Nimbus Group AB (publ)

STO:BOAT

Earnings Call Transcript 2022-Q4

[Operator]

Welcome to the Nimbus Q4 presentation. [Operator Instructions]

Now I will hand the conference over to the CEO, Jan-Erik Lindström; CFO, Rasmus Alvemyr; and Head of Investor Relations, Gunilla Öhman. Please go ahead.

[Jan-Erik Lindstrom, executive]

Thank you, and welcome. My name is Jan-Erik Lindström, and I will start this presentation then. And if we then switch to Page 3, some highlights of the fourth quarter. We had a sales increase by 25%, up to SEK 338 million. Improved EBITA amounting to SEK 10.3 million compared then to SEK 5.6 million last period, same last year then. The EBITA margin, 3.1% compared to 2.1% and the order book at a good level of SEK 930 million.

Still some supply chain disturbances, but we would like to point out that this situation is improving and it's a big difference, which is then, of course, good for us and interesting for the future. We still see a softer demand for lower-end boats. We talked about it in quarter 3 and that picture remains then. For us, it's a limited effect on the total sales since it's a small part of our core business then.

If we switch pages, something around the full year then, as we say here, we continue to execute on strategy. For the whole year, we had a sales increase of 20%, up to SEK 1,751 million, actually a new record for us. The organic growth of this was then 18.5%, which is very, very good and we kind of like that. We will come back to that later on. The EBITA amounted up to then 16%, SEK 193 million compared then to SEK 166 million last year.

During the year, we had this acquisition then of Herholdt Andersen in Norway, important step for us because Norway is an important market for us. It's a big market and we like them to focus a little bit and improve our presence at that market. So it's an important step.

Maybe then if you compare the big numbers, so to say, even more important step then, is then that we, during the year, actually then formed a local organization, our own office in Annapolis in North America, a big step for us.

We have prepared the product portfolio for expansion. We will come back to that a little bit later on. We also then increased during the year, increased the production capacity and together with what I said before, the improved situation and the supply chain in quarter 4, the picture starts then to look, I think, I should say good for the future.

If we then switch page. A small reminder, what is Nimbus Group, and this is the Nimbus Group founded in 1968. Almost immediately, we started our history of international sales. You can say 1 year after we were founded we actually started to sell on the international, or I should say global market. We have our 2 household brands with our well-known Scandinavian brands. And actually, if you look at the global brand awareness that is looked upon every year, we have a very high score for several of our brands inside the group.

Short notes, 21 February, of course, listed then on the Nasdaq First North. As I said, '21 May acquisition of Marine Store, the biggest network of dealers in Sweden. '22 then February, the acquisition of Herholdt Andersen. In June, same year, the establishment of the North American office. And in August then the launch of the new Aquador series. And that is a 3-boat series, and it's the biggest thing that we have done in the brand Aquador for actually almost 20 years.

In January this year, also some interesting things has happened. We have had a presentation of a couple of boats, especially then worth mention here then is the Nimbus 465 Coupe. And with that, we're actually entering a new segment for Nimbus, which will be very interesting to learn more about and to sell then, of course. And it looks really promising, but we will come back to that also.

A short reminder, the asset-light production platform, as we have talked about before. On the left side, you can see where we actually produce today. And then it's complete boats we are talking about, 9 locations in total, and 5 of them is actually then outsourced. And that relates then to the picture in the middle where we talk about the scalable cost base setup. And it is about scaling up and scaling down, but to have as much variable cost as possible.

And we are talking about these time frames and as you can see here, we talk about 3 months. And if you can add 2 of them together in 3 months or in 6 months' time, we can do a lot of difference in scaling up, but also then, of course, scaling down if necessary, but it's about that.

Production efficiencies, we work a lot with that. It all starts on the drawing table, as I used to say. And that is, of course, in this picture here, you see a good example of our B2C series, which is a modular area. And of course, then gets easier for the operational part of our company to actually then produce the boats, [ important ].

If we then switch page again, we come to the drivers and we have talked about that before. Basically, they are the same. It's the same picture that we see. Of course, if we start from the top, the overall wealth is increasing. Well, yes, we know that lately we have some pressure on that. But still in a comparison, we are roughly then at year 2019 and then everyone has to ask themselves, was it that bad during 2019?

Well, actually, then we are slightly around 2.5x more money to spend in our pockets than we had year 2000, so 2.5x more to spend. How do we spend this money then? Well, we know for a fact that we spent quite a lot on recreational things. We were -- as I say, we work a lot and we need the recreational time to recharge the batteries and with then, then also to spend them on quality.

