Silvan A/S

Ledelsesberetning
DKK'000 2023 2022 2021 2020 2019 Income statement Revenue 1,365,446 1,327,494 1,241,751 1,392,781 1,487,181 Gross profit 548,192 557,824 520,655 548,391 50,458 EBITDA 41,167 92,499 97,090 83,278 -67,200EBIT 8,833 67,239 72,544 58,446 -94,874EBT 2,231 63,774 66,589 39,825 -110,461Profit/loss for the year 4,075 49,540 51,473 30,957 -86,929Balance sheet Inventories 315,841 356,595 284,091 272,393 350,133 Cash at bank and in hand 28,345 27,903 51,064 156,577 64,132 Total assets 679,330 664,764 506,162 556,230 581,858 Investments in property, plant and equipment 70,333 60,203 36,344 15,378 11,590 Equity 103,692 124,117 74,577 23,105 -7,852Cash flows from operating activities 104,139 16,649 100,529 208,320 -7,340Cash flows from investing activities -68,727-60,264-36,042-14,375-11,789Cash flows from financing activities -34,97020,454-170,000 -101,50030,500Total cash flows 442 -23,161-105,51392,445 11,371Reported financials – key ratios Gross margin 40.1% 42.0% 41.9% 39.4% 33.9% EBITDA margin 3.0% 7.0% 7.8% 6.0% -4.5%Return on invested capital 1.3% 10.1% 14.3% 10.5% -16.3%Current ratio 115.1% 126.9% 98.8% 89.6% 136.2%Solvency ratio 15.3% 18.6% 14.7% 4.2% -1.2%1Adjusted financials – key ratiosAdjusted gross profit 319,341 557,824 524,415 551,475 540,380 Adjusted EBITDA 60,248 91,024 115,993 96,030 -3,820Adjusted EBITDA change -30,776-24,96919,963 99,850 28,733Adjusted gross margin 23.4%42.0%42.2% 39.6% 36.3%Adjusted EBITDA margin 4.4% 6.0% 9.3% 6.9% -0.3%Average number of full-time employees 639 624 597 639 795 Management's reviewFinancial highlightsThe financial ratios have been calculated as follows:Gross profit x 100Gross marginRevenueEBITDA x 100EBITDA marginRevenueOperating profit/loss x 100Return on invested capitalAverage invested capitalCurrent assets x 100Current ratioShort-term debtEquity ex. non-controlling interest year end x 100Solvency ratioTotal equity and liabilities at year-endFinancial performance in 2023In 2023, Silvan continued the strong performance from 2020 and 2021. The overall focus has been on continuously improving the business in line with the developed and agreed corporate strategy. The key financial figures for 2023 are:- Reported EBITDA of DKK 41 million.- Adjusted EBITDA of DKK 60 million.- Profit for the year of DKK 4 million.In 2023, revenue has increased by 3% compared to 2022 which is significantly better than the generalDanish DIY index (decreased by 1%). This development shows that Silvan’s strategy is working, andcustomers are acknowledging the positive development for Silvan.Comparing to the Forecast for 2023 sales have been 1% lower but still within the expected revenue rangebetween 1,350m DKK to 1,400m DKK. Mainly due to high inflation end of 2022 and in first half of 2023 andthereby increased costs, the development on EBITDA and profit for the year has not followed the positivesales development and were 48m DKK lower than forecasted. In second half of 2023 management ofSilvan has implemented several cost saving initiatives to improve the financial performance in 2024.For 2024, it is expected that revenue will increase above the level in 2023 mainly due the following factors:- Opening of new stores.- Positive development in sales in refurbished stores- Growth of e-commerce sales.The Forecast for 2024 forecasts improvements both on revenue, net income and EBITDA compared to2023. The Forecast for 2024 forecasts revenue to increase to a level of 1,400m DKK to 1,475m DKK andprofit for the year to reach a level of 35-45m DKK.Unusual circumstancesHigh inflation has had an impact on the financial reportingThe 2023 financial figures are influenced by high inflation. Key effects in the financial report are:- Higher rent costs.- Higher personnel costs.- Changed customer behavior due to low consumer confidence in the market.Financial instrumentsThe Company's goals and policies for management of financial risksOperating risksThe competition in the market is high and the market has a relatively high price transparency. The DIYmarket has been decreasing slightly in Denmark in 2023 (minus 1.0%). For 2024, the management ofSilvan expects that the market will grow again. Silvan is monitoring the market demands very closely andis constantly sharpening its product portfolio and service offers in order to maintain its strong marketposition. Silvan has the most well-known brand in the Danish DIY market, and this is a very strongcomparative advantage. Silvan is convinced that the strong concept and the very strong brand recognitionof Silvan are solid basis for the coming years.LiquitySilvan has confirmed unused credit facilities as of 31st December 2023 of 65m DKK. Including cash atbank and in hand 31st December 2023 of 28m DKK total available liquidity at the end of 2023 was 93mDKK, which is sufficient for the operating business