A quarter characterized by good growth and preparations for 2022
SUMMARY OF THE PERIOD
Fourth quarter: October 1st - December 31st 2021
Numbers in parentheses refer to outcomes during the corresponding period of the previous year.
Full year 2021
* Purchase Price Allocation (PPA) adjustment - In connection with the year-end work, the acquisition analyzes have been completed, which means in short that parts of the Goodwill item have been reallocated to identifiable intangible assets and inventory. The adjustment affects both the cost of goods for the acquired companies Nutravet, Pet MD Brands and Rx Vitamins (43.3 MSEK) and depreciation (53.6 MSEK). The negative impact on earnings regarding product costs, where these are reported at fair value, i.e., with a low profit margin, is of a non-recurring nature and is charged in 2021, while depreciation is made over the assets expected life. The completed acquisition analyzes do not affect cash flow. For more information, see note 2 in the Appendix.
** Converted to the number of shares after the share split 5:1
Significant events during the fourth quarter
Swedencare AB (publ) acquires Fulfillment Advantage Ventures (FAV), an American pet e-commerce logistics company on October 1st. The purchase price of a total of approximately 41.5 MSEK was paid through a cash payment of approximately 25.0 MSEK and a new issue in kind of shares of approximately 16.5 MSEK.
Swedencare AB (publ) sets new financial target. In 2026, sales will reach 4 Billion SEK with an operating profit before depreciation and amortization (EBITDA) of at least 30%
Significant events after the fourth quarter
Swedencare AB (publ) acquires the Italian Pet Health Care company Innovet who are focused on the veterinary segment. Access is expected to take place on March 1st.
Swedencare AB (publ) acquires the leading American pet supplement company NaturVet, which was completed on February 1st. The purchase price of a total of approximately 4,148 MSEK was paid through a cash payment of 3,717 MSEK and a new issue in kind of shares of 431 MSEK.
Swedencare AB (publ) carries out a directed new share issue of 35.5 million shares and is thus provided with 3,550 MSEK, which, after issue costs of 16.5 MSEK, provided a net contribution of 3,533.5 MSEK to partially finance the acquisitions of NaturVet and Innovet.
Words from the CEO
Strong sales ending the year with focus on synergies and continuing marketing investments to prepare for 2022
Thanks to successful acquisitions during the year and a strong ending of our sales, this quarter exceeds the total sales of 2020!
The revenue for the fourth quarter was 255.2 MSEK, which is a 154% increase compared to Q4 2020, and our strongest quarter so far. Our operational EBITDA-result increased by 43% to 48.3 MSEK, which gives us a 18.9% margin. Due to the rapidly increasing prices for raw materials, we had anticipated lower margin this quarter, especially for Vetio, the acquisition completed this summer. Results were also affected by the planned expansion of personnel at out new production facility in Florida, which soon will commence large scale production, initiation and marketing of a number of large online projects, which will be reaching a satisfactory level of profitability already by Q1 2022 and some legal costs that are not reoccurring. With price adjustments effective of January 1st and a strong start from all subsidiaries I expect us to be back to an operational EBITDA over 25% already in our next report.
The record-breaking revenue was not self-evident, as we still experienced effects of Covid this last quarter. Some exhibitions/costumer gatherings were postponed, and some customers were a bit cautious when ordering due to the risk of possible Omicron related lock downs. Luckily restrictions were brief, and we now really feel that 2022 has started full speed ahead businesswise. Customers in Asia and South America have regained their appetite, not only placed large orders, but also showing great interest in discussing our new product lines and planning upcoming launches in 2022. Compared to Q3 we grew by 15%, a satisfactory increase considering the somewhat hesitant trend at the end of the quarter. Our product supply keeps improving, mainly due to transfers to our own production facilities. We are planning to become completely self-sufficient in the production of soft-chews before the second half of 2022. By acquiring NaturVet, which we managed successfully despite a highly competitive situation, we secured a very important piece to reach self-sufficiency.
The US Market, the world’s largest, keeps dominating our business, even more so after our acquisitions since 2020. We have finished the merger of Stratford and Animal Pharm in which we have welcomed a very experienced CCO to be in charge of the veterinary business in the US. This addition is especially important in developing and making the most of all the opportunities we have within our group. Our strong market position has opened up for many new business opportunities, which we look forward to exploring. We experience great interest in our company from a business perspective, but also as an employer with many extremely qualified people contacting us. We will keep adding talent to our team, but cautiously so it’s in line with our growth and profitability plans.
Our newly acquired e-commerce fulfillment company FAV has had a flying start and is already a crucial part of our strong growth online. This will be even more notable as 2022 proceeds, as we so far only had time to extend the collaboration for a number of our subsidiaries and with a limited assortment. We have moved FAV to our logistic hub outside Tampa, to increase productivity while lowering costs. This setup also allows sharing staff resources between our group companies in the area. The number of shipped products from FAV increased from 49K in Q3 to 75K in Q4 and this is only the beginning. In Q1 dropship programs with Chewy and Target+ is starting and we have also successfully launched unique so called ”bundle packs” on Amazon.
Vetio faced some challenges during the quarter. We were aware that the result would be affected by significant price increases on raw material and packaging material and that Q4 would be more affected than Q3, during which the company still had access to material purchased in the first part of 2021 at significantly lower prices. From January 1st we have been able to balance these additional costs by increasing our prices resulting in improved margins already in January. Furthermore, the company faced increased personnel costs and also costs to finish our production facility in Florida, which also affected the margin negatively. Simultaneously the quarter has been very successful with the completions of development projects and securing deals with both existing and new customers. Vetio North, our pharma facility, will deliver three volume manufacturing contracts during 2022, compared to just one smaller production in 2021. The smaller production will increase during the first half year and the other two will gain full capacity during Q3, after test runs in the spring. Vetio South will start production in the new facility during Q1 and will be fully up and running by Q2 with both external and internal projects. All volume customers within the dermatology sector are projecting double digit increases for the year.
