Duell Corporation half-year financial report September 2022-February 2023

This company announcement is a summary of Duell’s Half-year Financial Report for September 2022–February 2023. The complete Report is attached to this announcement as a pdf file. It is also available on the company website at https://investors.duell.eu/

Challenging market conditions continue

Unaudited financials presented below.

December 2022-February 2023 "Q2 2023" (comparable figures in parenthesis 12/2021-2/2022): 

• Net sales decreased 5.7% to EUR 25.5 million (EUR 27.1 million). Organic net sales decreased 17.3%. Constant currency net sales decreased 2.5%.
• Adjusted EBITDA decreased 47.1% to EUR 1.2 million (EUR 2.3 million) with an adjusted EBITDA margin of 4.7% (8.3%).
• Adjusted EBITA decreased 53.3% to EUR 1.0 million (EUR 2.1 million) with an adjusted EBITA margin of 3.8% (7.7%).
• Adjusted operating profit was EUR 0.5 million (EUR 1.7 million) with a margin of 1.9% (6.2%).
  

September 2022-February 2023 "H1 2023" (comparable figures in parenthesis 9/2021-2/2022): 

• Net sales decreased 5.4% to EUR 51.3 million (EUR 54.2 million). Organic net sales decreased 18.6%. Constant currency net sales decreased 3.4%.
• Adjusted EBITDA decreased 77.3% to 1.0 EUR million (EUR 4.3 million) with an adjusted EBITDA margin of 1.9% (7.9%). EBITDA was EUR 0.7 million (EUR 2.2 million). The differences between adjusted and reported figures are explained by items affecting comparability. Items affecting comparability included EUR 0.2 million expenses related to restructuring costs incurred by Duell Group.
• Adjusted EBITA decreased 86.1% to EUR 0.6 million (EUR 3.9 million) with an adjusted EBITA margin of 1.1% (7.3%).
• Adjusted operating profit decreased to EUR -0.4 million (EUR 3.1 million) with a margin of -0.9% (5.8%)
• Earnings per share for the review period was EUR -0.1.

Outlook for financial year 2023 (unchanged)

The market continues to be uncertain. The accelerating inflation and the overall economic environment have decreased consumer confidence. These factors will reduce predictability. Duell will continue to execute its growth strategy despite uncertain market conditions.

Duell expects to have net sales growth organically and inorganically. Adjusted EBITA is expected to grow both in absolute and relative terms for the current financial year ending August 31, 2023. Organic net sales growth is calculated excluding the impact of acquisitions and divestments.

CEO Jarkko Ämmälä:

Market conditions continued to be challenging, especially in the Nordics, due to weak winter season. Retailers further reduced their inventory levels, which negatively impacted the net sales. Despite the challenging market situation, we won new customers in the European market and the impact will be visible during the second half. I am pleased that we improved our gross margin and reduced fixed costs compared to the previous quarter. We completed the change negotiations in February and the impact of cost savings are more visible in the second half, and especially in the fourth quarter. We renewed our organisation and strengthened the Management Team with two new members, who have clear business responsibilities for Powersports and Bicycle Business. Overall, the second quarter was close to our expectations.

We entered into a new financing agreement in February for EUR 58.5 million senior term and revolving facilities amending the current agreement. It replaced the existing financing arrangement without changes to principal amounts of the outstanding term loans and available revolving facilities for working capital needs.

We continued our growth strategy by acquiring UK based TranAm, which is a leading distributor and wholesaler of premium clothing and accessories for motorcycling. The acquisition supports Duell’s growth strategy, both in terms of geographical expansion and brand portfolio development. I am pleased that we can significantly strengthen our market position in the UK. It provides us with fast access to the large UK market and a strong foothold to further grow our business by also bringing our own brands to a wide range of consumers in the UK through TranAm's existing distribution channels. In addition, TranAm’s acquisition is strengthening Duell’s financial position.

