 billion.
• Positive growth in underlying revenues.
• An EBITDA margin before exceptional items of more than 18% (after IFRS 16) at the end of the strategy period.
• Annual CAPEX of DKK 80,120 million in the last three years of the strategy period.
• A debt ratio (after IFRS 16) of 2.5-3 (net debt bearing interest on EBITDA before exceptional items). The gear ratio should not significantly exceed 3 for long periods.

The effects of the acquisitions of Firtal Group and Kosmolet and green market initiatives are reflected in the financial ambitions for 2022/23. The effects of growth initiatives not yet published were not taken into account in the financial ambitions of the strategic period.

The dividends
On the basis of the current uncertainty relating to economic and societal conditions in 2020/21 and the decision of the Board to strengthen the liquidity of Matas and reduce gearing, the Board of Directors proposes to pay no dividend for the 2019/20 fiscal year.

Conference call
Matas will host a conference call for investors and analysts on May 27, 2020 at 12:30 p.m. THIS IS. The conference call and presentation are available on our website for investors: https://investor.fr.matas.dk. Conference call access numbers for investors and analysts:

DK: +45 82 333 194
UK: +44 3333009263
United States: +1 8338230587

Link to webcast: https://matas.eventcdn.net/2020fy

Please call 5 minutes before the conference call begins.

annual general meeting
The annual general meeting will be held on Thursday June 30, 2020 at 4:00 p.m. CEST at Gorrissen Federspiel Advokater, Axel Towers, Axeltorv 2, 1609 Copenhagen V.

Contacts
Gregers Wedell-Wedellsborg
CEO, tel +45 48 16 55 55

Anders T. Skole-Srensen
CFO, tel + 45 48 16 55 55

Elisabeth Toftmann Klintholm
Investor Relations and Business Manager, Tel. +45 48 16 55 48

Klaus Fridorf
Communication manager, tel +45 61 20 19 97

Forward-looking statements
This announcement contains forward-looking statements, including statements regarding the future operating results of the Matas group, its financial condition, cash flows, business strategy and future goals. These statements are based on reasonable expectations and expectations of management at the time of publication of this announcement. Forward-looking statements are subject to risks and uncertainties and to a number of other factors, many of which are beyond the control of the Matas Group. This may have the effect that actual results may differ significantly from the expectations expressed in the advertisement. Without being exhaustive, these factors include general economic and commercial factors, including market and competitive conditions, supplier, financial and regulatory issues as well as the effects of measures to contain the spread of COVID-19 which are not specifically mentioned above.

• Matas annual report 2019_20 UK

• Matas compensation report 2019_20_EN