Swedencare AB (publ)

Hi, and welcome to the presentation of SwedenCare's Q4 reports, led by our CEO Håkan Lagerberg and CFO Jenny Graflind. And we are pleased to have Brian Nugent, the CCO of SwedenCare North America, joining us with a presentation during today's webinar. And as usual, we will have a Q&A after the presentations, so please raise your hand if you have any questions and we will answer them in the end. Over to you, Jenny and Håkan.

Hi, everyone. Håkan Lagerberg here together with Jenny Graflind in Malmo. And then we have Brian Nugent, early morning in Tampa, Florida, joining us for presenting the US Veterinary Division. Okay, let's see now. Year-end report Q4 2024 highlights. Sales in EBITDA are at an all-time high, but growth is not where we want it to be. We had organic growth of 4%, so it's below our expectations. And It's somewhat the same story as last time with our biggest group company NatureVet having some headwind in the quarter with 21% organic growth decline and rest of the group altogether 18% organic growth. So we just need to get NatureVet fixed and then we will be at our growth targets of double digits as a whole group. I will come back and explain more about the road forward with NatureVet. Other highlights. We were accepted for trading under the ticker SWTCF at OTCQX in New York. And the reason for this is our strong presence in the US. You all know that it's plus 70% of our sales are in North America and looking at our shareholder base. We have a majority of European investors definitely looking at on the retail side. We have several North American institutional investors, but we have had requests and also think it's interesting to facilitate the trade of our share in North America. So we will follow this closely and see the development of predominantly retail investors. We also had another VOHC recognition for protein plaque off. Now it was for our fairly new soft juice where we made two clinical studies and could prove that it's effective against both plaque and tartar. And many products on the market that have the VOC seal is actually either or. Not that many products have both for plaque and tartar. We are very happy and proud about that. Looking at our sales channels, it's not an effect, let's say a detailed science because some are distributors and big retailers, we don't get the split there. But fairly similar as it has been, 40% online sales, 30% pet retail and 30% veterinary. If you're looking at the two different main regions that we have, there's a bit higher percentage in the US on the online compared to in Europe where we are a bit higher on pet retail and on the veterinary side, but not that big differences. I've also received a number of questions both from the board and and also from investors about the situation regarding potential trade wars and tariffs and what strategy you have and if we are prepared. And as many of you know, is that we have focused on having manufacturing local. So we have manufacturing hubs in the US for North America, and also a development site and manufacturing site of RX products in Canada. And then we have both in UK and Europe to handle the Brexit situation. So but we have not created this out of let's say, the strategy of avoiding tariffs, it's really down to having having secure product supply, And also from a sustainability perspective that we definitely want to avoid long, unnecessary transport. So that has been the main strategy for us is to have local manufacturing. But of course, it's convenient to have now when we have analyzed the situation, basically, Basically, I wouldn't say we are unaffected, but we have a very, very small percentage that comes from different regions, if you're looking at UK, Europe and US. So we are very local there with the ingredient supply, material supply, packaging. So we're well prepared. The only long-term issue could be that the pharma division that we have, many of the products that we are manufacturing in Canada, are going into the US market. However, it's long-term processes of moving manufacturing projects from one facility to another. and we have the competence. So if it would be problematic between Canada and the US, we are in a position to be able to open up a manufacturing facility in the US also for RX products. Furthermore, the board has proposed dividend of 0.25 sec per share, increase of 9% compared to 2023 and in line with our policy that if the board thinks it's, let's say, it's according to our policy that we could give a dividend up to 40% of the earnings. Jenny?

Yes. Some financial highlights for the quarter. Like Håkan said, we had another gross sales quarter of 661 million, which represents 4% growth. Four of this was organic growth and 1% was acquired growth. For the four-year growth, the organic growth was 9%. And the acquired growth mainly came from Medvent, a Canadian business that we acquired in August 1st. Our operational growth margin was the highest since 2022 with 58.5%. This is in line with our expectations. We have earlier said that we'd like to be around 58%. This quarter was slightly higher due to the fact that we had lower inventory adjustments and also we can finally see some improvement in purchasing. The external costs are increasing with the growth of Amazon as some of those costs are directly linked to sales. In addition, we had 9.7 million of additional costs this quarter and this includes a non-operating legal settlement from prior years. as well as we have done a rebranding project in NatureVet and also we have some reserves in the accounts receivable. As a result, EBITDA is at all-time high, 145.3 million for the quarter. The EBITDA margin is 22% and that's a growth of 9% compared to Q4 last year. The net results are impacted by lower interest costs. Of course, we have lower interest rates and also we have a lower debt level. In 2024, we booked the tax cost and adjustment throughout the year compared to 2023 when a large adjustment came in Q4. So these two items caused the increase of net results. We had a negative 13 million last year, and we now have a positive 23.8 million this quarter. And the net income for the whole year for 2024 is at 98.9 million, and that's an increase of 69% compared to last year. I can also mention that the effective tax rate for our group is at 11%. We continue to decrease our net debt to EBITDA, which is now at 2.05 compared to 2.63 one year ago. In the quarter we have repaid 75 million on our loans and for the whole year we have amortized or repaid 200 million. In addition to that, we have used our own generated cash flow to invest in some acquisitions, which you probably know about. That is a total of 107 million for the year. Operating cash flow was at 81.7 million for the quarter, and at the end of the year, we had 186 million of cash. And since we're closing the year, I just want to give you some highlights for how we finished. So we finished with net revenue, which amounted to just about 2.5 billion. Like I said, 9% growth compared to 23. Gross margin was at 57.7% for the year. And EBITDA grew with 14% this year to 560 million and a margin of 22.2%. Rolling 12 months is of course the full year this quarter, but as you can see, we have had a nice trend of growth and profitability from 2021. Product and brand split. We have had a decrease in nutraceuticals, which is our largest category of 8%. This is due to the decrease of NatureVet, which mainly sell products in this category. Farma, it's a quite small category still, but a very nice strong growth of 37%. We are growing with mainly manufacturing volumes here in Farma. And dental, which is always nice to mention, that mainly includes Proton Plakoff and a few other dental products, grew with 54% for the quarter. This category is now 18% of the group's total revenue. And the main contributors in this product group is the Proton Plakoff powder, but also the soft juice that had a nice growth, but also Restomil. That's a series where we have launched a new toothpaste during the quarter, and that's been well-received. Few comments on the brand split. The largest decrease is in private label, which Håkan will talk about. The contract manufacturing is absolutely worth mentioning. We had a growth of 22% in the quarter. The production segment has grown with 20% for the quarter and 28% for the year. The strongest growth we can see in Europe, we had actually 97% growth in 24 compared to 23. This is mainly driven by the increased software production, which we have in the UK. and where capacity has been built up during the year, but also in Ireland, where we have also invested to increase capacity. InnoVet, our Italian company, has also had a great year with record sales and far above market growth.