We had this, as we say, have increased popularity of staycation. That is an old trend. It started well before the pandemic, but the pandemic accelerated this. What we see now is that this trend line will then normalize and follow the old trend, so to say. And that is our expectation for the future.

If you look at the industry itself, we have a aging boat fleet. I usually talk about the Nordic, but we can switch a little bit and talk about the U.S. picture. And actually, 46% of the fleet in U.S., the recreational fleet, is built before 2000, meaning then that it's actually then older than 23 years. And that is, of course, a great opportunity for us.

If we -- together we add then to that aging boat fleet, the technical development, we can say, and I usually say this, that the big difference today compared to before is that the industry itself actually is in charge for the development. We don't heritage from, for example, the automotive industry.

And what the industry has been aiming for and also aiming at today is then what we call then the easy boating and it's also the in-water handling. It should be less stressful and it should be easier to handle the boats. And it's a big difference, of course, then on the new launch, if you compare that to the older boats and that's important. Then we also have the environmental issue with the new boats compared to the old boats because the new boat is, of course, very much better from that perspective.

If we then switch the page again, we're talking about the order development. And here, we have some interesting things. In total, the order book has decreased by 18% compared with last year, driven then mainly by lower sales in the low-end boats. And then we talk mainly about the Nordics.

If we then start to look into the order book, what do we see? Then we, of course, immediately see that the order book in North America has increased to SEK 190 million, and that is actually 108% increase year-over-year. And that is something that, of course, we are very satisfied with because that is one of our focus initiatives for growth.

The order book has also been -- or tend to be very well-balanced from a geographical point. It's basically so that we have 1/3 in the Nordic, including Sweden; 1/3 in Europe; and 1/3 in U.S. or I should say, North America, which is then, of course, interesting. If we look at the order book in the comparison, which also should remain, remember that the order book in 2021 and the beginning of 2022 was still boosted by the pandemic effect that we talked about on the last page.

So what we say then basically is that the long-term favorable growth trend continues. If we then also look into, again, the order book, how we treat our order book, the prepayment amounted to 16% of the total order book value. And not -- please remember that not all confirmed for certain boat models due to capacity constraints. So we still have some issues then to reallocate some of the models inside the production sites.

And with that, I leave to Rasmus for a while.

[Rasmus Alvemyr, executive]

Thank you, Jan-Erik. We continue to see a strong sales growth in especially Europe and on other markets. Europe has recovered from the pandemic and increased by 114% to SEK 136 million. Other markets, including North America, increased by 26% to SEK 76 million, which is also very positive and in line with the trend that we have seen in previous quarters.

Our investments in the U.S. market during 2022 has not yet had any significant impact on the sales in the fourth quarter. This is expected to happen during 2023 and 2024. In Sweden, sales dropped to SEK 68 million due to weak demand on mainly used boats and low-end boats. Sales in the fourth quarter was strongly affected during [ 2025 ] by, as Jan-Erik mentioned, this positive pandemic effect during that time.

The Nordics increased slightly compared with last year due to the Herholdt Andersen acquisition. Net sales in the fourth quarter amounted to SEK 338 million compared with SEK 271 million last year, which is then an increase by 25%. The organic growth was 21.5% and the difference in between those is fully currency-related.

Important to have in mind when looking at the figures is that the Q4 is a weak quarter for us due to seasonality effects, especially in the Nordic countries. For full year 2022, the net sales ended up at SEK 1,751 million which is an increase by 20% from full year 2021 and by 89% compared with the IPO figures from 2020.

Distribution of sales of -- through own dealers decreased by 4% compared with last year and then that up at 26%. The EBITA margin in the quarter is slightly improved and amounted to 3.1% compared with 2.1% last year. The EBITA is traditionally low in Q4 due to this seasonally weak quarter as it is. EBITA 2022 amounted to SEK 193 million, which is an increase by 16% compared with last year and plus 206% since the IPO 2 years ago. The EBITA margin ended up at 11% compared with 11.4% last year.

The gross margin decreased slightly to 19.2% compared with 19.4% last year. The underlying margin has improved, but the gross margin has also been affected by supply chain disturbances and a lower share of own branded products at our own dealers affecting the consolidated margin. All in all, the gross margin has, therefore decreased somewhat.

The OpEx in relation to net sales has increased to 8.8% compared with 8.6% last year. The increase is mostly referring to investments in the North American market and from additional costs referring to those supply chain disturbances that we have mentioned.

Let me come to working capital. The net working capital increased to SEK 400 million compared with SEK 347 million in the last quarter. An increased level of net working capital is expected in the fourth quarter because of those seasonality effects that we have with higher stock levels of boats. So that is expected.

