Matas Q1 2025/26 presentation: Solid growth and free cash flow amid Nordic expansion

Matas Group reported Q1 2025/26 currency-neutral revenue growth of 4.7% to DKK 2,074 million, while maintaining its full-year guidance for 3-7% growth and a 15% EBITDA margin despite a slight margin contraction to 14.5% due to FX headwinds. A significant highlight was the substantial improvement in free cash flow, soaring from DKK 32 million to DKK 344 million, reflecting enhanced working capital management. The Danish beauty retailer continues to advance its 'Win the Nordics' strategy, marked by robust 17.0% core online sales growth and operational efficiencies from new logistics centers, positioning the company for continued growth and deleveraging amidst macroeconomic uncertainties.

Analysis

Matas Group demonstrated solid operational execution in its Q1 2025/26 results, reporting a 4.7% currency-neutral revenue growth to DKK 2,074 million, which aligns with its maintained full-year guidance of 3-7%. While the reported EBITDA margin before special items saw a slight contraction to 14.5% from 14.9% a year prior, this was primarily attributed to specific, identifiable foreign exchange headwinds impacting the KICKS banner, rather than a fundamental operational weakness. In contrast, the core Matas banner improved its gross margin to 47.7%. A standout achievement was the dramatic improvement in free cash flow, which surged to DKK 344 million from DKK 32 million in the prior-year period, driven by disciplined working capital management and normalized capital expenditures following the completion of major logistics projects. This robust cash generation has already facilitated deleveraging, with the gearing ratio declining to 3.0x. The company's "Win the Nordics" strategy is showing tangible results, evidenced by strong core online sales growth of 17.0% and the activation of two automated logistics centers, which are expected to drive future efficiencies and support margin expansion.

Key Decisions for Investors

• Given the company's strong free cash flow generation and reaffirmed guidance, investors might view the recent share price pressure as a potential buying opportunity, contingent on confidence in the 'Win the Nordics' strategy.
• It is crucial to monitor the impact of currency fluctuations, specifically the Swedish krona's strength, on KICKS' profitability, as this remains the primary headwind to group margin expansion.
• Watch for evidence of operational leverage and cost synergies materializing from the new automated logistics centers in subsequent quarters, as this is a key catalyst for achieving the full-year EBITDA margin target of around 15% and funding future shareholder distributions.