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Fast synergies and opening of veterinary clinics gave a record boost in Q2
Summary of the period
Second quarter: April 1st - June 30th, 2021
Numbers in parentheses refers to outcomes during the corresponding period of the previous year.
First 6 months: January 1 st - June 30th, 2021
*Converted to the number of shares after the share split 5:1
Significant events during the second quarter
Significant events after the second quarter
Words from the CEO
Record acquisition and strong momentum for Swedencare
Yet another intense quarter is behind us, and we start seeing what I have been predicting in recent reports – that the new Swedencare is a company that continually will be able to deliver higher growth than the general market. This is made possible due to our competent staff and above all our fearless and somewhat unconventional approach to our work. We are curious, flexible, customer- and solution oriented and we are breaking new ground in many areas where we see exciting opportunities. Once again, I am impressed by our organization´s capacity to execute several major projects in a short period of time. Time after time we prove that our working capacity is high and that we can handle large as well as small projects without letting any business opportunities pass us by. I can´t see that there are any organizations that can match us today when it comes to competence, flexibility, speed, and the will to make sure that all customers are satisfied with the services and products that we offer the market.
The second quarter’s sales are 160 MSEK ($18.8 MUSD) which is an increase of 400% compared to Q2 2020 and the EBITDA grew by 536% to 47 MSEK ($5.5 MUSD), which constitutes a margin of 29.4%. Adjusted for acquisition costs, we reach an EBITDA-margin of 30%. Q2 brought a strong momentum for us and for the market in general despite continued effects due to the pandemic worldwide generating increases in costs, lack of inputs and transport challenges.
Our organic growth was 45%, which solidly exceeded the 30% I had expected based on last year’s Q2 being more modest due to the pandemic. Again, we exceed the market growth, and we strive to keep doing so. There is still much to do, and we have strong product lines that will develop with increased sales channel efforts as well as brand new therapy areas.
All though being successful during this quarter some of our larger projects were slightly delayed and only got initiated in the last weeks of the quarter which means that they are not included in our sales figures for Q2. Among these is the launch of Animal Pharm´s products on the internet platforms Amazon and Chewy, as well as Pet MD® on Amazon UK and the rest of Europe. I promise to get back with more information about these projects in the coming reports.
I would like to highlight some of the activities executed by our group companies and markets worldwide. Our newly acquired companies all had high profitability and when looking at growth, to compare with our 45% organic, it varied between nearly 100% to single digit growth for a few. The ones with smaller growth had one thing in common, it was due to back orders from suppliers. We have thankfully been able to deliver most of these in July. The situation is a bit better than end of last quarter and together with our acquisition of Vetio I do believe that we will be able to minimize back orders before the year end. Our company DNA is sales and delivery so we don´t like to know that we could have sold even more.
In, basically, all markets there was a sharp increase in the two channels, Veterinary and Pet Retail compared to Q2 last year since most of the outlets have gone back to normal opening hours and with normal customer flows as a result. Online, that for many of our end customers was the only viable alternative last year, also increased but not to the same extent as the other two. Besides the re-opening of the physical stores the main internet platforms in North America and Europe have all had some challenges concerning warehousing and fulfillment which has led to limits in how large inventory the vendors are allowed have. New logistic centers are being launched so hopefully this issue will be more or less solved in the second half of this year.
It is satisfying to see that the strong development continues in middle- and south Europe. Our online team works focused to launch on all the Amazon platforms in Europe which, together with increased campaigns on social media, also drives sales in the physical channels. Our Irish production facility has been going in full speed and with several new projects to start up production within dermatology in the second half of the year we will increase further. Nutravet is worth to highlight after a record sales quarter where several new products have been launched, among them ”nutraplaque” containing our unique ingredient, and they have all received a fantastic response from the market. Our Greek group company is launching Nutravet and there is strong interest in the brand and its high quality and unique product range.
For external markets we have had large shipments to Asia (China and South Korea) and an encouraging first order to a new pet food project in Brazil. Looking at South America I would like to mention Chile which has developed exceptionally over a short period of time. Despite the rather small size of the Chilean market, I would not be surprised if Chile will be our largestmarket in South America already this year.
USA which, already prior to the Vetio acquisition, is more than 60% of our sales continues to deliver. SwedencareUSA has now started the launch to the Pet Specialty retailers of carefully chosen Stratford and Animal Pharm-products under the Swedencare-brand. Official launch is in a couple of weeks at the SuperZoo trade show, but sales have already been done to a chain in Canada and there are more to come! This is a good example of how our group can take advantage of the large and varied product portfolio from all our companies into new segments and opportunities. Our new warehouse and distributions center in Florida has grown and now entails all of Stratford, Animal Pharm and Holden2’s operations. There have been some one-time costs and naturally a tremendous strain on the colleagues in charge of this project who all have done an outstanding job. Holden2 has expanded their organization to among other things manage both internal and external projects for the increased presence in different digital channels. Still focus on Amazon and Chewy together with our own direct to consumer (D2C) source. One new feature this quarter has been the launch of a successful “auto-ship program” on PetMDstore.com. Rx Vitamins first quarter was strong, and we have already launched on a couple of new international markets.
At the end of the quarter, we did our biggest acquisition ever, Vetio – the leading specialized CDMO (Contract Development Manufacturing Organization) within animal health. With $20 MUSD in sales the first half-year of 2021 we know that Vetio will be a significant part of our sales already this year and I am convinced that Vetio will have a strong growth rate since they already have several volume contracts starting in 2022 and 2023 and all new business opportunities that are out there. The acquisition also gives us a platform and security for our own product supply, where we’ve had some issues which I have mentioned. I have received many positive comments from market ”colleagues” and some very disappointed because they missed out on this opportunity. In connection to the deal, we secured funding from two strategic investors of 1 150 MSEK ($135 MUSD), which gives us confidence that we are on the right track. The new shareholders will contribute positively operationally, primarily within pet food as well as with M&A.
We have made many good acquisitions over the years, but Vetio is the most transformative, not only due to size but since we now possess a width and capacity that not many in the animal health industry do. This means that we will get opportunities to completely new types of business deals and give us a rather unique position in the market. We have already several new business concepts in development but first I will have a couple of weeks’ vacation! I hope that all of you, our shareholders, are satisfied with what my fantastic organization has delivered in this quarter and that you also have had or will have some days off this warm summer.
Håkan Lagerberg, CEO
Malmö July 29th, 2021
The complete half year report is attached to this press release and is available at www.swedencare.com
Swedencare invites shareholders and analysts to a presentation of the half year report where CEO Håkan Lagerberg and CFO Jenny Graflind will comment on the report. The presentation will be held today at 11:00-11:30 am CEST and can be followed via live webinar.
Please use this link to join the webinar:
https://swedencare.webinargeek.com/swedencare-live-presentation-of-our-q2-report-with-q-a/join/yb72gy69
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