Second quarter 2021 (Q2 2020)
- Net sales increased by 17.5% to 381.0 MSEK (324.1 MSEK same period last year)
- Net sales growth adjusted for exchange rate differences at 17.6%
- Contribution margin after fulfillment cost increased to 30.0% (29.6%)
- EBITDA amounted to 46.5 MSEK (56.2). EBITDA-margin at 12.2% (17.3%)
- Adjusted EBITDA amounted to 46.5 MSEK (58.8), Adjusted EBITDA- margin of 12.2% (18.1%)
- Operating profit (EBIT) at 35.3 MSEK (45.8), a margin of 9.3% (14.1%)
- Adjusted EBIT at 35.3 MSEK (48.3) gives a margin of 9.3% (14.9%)
- Net profit for the period after taxes at 15.1 MSEK (47.1)
- Earnings per share SEK, before and after dilution at 1.69 SEK (8.75)
First Half 2021 (H1 2020)
- Net sales increased by 24.1% to 800.5 MSEK (645.2 MSEK same period last year)
- Net sales growth adjusted for exchange rate differences at 24.8%
- Contribution margin after fulfillment cost increased to 29.4% (29.1%)
- EBITDA amounted to 73.8 MSEK (85.0). EBITDA-margin at 9.2% (13.2%)
- Adjusted EBITDA amounted to 86.8 MSEK (90.5), Adjusted EBITDA- margin of 10.8% (14.0%)
- Operating profit (EBIT) at 51.7 MSEK (63.7), a margin of 6.5% (9.9%)
- Adjusted EBIT at 64.7 MSEK (69.3) gives a margin of 8.1% (10.7%)
- Net profit for the period after taxes at 21.6 MSEK (57.3)
- Earnings per share SEK, before and after dilution at 2.40 SEK (10.64)
Significant events during the second quarter 2021
- Order production on customer unique packing lines reached 60% for the quarter, on target for 100% by year-end.
- All remaining legacy fixed meal-kits for the Linas Matkasse brand and substantially all of the same for the Adams Matkasse brand were discontinued during the quarter with customers migrating to fully flexible meal-kit offerings.
- Pilot project launched for climate-calculated recipes in Sweden on the Linas Matkasse brand, and external reporting initiated on food waste generated in our own production underscoring our commitment to transparency and sustainability.
- The acquisition of the remaining 41.52% of the shares from the founder and CEO of RetNemt was finalized and the integration of the RetNemt operations was started.
- The settlement of the bond was finalized, in accordance with what was outlined during the listing process.
Comments from CEO Walker Kinman: “Profitable growth continues as Covid influence recedes”
It is exciting to report yet another strong quarter for LMK Group where we have continued to deliver profitable growth while strengthening our competitiveness in the Nordic meal kit space. Despite tough comparison figures, we continue to grow at a fast pace. Net sales amounted to 381 MSEK, representing an increase of 17.6% organically compared to the same period last year, driven by increased delivery volume even as seasonal purchasing behavior in the quarter returned to pre-covid levels. Adjusted EBITDA amounted to 46.5 MSEK (58.8), reflecting an increased marketing spend of 25 MSEK in the quarter as we approach our targeted marketing spending levels. The increase should be put in perspective to the fact that we had very low marketing expenses in Q2 2020 while still being able to attract new customers due to the initial spread of Covid-19. We are convinced that the media investments we have made now, in combination with our continued investments in the technology platforms and other improvements to increase product competitiveness, will support our work to further strengthen our market leading position.
Looking at the first half of 2021, we achieved a total organic growth of 25% from the same period last year, with continued contribution margin profitability improvement despite a massive shift towards product flexibility.