Our product line ProDen PlaqueOff® continues its strong development and we are happy to report a 10% increase in sales during the first quarter after the expiration of our patent. I have always underlined the strength of our brand, the strong clinical evidence, and the loyal customer support we have worldwide. We are also having interesting discussions with new partners about possible collaborations, which if concluded, will have a significant impact on sales for 2022. Markets with particularly positive trends during Q4 were the US, Scandinavia, Spain, Japan, Chile, and Australia. China returned with an order, and it is worth noting that during the Chinese online-super-day ”double eleven” ProDen PlaqueOff® came in on a strong first place with 22% of all sales in the Pet dental category on Tmall/Taobao, the runner up Tropiclean had 13%. Never before have we taken such a large part of the sales and never with such a distance to the second runner up.
Our English group company Nutravet had a very strong year, and the quarter proceeded equally so. Worth noting is that this quarter was the strongest ever export wise and South Korea stands out especially. We also have a continuing collaboration between Nutravet, SwedencareUK and Swedencare Ireland. Together we have a strong position and can avoid many of the trade obstacles that have evolved between the EU and the UK due to Brexit.
At the turn of November/December, for the first time in two years, we finally managed to gather the board and most group companies to hold a strategical and business development meeting in Tampa, Florida. The majority of the participants met in person for the first time and all though digital meetings have merit they don’t compare to meetings face-to-face when it comes to results. We spent some really productive days together and although some synergy projects had been started before, this get-together can be seen as pulling the plug. We see a noticeable difference in how the group companies now interact directly, without involvement from group management. During the meeting we were fortunate to welcome Dr. Pol and his family who shared their knowledge and experience. Gathering more than 40 people from all over the world is a significant investment which proved to be well worth while.
We can sum up 2021 as a very intense year with the numerous transformative and complementary acquisitions of Pet MD Brands, Rx Vitamins, Vetio and finally also FAV. Even though Covid has affected the business in many ways our organic growht summed up to 17%. However, I am convinced that when I write next year’s ”Words from the CEO” we will have delivered over 20% in organic growth. 2021 has been a year with continued strong demand and with focus on analyzing the North American market, export opportunities, business development as well as identifying and implementing synergies and taking advantage of opportunities. 2022 has started strongly proving that our solid work last year already is starting to pay off and that our organization is characterized by commitment, execution, and pride.
Furthermore, we started this year by taking a big step towards becoming the leading Pet health company by making two fantastic new acquisitions. With Innovet, our longtime partner on the Italian veterinary market, we gain an impressive product portfolio, advanced scientific knowledge, and a strong IP portfolio, which we will develop internationally. Today Innovet has a revenue of 133 MSEK, of which 90% is from within Italy, and the company has a high profitability with an EBITDA over 30%. Innovet has a strong pipeline of new products, and we look very much forward to helping to get these launched to the international market on a larger scale. Renato della Valle, who alongside with his family, have managed Innovet successfully will remain as CEO and he is committed to further increase growth with the help of our group.
The largest acquisition in the history of Swedencare was when we acquired the US company NaturVet, an acquisitions I hardly would have dared to dream about just one year ago. NaturVet is a unique brand and the oldest as well as the strongest in Pet retail supplements in the USA. With sales of almost 600 MSEK during 2021 to over 10 000 independent pet specialty retailers as well as to four of the five largest chains, among them Petco, and with rapidly growing online-sales to, among others, chewy.com and Amazon NaturVet truly is a transformative addition for us. With this addition, besides from gaining an impressive product line, we also get an exceptional management group and a sales organization that complements ours as well as the leading soft-chew production in the US. Two lines are currently producing and during Q2 a new third line will be implemented, which will more than double the current volume capacity. Apart from all this, another important reason for us to work relentlessly to finalize this deal are the many similarities we found between our companies. Scott Garmon, who founded the company with his wife 27 years ago, shares our visions and view on what’s important in building a successful business. Entrepreneurship, speed, customer focus, quality and profitable growth are examples of what I think characterizes both companies. We have already started a number of projects between our American companies and there is no doubt that NaturVet will be among the fastest growing entities in the group while also boosting our other group companies. Profitability is also at top level with an EBITDA above 30%.
Our financial goals communicated in December 2021 are inspiring but have to be seen in a new light now that we, after acquiring NaturVet and Innovet, had a proforma turnover of more than 1.6 billion SEK in 2021, a significantly higher level than when the goals were set. Nevertheless, the whole organization and I look forward to delivering high growth and a good result this year. We soon will meet customers and colleagues within the pet sector at Global Pet Expo in Orlando at the end of March. Among other things, we will be launching a new product line within the ProDen PlaqueOff® family, a brand-new line from NaturVet targeting Millenials and Dr. Pol will be present at the expo to make his first big product launch. The market knows we have great ambitions, and we look forward to keeping on working in the same spirit!
Håkan Lagerberg, VD
Malmö February 17th, 2022
The complete yearend report is attached to this press release and is available at www.swedencare.com
Swedencare invites shareholders and analysts to a presentation of the yearend report where CEO Håkan Lagerberg and CFO Jenny Graflind will comment on the report. The presentation will be held today at 3:00 -3:30 pm CET and can be followed via live webinar.
Please use this link to join the webinar:
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