throughout 2024.The Company's risk exposureFinancial risksSilvan is not materially exposed to substantial financial risks in the form of currency or interest rate risks.In addition, only a very limited share of revenue is settled via credit limits to customers, and accordinglyrisk is limited.Corporate and social responsibilities in accordance with section 99a ofthe Danish Financial Statements ActSilvan is a leading Danish Do-It-Yourself (“DIY”) retailer and operates 45 stores and one online shop. Thestores are primarily located in larger cities and the target is to be the most convenient destination foreveryday DIY products in Denmark. The focus is on making home improvement more accessible,customer-centric and offer an exciting shopping experience. Silvan complies with the Danish legislation, including environmental legislation and human rights, laborlegislation and safety requirements, and is step by step taking further initiatives to outline this in its ownspecific policies. Silvan’s policies sets out to:- Minimise the use of resources.- Reduce negative impacts on the environment and therefore also on the climate.- Ensure equality, dialogue, respect, health and safety regarding social conditions and employeerelations.- Respect human and labour rights.- Fight corruption and bribery.This journey has along with many other activities continued during 2021, 2022 and 2023 and is stillongoing.Anti-corruptionSilvan is sourcing all its products from external suppliers, and accordingly is not in full control of the entiresupply chain. However, Silvan makes substantial efforts to ensure that its suppliers have alsoimplemented anti-corruption measures. Silvan has reviewed and improved in 2020 its standard contractual framework that is used for cooperatingwith its suppliers. As part of this project, a new Code of Conduct has been developed that all suppliershave to agree to. The implementation of the new contractual framework including the Code of Conduct isimplemented in all new contracts with suppliers since the beginning of 2021.For 2021 2022 and 2023 there were no registered breaches of Silvan’s policy, and all suppliers were incompliance with Silvan’s policies. One of the main risks for the business is that the suppliers are not incompliance with Silvan’s policies, which is managed through a strict supplier evaluation process and veryclear contractual framework including the Code of Conduct.Silvan will continue to review the Code of Conduct on an ongoing basis and implement in all new contractswith suppliers also in 2024.In addition, Silvan has several compensating financial controls which help counteract unwarrantedfinancial arrangements, that could have a significant impact on the financial performance..Moreover, as of August 2023 Silvan has started to assess any risks in the supplier portfolio through a riskdetection software called EcoVadis.Operating review- The waste handling at all stores of Silvan has been reduced and a new reduction and sorting programhas been developed.- Installations of charging stations for electric vehicles have been implemented at 5 Silvan stores, aswell as the Silvan headquarters. Along with this, the complete electrification of the own vehicle fleethas been initiated.Especially the following measures have resulted in further improvements for 2023:- The food offering in the canteen has further been approved to include much more organic as well asvegetarian food.- Many elements of the new store concept that has been already implemented in 8 stores are alsogeared to sustainability (including the almost complete replacement of plastic elements with wood ormetal solutions, extensive shared services offerings (e.g. free trailer and e-cargo bike rental, etc.).- Several improvements have been made to the energy consumption of the stores, such as automatedcontrols to lower the heating at night and switch of the lights in rarely used areas.For 2024 multiple measures are already in the planning stage to further focus on sustainability. Forexample, in addition to the expansion of the sustainable product range, Silvan is in further ongoingdiscussions with its suppliers to enable more sustainable solutions for its product packaging.Moreover, it is planned to replace gas heating with more sustainable heating options at selected stores.Installations of additional charging stations for electric vehicles are examined for selected parking spacesat Silvan stores. Next to the implementation risk, another risk to achieve the CSR measures are the overall global supplychain turbulences caused by Covid-19 and the war in Ukraine. To closely monitor the process and toensure that the measures are successfully implemented Silvan has setup a project governance structureincluding monthly Steering Committee meetings in which the complete Executive Board is participating.