Nepa AB (publ): TURNED PROFITABLE WITH CLEAR STRATEGY FOR PROFITABLE GROWTH

This is a translation of the Swedish interim report. If there should be any discrepancies, the Swedish language version governs.

 

FOURTH QUARTER, OCTOBER- DECEMBER 2020

  • Net sales decreased by 3.9%, or 3.2% FX adjusted, to MSEK 67.8 (70.5)
  • Gross profit decreased by 6.9%, or 6.1% FX adjusted, to MSEK 50.3 (54.0)
  • EBIT increased to MSEK 5.4 (-5.3)
  • Earnings after tax was MSEK 4.3 (-6.2)
  • Earnings per share was, basic SEK 0.55 (-0.79), diluted SEK 0.55 (-0.79)

 

FULL YEAR, JANUARY – DECEMBER 2020

  • Net sales decreased by 1.6%, or 0.9% FX adjusted, to MSEK 258.8 (263.1)
  • Gross profit decreased by 5.9%, or 5.0% FX adjusted, to MSEK 190.2 (202.0)
  • EBIT increased to MSEK 15.6 (-22.9)
  • Earnings after tax was MSEK 13.1 (-22.9)
  • Earnings per share was, basic SEK 1.67 (-2.91), diluted SEK 1.67 (-2.91)

 

IMPORTANT EVENTS

DURING THE PERIOD       

  • All employees in Sweden have been back to full time work from October 1st.

 

AFTER THE PERIOD ENDED

  • We have continued to welcome new customers and have not lost any customers so far.

 

A WORD FROM OUR CEO

Market conditions developed stronger than we expected in the fourth quarter as old clients continued to rely on us and new clients were added. In part, this may have been an effect of the market being cautious earlier in the year, while the need to analyse customer behaviour increases in times of change.

We ended the year with another profitable quarter, showing an EBIT of SEK 5.4 million (-5.3), an increase of SEK 10.7 million compared to the same quarter last year. This is without any government support. Revenue decrea­sed 3.9 percent in the quarter to SEK 67.8 million (70.5). Reduced demand for ad hoc services due to the pan­demic contributed to the decline. This was in line with our assessment that the second wave of the pandemic combined with the strong sales in corresponding quarter of 2019 would make it difficult to show revenue growth. Gross profit fell 6,9 percent to SEK 50.3 million (54).

For the full year, we report sales growth in Sweden and Finland, and a group operating profit (EBIT) of SEK 15.6 million, an improvement of SEK 38.6 million from SEK
-22.9 million in 2019, despite the pandemic. This includes government support of SEK 9.1 million. Cash flow for the year was SEK 54,9 million (-30,6) which means that cash at year-end increased to almost SEK 70 million (14.6), including government loans of SEK 15.5 million.

When I took office in January 2020, I promised three things;

1. that we would return to profit,
2. strengthen cash flow and
3. to increase the share of recurring revenues in the long term.

Just over a year later, I note that we have delivered on the first two pledges. We have in 2020 grown the recurring revenues by SEK 6.2 million, or 3.8 percent. We have established a strategy that creates the conditions for increasing growth and the share of recurring revenues in the long term. I am proud that we have distinctly succeeded in reversing the trend and want to take the opportunity of thanking all of my colleagues at Nepa for their extra­ordinary work during challenging conditions.

Working on the new Nepa

This week, the Board adopted the new strategy which clearly indicates our future direction that we have been working on since early autumn. After analysing the situation in 2020, this year we are laying the foundation for stepping up growth and profitability through smarter utilization of our latest technology platform, increased scalability, and more streamlined deliveries. With proprietary algorithms in marketing optimisation and branding, we can make fast and statistically assured calculations. As a result, we can significantly increase our clients’ ability to control and strongly improve the effectiveness of their marketing investments and brand development. That the strategy is working is demonstrated by this year’s outcome in Finland, where we have progressed the furthest in migrating our recurring project to our latest technology platform, which has resulted in higher quality in deliveries, radical profitability improve­ments and satisfied clients.

The end of cookies

In recent years, privacy issues have received increasing attention, with the EU’s Data Protection Regulation (GDPR) as one example. Privacy requirements have prompted search engine players such as Firefox, Safari, and most recently Chrome to end support for third-party cookies and data in their respective advertising tools and browsers. Thus, once these decisions are implemented, it will no longer be as easy to follow individuals’ online behaviour and to target ads to individuals. For Nepa’s clients, this increases the need for data collection, decision support and analysis to compensate for this, which benefits us.

Future prospects

The positive market trends have continued into the beginning of this year. After the measures taken in 2020, we have a fundamentally sound business and thanks to the last years investments a new tech platform. We can now put our energy into migrating our many recurring projects to our new platform in all markets, after testing it with great success in Finland. This will allow us to substantially increase our scalability. We also know, through our expanded partnership with Facebook, that our modelling competence and proprietary algorithms are world class, and we are now adding these to most of our deliveries.

I am humbled by the continued transformation work ahead of us this year. When this phase is completed, I believe that we will have an internationally competitive offering with the potential for rapid growth combined with profitability.

 

P-O Westerlund
CEO
 

For further information, please contact:

P-O Westerlund, CEO                            Michael Wallin, Head of IR
+46 706 404 824                                     +46 708 788 019
p-o.westerlund@nepa.com               michael.wallin@nepa.com

This is a translation of the Swedish interim report. If there should be any discrepancies, the Swedish language version governs. The Swedish version is information that Nepa AB (publ) is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 08:00 CET on March 19, 2021.