A Year of Extraordinary Results

2023 consolidated results

18 April 2024

  • Shelly Group had an extraordinary year where they kept on beating their own sales projections. Total revenue marked an impressive growth of 56.8% reaching BGN 147.7mln, which was due to the focused sales strategy implemented in 2022.
  • The sales of IoT products make up more than 99% of the revenues, hence the additional revenues, which compromise of sales of services, rents, FX instruments, etc play a marginal role and their movements are largely irrelevant.
  • The geographic focus of sales, as indicated in previous announcement, are the EU markets, which make up over 87% or BGN 127.7mln. This account grew substantially by 77.9% over the last year. The non-EU sales stayed at the same levels at BGN 15.4mln. This account offers great potential as sales to the US can become a game changer in the future. Sales to Bulgarian clients has dropped 37% to BGN 3.5mln. That, however, is under 2.5% of the total amount.
  • Analysis of sales cost changes indicate the implementation of a focused marketing based sales strategy. Sales cost have ballooned from BGN 3.9mln to 10.2mln. The real chunk of that – advertising has grown from BGN 0.8mln to BGN 6mln. Naturally, this is targeting retail clients. There is also an additional account, which was not present in the past- exhibitions – standing at BGN 0.7mln. As exhibitions are open for all but really sought after corporate representatives, this indicates a more focused B2B approach. The amount for certification of new products has nearly doubled to BGN 0.34mln indicating both new markets approach and newer products. Other account movements, for example those for all cash payments and all other unaccountable smaller scale activities, have decreased, which indicate a serious push towards efficiency.
  • EBITDA increased 83.7% to reach BGN 40.9mln, which is the result of the increased investments last year in the sales channels and RND processes. The shift is largely due to the different increases of Sales Revenue (57.3%) and COGS (35.7%), which lead to Gross Profit shooting up 78.6% to BGN 83.7mln.
  • Besides the Cost of Sales, Administrative Expenses increase by modest 33% and “Other expenses” increases noticeably from BGN 1.2mln to BGN 6.5mln. The majority of it, however, is due to a provision for possible future client claims as required by EU regulation for operating on EU markets. As mentioned before, we notice a very positive shift towards efficiency from the management.
  • Net profit of the group increased by whopping 89% to BGN 37.5mln as a result of the abovementioned improvements and the Net margin improved by 3.8% to 22.31%.
  • The positive Net Profit changes affected ROA, ROE and ROIC, which reached the highest values in the last 3 years.
  • Current ratio halved to 6.6 from 2021 results due to the increase in Current Liabilities, which is largely due to the increase in Trade Payables (payments to suppliers as a result of increased sales) and increased tax liabilities for corporate tax.
  • Cash ratio’s decline is explained by the same large leap of Current Liabilities.
  • The company remains very liquid and stable with cash representing 13.5x total debt and 34.7x short term debt.
  • The company lent EUR 280,000 to Expat Capital for 1 year at 1% p.a.
  • In July 2023 the company increased the capital with 50,946 shares of BGN 1.00 each allowing greater ownership by employees of the company and those of subsidiaries within the group. The new share count is 18,050,945.
  • The company announced on 22.02.2024 that they would exercise the call option to acquire additional 16% of the capital of their Slovenian subsidiary (the initial acquisition had started January 2023) for EUR 0.6mln. The remaining 24% are a subject of an additional call option which can be exercised in 2026 as per agreed conditions meeting certain performance indicators.
  • The company announced on 05.03.2024 that they reached an agreement to rent out 2,840 sqm office space, 60 parking spaces and a service area in Office X, Building 3, in Sofia for BGN 113,270 per month net of VAT. The management intends to shift the HQ to that address, which would be better suited to meet the increased business needs of the growing company. The existing location is expected to be sold out, the cash from which would be used to further generate additional sales and help optimize operations of the company.

Ivaylo Valchev
Equity Analyst
Tel.: +359 2 937 9862
e-mail: valchev@sis.bg

Svetozar Abrashev
Senior Managing Partner
Tel.: +359 2 937 9869
e-mail: abrashev@sis.bg

Sofia International Securities
Sofia 1000,
140 G. S. Rakovski Str.
Tel.: + 359 2 937 98 65
e-mail: info@sis.bg

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The value estimate(s) stated in this report is (are) valid only in light of the valuation methods used to derive this estimation. The use of other or more comprehensive approaches could result in other estimates of value that could diverge substantially from the results presented herein. With regard to the above, when making our conclusions about the intrinsic value of the Company’s share capital, we have not considered or evaluated any possible tax, legal or other effects that might arise from engaging in transaction(s) with the shares of the company. The document should not be regarded by recipients as a substitute for the exercise of their own independent judgment and they should seek and obtain independent investment advice is necessary. Any facts and/or information stated in this document are subject to change without notice and Sofia International Securities is not under any obligation to update or keep current the information contained herein. Any opinions expressed herein are only correct as of the stated date. Past performance is not indicative of future results. Foreign currency rates of exchange may adversely affect the value, price or income of any security.

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