A strong quarter despite challenges

Summary of the period
Numbers in parentheses refer to outcomes during the corresponding period of the previous year.

Fourth quarter: October 1st - December 31st 2022

• Net revenue amounted to 497.4 MSEK (255.2 MSEK), corresponding to an increase of 95% (154%)
• Operational EBITDA amounted to 120.2 MSEK (48.3 MSEK), corresponding to an increase of 149%, and an EBITDA-margin of 24.1% (18.9%). The adjustments refer to costs in connection with the acquisition of CVPof 2.8 MSEK and an accounting adjustment of acquired inventory of 5.1 MSEK (2.9 MSEK)
• Organic, currency-adjusted growth amounted to -5% (10%)
• Operational EBITA amounted to 102.0 MSEK (40.6 MSEK), corresponding to an increase of 151% and an EBITA-margin of 20.4% (15.9%)
• Operational EBIT amounted to 100.5 MSEK (40.5 MSEK), corresponding to an increase of 148% and an EBIT-margin of 20.1% (15.8%)
• Profit after tax amounted to 15.8 MSEK (19.7 MSEK)
• Earnings per share calculated on 158,522,955 shares (118,150,028 shares) 0.10 SEK (0.17 SEK)
• As of December 31st, 2022, cash amounted to 245.1 MSEK (136.1 MSEK)

Full year 2022

• Net revenue amounted to 1,829.5 MSEK (770.4 MSEK), corresponding to an increase of 137% (221%)
• Operational EBITDA amounted to 430.5 MSEK (190.2 MSEK), corresponding to an increase of 126% and an EBITDA-margin of 23.5% (24.6%). The adjustments refer to costs in connection with the acquisition of NaturVet, Innovet and CVP of 14.0 MSEK (17.2 MSEK) and an accounting adjustment of acquired inventory of 35.8 MSEK (43.3 MSEK).
• Organic, currency-adjusted growth amounted to 2% (17%)
• Operational EBITA amounted to 367.1 MSEK (171.9 MSEK), corresponding to an increase of 114% and an EBITA-margin of 20.0% (22.2%)
• Operational EBIT amounted to 373.8 MSEK (178.7 MSEK), corresponding to an increase of 109% and an EBIT-margin of 20.4% (23.1%)
• Profit after tax amounted to 94.5 MSEK (54.6 MSEK)
• Earnings per share calculated on 155,346,212 shares (111,951,297 shares) 0.61 SEK (0.49 SEK) *
• Cash flow from operating activities amounted to 260.2 MSEK (125.8 MSEK)
• Exchange rate gains amounted to 8.5 MSEK (7.8 MSEK)
• The board proposes a dividend of 0.22 SEK (0.20 SEK) per share

*Converted to the number of shares after the share split 5:1 that took place in May 2021

Significant events during the fourth quarter
An extraordinary general meeting took place on October 19th, 2022. The extraordinary general meeting decided, in accordance with the board's proposal, on an incentive program for key employees in the Swedencare group, comprising a private placement of a maximum of 415,000 warrants to the company and transfer of the warrants to the participants in the incentive program. 415,000 warrants correspond to a dilution effect of a maximum of approximately 0.26 percent, based on the number of shares and votes in the Company after the utilization of the warrants. Employees in the Swedencare Group have acquired 251,500 warrants in the decided incentive program 2022/2026. The transfer of the warrants to the participants in the incentive program took place at market value.

Swedencare AB (publ) acquires UK-based Custom Vet Products (CVP), a manufacturer of soft chew products which was completed on November 1st, 2022. The purchase price of a total of 134.7 MSEK was paid through a cash payment of 108.2 MSEK and a new issue in kind of shares of 26.5 MSEK.

Significant events after the fourth quarter
There are no significant events after the end of the fourth quarter to comment.

Words from the CEO
Improved profitability but not expected growth numbers. With yet another acquisition in the last quarter we have added three new members to the Swedencare family during 2022.

The net revenue for the 4th quarter was 497 MSEK, which is an increase of 95% compared to Q4 2021 and it makes it our strongest quarter ever. Our operational EBITDA result increased by 149% to 120 MSEK, which equals a 24.1% margin. This level of margin is a clear improvement compared to both Q3 2022 but also Y-o-Y. The operational gross margin continues to strengthen (59.3% compared to 55.8% last quarter) mainly due to moving external manufacturing to internal, and this will continue this year as well. The operating cashflow has improved during the quarter due to a positive change of working capital. During 2022 we have made the substantial CapEx investments necessary to insure strong growth in the upcoming years. Fewer investments in upcoming years will allow cash utilization to reduce net debt.