We completed a directed share issue on March 1, raising EUR 8.7 million to finance the first instalment of 60% of the total purchase price of the acquisition. The share issue increased the total number of Duell’s share by 20%. The acquisition was closed on March 8 and the second instatement for the remaining 40% of the purchase price will be paid by end of 2023.

Despite the challenging market conditions, we will continue our growth strategy, supported by the acquisition of TranAm. To strengthen our profitability and financial position, we are focusing on reducing inventory levels, optimising brand portfolio and continuing our cost-saving programme. These measures will support the achievement of the 2023 growth and profitability targets and the impact of these programs will be visible particularly in the fourth quarter.

Key figures and ratios EUR thousand	Q2 2023 (12/2022-2/2023)	Q2 2022 (12/2021-2/2022)	H1 2023 (9/2022-2/2023)	H1 2022 (9/2021-2/2022)	FY 2022 (9/2021-8/2022)
Net sales	25,543	27,103	51,294	54,237	123,991
Net sales growth, %	-5.7	57.4	-5.4	64.4	61.5
Constant currency net sales growth, %	-2.5	55.4	-3.4	62.5	61.9
Organic net sales growth, %	-17.3	11.5	-18.6	21.4	15.7
EBITDA	1,090	2,236	733	2,207	7,383
EBITDA margin, %	4.3	8.3	1.4	4.1	6.0
Items affecting comparability, EBITDA*	103	21	239	2,072	2,074
Adjusted EBITDA	1,193	2,257	972	4,279	9,457
Adjusted EBITDA margin, %	4.7	8.3	1.9	7.9	7.6
EBITA	873	2,068	312	1,875	6,652
EBITA margin, %	3.4	7.6	0.6	3.5	5.4
Adjusted EBITA	976	2,089	550	3,947	8,726
Adjusted EBITA margin, %	3.8	7.7	1.1	7.3	7.0
Operating profit	374	1,648	-685	1,064	4,904
Operating profit margin, %	1.5	6.1	-1.3	2.0	4.0
Adjusted operating profit	478	1,669	-446	3,136	6,978
Adjusted operating profit margin, %	1.9	6.2	-0.9	5.8	5.6
Earnings per share, basic, EUR	-	-	-0.1	-0.02	0.08
Earnings per share, diluted, EUR	-	-	-0.1	-0.02	0.08
Number of outstanding shares at the end of the period, basic	-	-	25,454,574	25,454,574	25,454,574
Number of outstanding shares at the end of the period, diluted	-	-	25,454,574	25,454,574	25,454,574
Weighted average number of shares, basic	-	-	25,454,574	25,454,574	25,454,574
Weighted average number of shares, diluted	-	-	25,454,574	25,454,574	25,454,574
Investments in tangible and intangible assets excluding acquisitions	669	95	1,083	134	915
Net debt	62,785	37,606	62,785	37,606	44,571
Net working capital	66,912	51,222	66,912	51,222	57,718
Operating free cash flows	-1,412	-5,485	-6,384	-12,965	-1,818

*) Items affecting comparability:
IPO costs of EUR 0 thousand in H1 2023 (EUR 2,072 thousand in H1 2022).
Cost saving program costs of EUR 239 thousand in H1 2023 (EUR 0 thousand in H1 2022). 

Operational key figures	Q2 2023 (12/2022-2/2023)	Q2 2022 (12/2021-2/2022)	H1 2023 (9/2022-2/2023)	H1 2022 (9/2021-2/2022)	FY 2022 (9/2021-8/2022)
Number of brands	529	343	529	343	496
Share of own brand sales, % of total	29.9	24.7	25.9	23.2	20.7
Share of online sales, % of total	25.1	23.6	23.2	24.7	25.2
Equity ratio, %	25.5	34.2	25.5	34.2	33.4
Full-time equivalent employees*	210	171	213	173	193

*) Including seasonal employees

Significant events during the reporting period

Duell announced on February 2, 2023, that it had completed the change negotiations in Duell's Finnish companies, as a result of which the reduction of personnel was a total of 13 employees. In addition to the change negotiations in the Finnish companies, Duell realised personnel reductions in other country organisations summing to 10 employees. The personnel reduction realised in the entire Duell Group was a total of 23 people. The cost saving at the Group level for the 2023 financial year is approximately EUR 700,000 and for 2024 EUR 1.3 million.