We continue to see high customer activity and strong demand for our flexible meal kit offering and have attracted an increasing number of customers. The number of active customers increased by 16%, with seasonal patterns at the end of the quarter reflecting a pre covid operating environment. At the same time, purchase frequency only declined 2.2%, despite less restrictions relating to the pandemic and the return to normal seasonal purchasing behavior. Average transaction value increased by 4% on a common currency basis as a result of the successful launch of grocery add-ons, mix change given increased flexibility and price increases.
Increasing customer loyalty is one of our top priorities and we continued to make changes to our operations in the quarter that will further drive loyalty. Order production on customer unique packing lines during Q2 2021 increased to 60% compared to 30% the corresponding period last year, and 49% in the previous quarter. This is largely due to the successful integration of our flexible offering, which enables more customers to choose recipes easier, in addition to the sunsetting of significantly all legacy portfolio products in the Linas Matkasse and Adams Matkasse brands during H1 2021. Furthermore, as we continue to shift toward 100% customer unique processing, we expect batch processing to be completely phased out in H2 2021 for all brands. While increased flexibility in packing operations carries a higher unit production cost, these have been lower than originally estimated and, so far, we have been able to offset this increase in cost with scale economies and purchasing productivity leading to an increase in our Contribution Margin compared to the same period last year.
Moving forward sustainably
In May, we announced the launch of a pilot project for climate-calculated recipes, which aims to increase transparency in recipes while facilitating active choices for customers. As announced after the end of the quarter we have furthermore initiated disclosing of food waste from own production as part of the yearly sustainability reporting. For 2020, we measured a food waste per meal of 1.74g and are continuously working to reduce these values even further. Our short-term target is to maintain this world leading level of production food waste while increasing meal flexibility for customers and shortening order to delivery times.
In addition to measuring food waste, LMK Group is continuously working with suppliers to eliminate unnecessary plastic packaging that does not reach the consumer and reduce both cost and waste in the value chain. We have set an initial target to reduce plastics within the LMK Group meal kits by 20%. In addition, we have identified areas within nutrition, local sourcing of proteins, and transportation where measurement and target setting processes are ongoing and will be shared when they are ready.
Continued high customer activity expected
Going forward, we will continue to deliver on our strategic priorities to enable profitable growth through inspiring meals that simplify customers’ everyday life. A key activity is the integration of the RetNemt operations which is well underway and on track to be complete during Q4. Investments related to integrating RetNemt are expected to land in the range of 10-15mSEK over the next 12 months. As a result, we will have a single ERP and technical platform across the group providing further opportunities for unit economic improvement and accelerating growth in Denmark.
We continue to see high activity early in Q3 2021. During the second half of 2021, we expect to see the normal impact of seasonal purchasing behavior return as more customers travel or otherwise pause deliveries around the year-end holidays. We remain confident that the changes to our product model combined with the increase in the customer base will generate solid growth even during the second half of 2021 in a challenging comparable environment.
Lastly, we have had the pleasure of welcoming more than 70 new employees to LMK Group during the quarter. The majority are based in Norway where we previously have had a high share of staffing agency personnel in production. We have also recruited new talent in tech and marketing. During the quarter we finalized an organizational development project engaging our employees to launch a common group definition of our purpose, culture, and key strategic focus areas. We call it the “Compass” which we will use to continue to navigate in the Nordic foodtech landscape with an ever-increasing efficiency. Through our services we will continue to inspire and make it easier for people to cook and enjoy good food. Always with the purpose to continue innovating the mealtime experience.
Report presentation
CEO Walker Kinman and CFO Erik Bergman will present the report in a conference call and webcast today 24 August at 09:00 CEST. The presentation will be held in English and will be concluded with a Q&A session.
To participate via telephone please dial-in on the numbers below:
SE: +46 8 5055 8368
NO: +47 235 00 236
DK: +45 787 232 52
UK: +44 3333 009 034
US: +1 646 722 4903
Webcast link: https://tv.streamfabriken.com/lmk-group-q2-2021
Link to report
The interim report is attached to this announcement and can be found at: https://lmkgroup.se/investor/financial-reports/