But the net working capital is also affected by temporarily increased stock levels related to the supply chain disturbances that has forced us to increase safety stocks, but also that we have finished boats that are missing engines and therefore, cannot be delivered. The level of this safety stock is expected to decrease gradually during 2023.

Here, we have our financial targets. These have been communicated earlier. We say that we should have an organic growth that exceeds 10% over a business cycle, including acquisitions of dealers, but not brands. In 2022, the organic growth was 18.5%, as mentioned before. The EBITDA margin should reach 10% in the medium term and the actual figure is 11%. We should have no senior debt for real -- except for real estate-related debt and we should have a check limit. And as per today, we have a real estate debt beside the usage of check limit.

We have a dividend policy to pay out up to 30% of net earnings taken into account financial position, cash flow growth opportunities of the company. And the Board has proposed a dividend of SEK 1.50 per share, which represents 19% of the result.

Then I hand over to Jan-Erik again.

[Jan-Erik Lindstrom, executive]

Thank you. Then we should look in a little bit then to North America. And why we're so excited with the development there. To begin with then, we're quite new at that market. We started -- just from the history perspective, we started there 2017 and we have had good progress so far. And we then think that the attractive and updated product portfolio will play with us on the markets.

We have had several new product launches then during the quarter 1 this year in Dusseldorf, the biggest boat show in-house that we have in our industry. That will support the expansion. We have strengthened the dealer network during the quarter 1, again, '23 and actually then added 20 locations and ending up in 39 in total.

We have also strengthened the group presence then, which I have said earlier, with a local organization and headquarter and then which, of course, then give us the possibility to have a broader participation in local events and in relevant boat shows.

The order book, as I said before, record level, SEK 190 million, actually then 108% increase year-over-year. We are aiming at the world's largest motorboat market. It's 47% of the total market. They have their aging fleet, as I mentioned before, 46% older than year 2000.

Good to remember when we look at the -- so to say, the perspective of the future that today's market well below the record years. So we still have a quite significant gap between today and what was the present peak, so to say. And we are then -- the market itself then is well-suited for the Nimbus Group products. And that we know for a fact because as I said, we have been there since 2017.

And with that, I leave the word to Gunilla.

[Gunilla Öhman, executive]

Yes. And I just want to share the update of the ownership in Nimbus and most owners are exactly the same as earlier on. There was some buy from the Roos Group. So that increased in November from 10.0% to 10.8%, but the rest is -- remains stable, the same.

[Jan-Erik Lindstrom, executive]

And...

[Gunilla Öhman, executive]

And I just want to remind that our Q1 report for this year, '23, is due on May 3. So by then, we open up for questions.

[Operator]

[Operator Instructions] The next question comes from Gustav Österberg from Carnegie.

[Gustav Österberg, analyst]

Thank you for the update, the sales figures for the different geographies. I was wondering if you could just take a few points on the demand trends in each market. I mean, we're seeing weaker development in Sweden, but obviously, better development in the other geographies. Also maybe comment a little bit on how much the impact that you're seeing in terms of market share gains is affecting the development in North America, i.e., is the overall market stable, increasing or declining? Or like how much of that increase is your market share gains?

[Jan-Erik Lindstrom, executive]

I can start. Maybe if you want to fill in there, Rasmus, later on. But if we start to -- if we look at the Nordics and we already mentioned that during the quarter 3, we think that we will see a softer market. We don't see it yet, you can say, on the bigger boats, but it's in line with our forecast, so to say, that that could, of course, happen.

And it's about the people actually then the customer is hesitating because we know that we maybe are in a recession, but it's not the financial meltdown. So the money is there, but people hesitate. And that is so to say, a picture of the Nordic countries.

If we look at Europe, then it becomes really interesting because we have talked about the pandemic, you can say, the positive effect, but that is mainly then for the Nordic countries and some parts of the North American market. Europe actually had a downturn. It was actually more or less closed on many places, in just in boating districts.

And what we see now in this figure is 114% plus. It's not only a normalization, but a part -- a great part of that is actually a normalization. And for example, now when we were down in Dusseldorf, it was a lot of attention, a lot of interest and also a lot of leads to follow up for potential sales later on then.

So the business climate for us in Europe is much stronger than we actually see then in the Nordic countries. Again then, especially then the smaller boats, the low-end boats, as we talk about.

North America, you can say that how we interpret it is that it's more or less is a balanced market. There are no signs really that they go up, but not really that they go down. The important thing for us is that we have the momentum. We have had momentum earlier on in Europe. We think we still have it. And of course, then when we have launched new products, we expect them to perform well.