Our organic growth (-5%) was slower than anticipated mainly due to the challenges faced by Vetio South, our manufacturing facility in Florida together with Stratford and Nutravet. The latter two are still affected by inventory trimming and enlarged co-operation agreements that's been concluded but will have a positive effect in 2023 and onwards. Despite several group companies having strong growth, several around or above 25%, the organic growth for the quarter was negative. As you know, we focus on long term growth and success with optimization within our group. The synergy projects are focused mainly on revenue opportunities within the group by having access to each other's sales- and communication channels and product portfolio.

Pet market
The market development has been strong in our main markets. The number of dogs and cats continue to rise, contradictory to some experts who predicted a decline after Covid. Worth mentioning is that most of our products are used during the second half of the pet’s lifetime, which means that the pets acquired during the pandemic have not yet become customers of pet health care products. The demand from from this group will be seen in a few years to come. An interesting comparison for the USA is also that approx. 73% of people use some kind of food supplement and the corresponding number for pets is 14%. There is thus much to suggest that we have many years of strong growth ahead of us.

Europe
Several of our subsidiaries in Europe have had their best quarter of the year and this is hopefully an indication that customers have regained their willingness to consume. Nutravet had, as expected, a negative growth because their largest customer significantly trimmed down their stock in 2022, but the strong profitability returned and we foresee a strong increase in revenue in 2023, partially because customers stock are adjusted and since additional countries will be added to the cooperation. Innovet in Italy finished the year on a strong note and their new product (Oleea) which helps with immediate weight loss, had a flying start. This is a product that I expect to have a broad global demand in a few years. Our latest acquisition Custom Vet Products (CVP), which joined the group on November 1st has been busy finishing the installation of a new manufacturing facility. During 2023 several new volume customers are starting up and we will also initiate several internal projects, of which the most important will be the new ProDen PlaqueOff® soft chew for Europe. The CVP team is also responsible for initiating the manufacturing of soft chews at our Irish plant.

North America
The North American market, the world´s leading market, dominates our business and accounts for over 80% of our sales. The entities that had a negative effect on our growth during the quarter were Stratford and Vetio South. Stratford has, as I mentioned in the last report, a new strategy focusing on strong co-operations within the veterinary sector, which has taken longer time and this has had a negative impact on revenue during 2022 but will lead to strong growth in 2023 and in the following years. My hope is to be able to share information about at least one such cooperation in the next report. As for Vetio, the Canadian operations grew according to plan with 25% but Vetio South had a negative development. A large complex manufacturing agreement with a number of unique recipes and SKUs unfortunately impacted sales and profitability negatively. The sales were lower because we had to postpone a number of projects and profitability was affected by the complexity that we could not fully invoice alongside increased costs for raw material within the dermatological sector. The impact for raw material costs will be adjusted by January 2023, when price increases have been accepted in all major customer contracts. The end result of this complex project has been a success and we now have all processes ready for the next production, which will be made earlier due to consumer demand for the products having exceeded the expectations of our customer. During the quarter we have also strengthened our staffing and production capacity to ensure that we will be able to deliver in accordance with our high demands. For the other American companies, the quarter was positive.

NaturVet® and ProDen PlaqueOff®
Our largest brand NaturVet® closed the year with growth and it was noticeable, especially during December, that the sentiments of the buyers have altered considerably. For the quarter as a whole online sales are growing most rapidly and since the fall we have also been focusing on social media. NaturVet® now has over 85,000 followers on Facebook and are working purposefully to increase growth. Product- and concept development efforts have been intense and several inovations will be launched the upcoming year.

ProDen PlaqueOff® continues its strong sales development, with sales increasing by 22% this quarter. North America may be the core, but the brand continues its successful journey on basically all markets. We keep being a requested cooperation partner within pet food as well as for co-branding, both important factors for continued success.

Our strategy with contract manufacturing, private label solutions and strong brands along with sales both through distributor networks and partners as well as directly to consumers make us a fairly unique organization in our sector. We still see great interest from companies both wanting to cooperate and in M&A.

I summarize 2022 with mixed feelings. We fell short of ambitious growth targets, partly due to factors outside our control but not solely. Therefore, we have built a solid foundation and have identified several areas where we see potential for improvement. With a clear strategy and an organization that has been improved with a number of new key members, we are ready to deliver on hight expectations. Our focus during the past year has been to identify and finalize bigger opportunities and this will materialize in 2023 while I am looking forward to deliver significantly higher growth this year. I thank You for the trust and look forward to sharing news of inovative products, customer contracts and strong sales with high profitability that should always be our trademark.

Håkan Lagerberg, VD
Malmö February 16th, 2023

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 10:00 -10:30 am CET and can be followed via live webinar.

Please use this link to join the webinar: https://zoom.us/j/91792724042.