Bang & Olufsen interim report for Q1 2022/23: Challenging macroeconomic environment continued in Q1
October 05 2022 - 1:52AM
Bang & Olufsen interim report for Q1 2022/23: Challenging
macroeconomic environment continued in Q1
The company continued to see robust demand for its products.
Sell-out in EMEA was down 2%, with demand moving to more travel and
outdoor-related products compared to last year. Sell-out in
Americas grew by 14%, while Asia declined by 27%, mainly due to
China, which was impacted by lockdowns and declining consumer
confidence. All in all, sell-out declined by 9% compared to Q1 of
last year.
Revenue declined by 8.2% (-10% in local currencies) to DKK 612m.
The company continued to be adversely impacted by lockdowns in
China. Also, the increased uncertainty and declining consumer
confidence led to some of the company’s retail partners reducing
their inventories and being more cautious when replenishing.
The gross margin was 36.6%, adversely impacted by product mix,
higher cost for components purchased last year, lockdowns and sale
of a large quantity of earphones at a lower price. This also had a
negative impact on the company’s EBIT margin before special items
and free cash flow which was -14.1% and DKK -81m respectively.
Bang & Olufsen initiated measures to mitigate the effects of
increasing uncertainty and declining consumer confidence. These
included a general hiring freeze, a lowered production forecast and
phasing of investments. The company will continue to execute on
core parts of its strategy, accelerate selected marketing efforts
and make the US a core focus market.
CEO Kristian Teär comments:
“The challenging macroeconomic environment continued in the
first quarter of 2022/23, which, seasonally, is our smallest
quarter of the year. Despite that, we saw robust demand for our
products with higher sell-out performance than sell-in in all
markets except China. However, regional lockdowns and the economic
climate in China had a direct impact on our sales, and rising
interest rates, the war in Ukraine and higher inflation affected
consumer confidence across Europe. As a result, revenue declined
compared to last year.”
“We can see our strategy is working. We have created a strong
portfolio with award-winning products and significantly improved
our sales and marketing efforts, which will help us realise our
growth potential. We have a strong focus on our cost base,
adjusting our investment plans to reflect the high uncertainty.
However, we will continue to invest in building robustness, and
launch of products and initiatives that can help drive growth in
the short-term and also ensure our long-term success. This includes
our city-focused strategy, where we will build on the success in
London and expand the concept to New York and Paris during the
coming quarters.”
Financial highlights, Q1 2022/23
- The company continued to see robust demand for its products.
Sell-out in EMEA was down 2%, with demand moving to more travel and
outdoor-related products compared to last year. Sell-out in
Americas grew by 14%, while Asia declined by 27%, mainly due to
China, which was impacted by lockdowns and declining consumer
confidence. All in all, sell-out declined by 9% compared to Q1 of
last year.
- Compared to last year, revenue declined by 8.2% to DKK 612m.
The decline was related to regional product sales, which declined
by 13.7% (-16% in local currencies). Brand Partnering & other
activities grew by 51.7% (44% in local currencies). The company’s
exit from the Russian and Belarusian markets had a 1pp negative
impact on growth.
- Due to the increased uncertainty in the markets, the company
saw retail partners reduce their inventories and being more
cautious about replenishing. This impacted financial performance,
especially in EMEA and Asia.
- Gross profit was DKK 224m (Q1 21/22: DKK 299m). This was
equivalent to a gross margin of 36.6% (Q1 21/22: 44.8%). The
decline reflected product mix, higher costs, mainly from components
purchased late last year, and sale of a large quantity of earphones
at a lower price. Lastly, the higher fixed-costs-to-revenue ratio
and currency movements contributed to the overall margin
decline.
- EBIT was DKK -85m (Q1 21/22: DKK 7m). This corresponded to an
EBIT margin of -14.1% (Q1 21/22: 1.1%). No special items were
recognised in Q1 and the EBIT margin before special items was
therefore also -14.1% (Q1 21/22: 1.4%).
- The result for the period was a loss of DKK 100m (Q1 21/22:
profit of DKK 1m).
- Free cash flow was DKK -81m (Q1 21/22: DKK 21m), driven by
EBITDA. Available liquidity was DKK 207m (Q4 21/22: DKK
301m).
Progress on strategic initiatives
- In Q1, the company launched its most modular product design to
date with the soundbar Beosound Theatre. The modularity value of
Beosound Theatre is twofold, as the soundbar fits almost any TV
screen and outlasts traditional product cycles due to its
upgradability in design and technology.
- With an ambition to build a seamlessly connected product
ecosystem, the company continued to strengthen software
capabilities. In Q1, Bang & Olufsen opened a new office in
Sofia, Bulgaria, which will supplement the company’s software team
in Denmark.
- Bang & Olufsen also launched the Balenciaga Speaker Bag,
one of its most successful brand collaborations to date, thanks to
the global media reach and brand interest.
- The company continued its growth trajectory in London with
sell-out from the company owned stores growing 71% year on year.
The Win London project continues and the company has decided to
expand to New York and Paris in the coming quarters in order to
leverage methodology and learnings.
Outlook 2022/23The company maintains its outlook, which is as
follows:
- Revenue growth (in local currencies):
|
-4% to 5% |
- EBIT margin before special items:
|
-2% to 3% |
|
-50 to 100 |
The outlook for 2022/23 is subject to unusually high uncertainty
related to consumer confidence due to high inflation, rising
interest rates and the war in Ukraine, which, in combination, have
increased the risk of recession. Furthermore, there is higher
geopolitical uncertainty and risk related to current and potential
future regional COVID-19 related lockdowns, especially in
China.
Conference call for analysts and investorsThe company will host
a webcast on 5 October 2022 at 10:00 CEST, where the financial
development for Q1 2022/23 will be presented.
The webcast can be accessed at
https://streams.eventcdn.net/bo/2022q1
Dial-in details for participants in the Q&A:DK: +45 7876
8490UK: +44 203 769 6819US: +1 646 787 0157PIN for all dial-ins:
193621
For further information, please contact:
Martin Raasch EgenhardtInvestor RelationsPhone: +45 5370
7439
Jens Bjørnkjær GamborgGlobal Sustainability and
CommunicationPhone: +45 2496 9371
- Interim report Q1 2022-23
- BO_2205_Interim report Q1 2022-23_UK
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