But in North America, we are basically still new on the market and we know that our products creates a lot of interest. And we have talked about that before that we don't like false starters. And since we were fully loaded in the production with actually then to deliver both to the Nordic countries and the European countries, very few of the produced boats actually was delivered then to North America because we didn't want to take on new dealers because we couldn't provide them with boats. And that will then create this false start I'm talking about.

Now we are in a better position. We have increased the production capacity as we have said. Also then, of course, we like that the supply chains is getting better. So now we can take on all these dealers that actually has been waiting more or less, you can say, to sell our products. And that is, of course, very positive for us. If the total market still then gets weaker in the long run in U.S., we still then believe that our performance will outperform the market.

[Gustav Österberg, analyst]

And then I have a follow-up. I mean you've signed several new dealers in the quarter in many different geographies. I think it was the U.S., the Australia, New Zealand and the U.K. Is it still the case that sort of in the medium-term potential from these new signed dealers, the biggest potential is in the U.S.? Or are the larger dealers signed in the U.K., Australia or New Zealand for instance?

[Jan-Erik Lindstrom, executive]

The best possibility is then, of course, North America, again, because our market share is still quite small in North America. But the sites that you've mentioned there is important because again, remember what we say that if we should take on the dealer, then it must be an interesting boating district and it's -- our product should have then also suit the market, so to say.

Of course, we have changed the product development a little bit during the last year. For example, the new Aquador line, which is actually meant already from the beginning to be a global product and not as before then when it was very Nordic in the, so to say, approach of the product. So I don't like maybe then to compare if you understand what I mean, but the big potential is, of course, in North America.

[Rasmus Alvemyr, executive]

We can also add there in terms of spots, there are more locations that we have that are new in the U.S. So the potential is bigger in that perspective.

[Gunilla Öhman, executive]

Okay. Then I have some questions from the web. The first one comes from [ Christian Secton ], [ Capital ]. And his question is the cash flow has been negative for the past 2 years because of investments and disturbances in the supply chain. Do you expect positive cash flow for '23?

[Rasmus Alvemyr, executive]

Yes, we do. We expect the cash flow to be positive since we have had high pressure now in terms of the stock reflowing to the supply chain. So yes…

[Jan-Erik Lindstrom, executive]

Security.

[Rasmus Alvemyr, executive]

Yes, and security stocks. So we expect it to be positive, absolutely so.

[Jan-Erik Lindstrom, executive]

And also worth mention, we have had -- as we have said during the call here, we have had a couple of launched new products and we have had a lot of product development during -- especially then maybe last year then '22.

[Rasmus Alvemyr, executive]

And also worth to be mentioned there, we have a specific topic right now where we have SEK 40 million [ tightened ] up in VAT, which we expect to be paid out in the first half of 2023, referring to a broad VAT, we can call it.

[Gunilla Öhman, executive]

Thank you. And then there is another question from [ Christian Secton ]. Are you considering switching listing platform to enable buybacks regarding your rather low market multiple?

[Jan-Erik Lindstrom, executive]

Very interesting question, but it's not a question for us maybe then to answer. Sorry for that. But a good question. But I think we should pass on that one because that is more a owner's question maybe.

[Gunilla Öhman, executive]

Yes. And then there is another person [ Odinex Invest AS ], asking, how do you see the margin development in '23?

[Jan-Erik Lindstrom, executive]

Our price strategy, so to say, that is, of course, then to protect the margin and that continues. And we feel that we have, again, the momentum we can protect the margins. We see also, of course, the disturbances that we have had actually during 2 years with the supply chain issues that has made us -- as I say, it's not completely true, but we are more or less -- some of the models we have produced twice because we have a lack of engine, which means that the boat will go out on the yard and then go back again and to fulfill the production. And these things, we actually then expect and as we have indicated on the call, it's looking much better. And this, of course, will strengthen the margin.

[Rasmus Alvemyr, executive]

And in addition to that, we can also mention that this also gives us the possibility to sell own branded boats through our own dealers, which we have not been able to do during 2022 because of -- we have had a shortage of boats. So this will also increase the consolidated gross margin.

[Gunilla Öhman, executive]

Well, thank you. That was all the questions that we had from the web.

[Jan-Erik Lindstrom, executive]

Thank you.

[Rasmus Alvemyr, executive]

Thank you.

[Unknown Executive]

And there are no more questions from the telephones at this time. So I hand the conference back to you, Jan-Erik, for any closing comments.

[Jan-Erik Lindstrom, executive]

Yes. And we don't really have any one because it's -- thank you for listening in and don't forget about the quarter 1, 2023 report in the 3rd of May. And thank you.