Duell entered into a new financing agreement on February 24, 2023, including an EUR 58.5 million senior term and revolving facilities agreement amending the current financing agreement. It replaced the existing financing arrangement without changes to principal amounts of outstanding term loans and available amounts of revolving facilities for working capital needs.

Duell announced on February 27, 2023, that is has agreed to acquire the entire share capital of the UK based company Tran-Am Ltd (“TranAm”) for a total purchase price of GBP 11.875 million. TranAm is a leading distributor and wholesaler of premium clothing and accessories for motorcycling. The acquisition of TranAm is part of Duell’s growth strategy and supports Duell’s geographical expansion and brand portfolio development. TranAm’s balance sheet was consolidated to Duell Group figures on February 28, 2023.

Significant events after review period

Duell announced on March 1, 2023, that it intends to carry out an issue of up to 5,090,900 new shares in a directed share issue to a limited number of institutional and other investors in deviation of the pre-emptive subscription right of the shareholders. The maximum number of shares corresponds to approximately 20 per cent of all the issued shares in Duell immediately prior to the Share Issue. The proceeds from the Share Issue will be used to finance the first instalment of the purchase price in relation to the acquisition of Tran‑Am Ltd.

Duell announced on March 1, 2023, that it has successfully completed directed share issue raising EUR 8.7 million in a directed share issue to finance the Tran-Am Ltd. acquisition. The number of shares totalled 30,545,474 after the share issue.

Duell announced on March 8, 2023, that it has closed the acquisition of Tran-Am Ltd by paying the first instalment of approximately 60% of the total purchase price of GBP 11.875 million on 8 March 2023. The second instalment of approximately 40% of the purchase price, which will be financed with the company’s cash reserves, will be paid by the end of 2023.

Webcast for investors and media

Duell will arrange a live webcast for investors and media in English on April 5, 2023, at 09.30 am EET. The webcast can be followed online through this link. A presentation will be held by CEO Jarkko Ämmälä, and IR Pellervo Hämäläinen. A recording of the event will be available later the same day at https://investors.duell.eu/.

Medium-term financial targets (3-5 years) (Targets unchanged)

Growth: net sales in the range of EUR 200-300 million by the end of 2025, achieved through yearly growth organically and inorganically.

Profitability: adjusted EBITA margin of at least 13% in the medium-term.

Leverage: net debt to adjusted EBITDA ratio in the range of 2-3. Leverage may temporarily exceed the target range (for example, in conjunction with acquisitions).

Financial reporting and Annual General Meetings in 2022 and 2023

• Business reports for financial year 2023
  • September 2022-May 2023 including third quarter: Thursday, July 6, 2023
  • September 2022-August 2023 including fourth quarter: Thursday, November 9, 2023
• The Annual General Meeting is scheduled for December 5, 2023. The Board of Directors of the company will convene the meeting.

Further information

Jarkko Ämmälä, CEO
Duell Corporation
+358 50 056 5149
jarkko.ammala@duell.eu

Pellervo Hämäläinen, IR
Duell Corporation
+358 40 674 5257
pellervo.hamalainen@duell.eu

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Duell Corporation (Duell) is an import and wholesale company based in Mustasaari, Finland, established in 1983. Duell imports, manufactures, and sells products through an extensive distribution network in Europe covering 8,500 dealers. The range of products includes 150,000 items under 500 brands. The assortment covers spare parts and accessories for motorcycling, bicycling, ATVs/UTVs, mopeds and scooters, snowmobiling and boating. Logistics centres are located in Finland, Sweden, Netherlands and France. Duell’s net sales in 2022 was EUR 124 million and it employs over 200 people. Duell’s shares were listed in November 2021 and are traded on the First North Marketplace. www.duell.eu