Nobia: Strong cash flow despite “unprecedented” UK sales drop

Group sales decline by 25% but cash flow increased and debt reduced

22 Jul, 20

Kitchen furniture Group Nobia cited a challenging quarter, with a sales decline of 25% and “unprecedented” 56% drop in UK sales due to COVID-19, in its interim financial report (January to June 2020).

Nobia invests SEK2billion in Swedish factory

 

However, the group reported it delivered a “strong” cash flow and strengthened its financial position.

President and CEO of the Nobia Group Joe Sintorn commented: “It has been a challenging quarter in unprecedented times.

“We came from a situation with relatively good demand and order book in March, to an escalating Corona pandemic with national lockdowns, closure of factories, distribution etc, preventing us from operating in a normal manner.”

Nobia reported net sales for the second quarter amounted to SEK2.741m, down from SEK3.751 and operating profit of SEK-43m (391), with an to an operating margin of -1.6%.

The operating profit was impacted by restructuring costs of SEK -93million and bad debt provisions of SEK-15million. Profit after tax amounted to SEK -58million (290)

However operating cash flow increased to SEK 716million (244) and net debt declined to SEK231million (1,221).

Jon Sintorn commented: “Even though our operations are normalising, the pandemic still has a large negative impact on the global economy, and we need to continue with measures to safeguard the health of our employees, customers and partners.

“On a positive note, demand for home renovation, and thus also the demand for kitchens, has gradually improved after the steep decline in April, giving us the opportunity to allocate more resources to sales again.

“By mid-June we had reopened most of our physical stores and further strengthened our digital sales capabilities to better service consumers online.”

He continued: “Despite an organic sales decline of 25% for the group, driven by an “unprecedented 56% drop in the UK on the back of the business restrictions, we successfully delivered a strong cash flow and strengthened our financial position.

“The Nordic region delivered a stable result despite the challenging environment, with sales almost on par with last year and an operating margin of 13% from 14.7%.

“Operating income for the group, excluding one-time items, declined to SEK50m (391) and cash flow increased to SEK 716m (244) taking down net debt excluding pensions and leases to SEK231m (1,221).

“At the same time as we have managed the consequences of the pandemic, we have continued to plan ahead and to execute on our strategy.

“To enable investments and collaboration across our strong brands and provide a stronger platform for business decisions, we carried out organisational changes in the quarter by decentralising central functions and regionalising local functions.

“In addition, we are taking further measures to increase efficiency in the UK, which will impact around 240 employees across the UK store network and supply chain.

“Earnings for the second quarter 2020 were charged with one-time costs of SEK93million relating to these measures.”

Nobia temporarily laid off 3,000 employees during the lockdown in March 2020.

Sintorn concluded: “Although our operations are normalising , we foresee that the short-term performance will continue to be impacted by the global recession, albeit not to the same extent as during the second quarter.

“Having said that, I am certain that the structural measures we have put in place, the continued execution on our strategic priorities and the strong balance sheet will provide solid financials and opportunities both short and long-term.”