Brodrene A& O Johansens

Welcome to our second quarter and first half of 26 webcast. Let us look at some of the highlights of the second quarter. It is indeed busy times in AO. We are excited about the M&As and the massive investments in the future that we are carrying out. But we are just as satisfied that our daily business is showing strong development even stronger than we expected. AO saw the highest second quarter sales ever. We saw a growth of 11.6% in Q2. B2B grew revenues by 10.9% and B2C saw 15.4% growth. Excluding VVS Experten, the organic growth was 10.6%. I'm particularly satisfied to note that the growth in Q2 and first half of 26 now exceeded our expectations, despite the tough winter, which has a negative impact on the month of February. Based on the higher than expected growth in Q2, we revised our guidance, and Pierre will walk us through the updated guidance later. Gross margin improved 24.6%. Overall margins increased from 24% last year to 24.6%. We calculate that the one-off gain from the increasing prices amounted an increase of approximately 0.2%. The pressure on margins is still fierce. But the B2B business managed to deliver margins that are 0.4% higher than last year. B2C margins increased 1.8% to 33.1%. I'm satisfied with the margin development it is. and will be a priority for A&O to focus on securing margins and at the same time growing our projects activities. A&O has acquired YodMV cables as of 1st of August. The acquisition has been approved by the competition authorities. JLMV Cables is a Danish supplier of cables for construction for the industry and for the infrastructure market. Yearly revenues amount to approximately 125 million DKK. The acquisition strengthens A&O's product assortment primarily within medium voltage cables and will strengthen our positioning in the project segments. The acquisition is expected to bring approximately 50 million revenues rest of the year at an EBITDA margin around 10%. Our offer to buy Elektroimportøren has met support from more than 90% of the shareholders of Elektroimportøren. I'm delighted to conclude that by late August, Electroimproturne will be part of the AO Group of Companies. Let's walk through the rationale behind the acquisition, which increases the size of AO Group of Companies by more than 20%. Elektroimportøren is a market leader in Norway. Sales of almost 2 billion NOK driven out of 32 stores in Norway and 2 in Sweden, holds a leading position in Norway and has defined Sweden as a growth market. The assortment is a broad range of electrical equipment serving both the B2B customer and the B2C customer. approximately 52% of sales to B2B and 48% to B2C customers. Elektroimportøren owns an impressive brand called Namron, accounting for approximately 33% of sales. The Namron assortment consists of approximately 1,600 articles and is popular both with B2B and B2C customers. Electro-Importeuren has slightly more than 400 full-time employees. More than 70% of all shop employees hold an education as electrical installer, which is a signal of the quality marks in Electro-Importeuren. We see a strong rationale in adding Electro-Importeuren to the AO family. Combining B2B and B2C activities, Elektroimportøren has a leading position in Norway. A&O has a leading position in Denmark. We see a common potential in growing the activity in Sweden. The acquisition supports A&O's long-term growth strategy in Scandinavia. Both Electro-Importeuren and AO operate a business model that serves B2B and B2C customers. Relevant parts of the AO assortment can be included in the assortment of Electro-Importeuren across the 34 shops and vice versa. We will utilize our strong property portfolio in financing the acquisition. The acquisition calls for approximately 800 million DKK in additional financing. Approximately 500 million DKK will be raised by loans as well as sales and leaseback arrangements in our property portfolio. The additional 300 million DKK is expected to be split in 150 million DKK cake bags line, which we plan to repay during the coming 10 quarters, and a 150 million DKK revolving credit facility. The acquisition of Electro Importeuren is historical for A&O and marks our transition from being a Danish wholesaler into becoming a Scandinavian wholesaler. Now, let us look at the management's observations. The competition remains fierce. Demand remains lower than supply of wholesale capacity in Q2. This causes a somewhat one-sided customer focus on price, especially on project sales. During such times, we observe an increasing tendency from customers in negotiation, even smaller order, as normally done for larger projects. Over time, we expect a more balanced demand-supply situation. By then, we expect a less one-sided price focus and an increased customer focus towards solution sales and other add-ons, such as how the customers are served in the best and most convenient way. Our investment drives up costs of doing business. As we stated in our outlook for 26, our investments in business will increase the cost base. The full year impact from the new shops in Sweden, the investment in additional competencies within the project activities, and our focus on strength and coverage of tooling and fasteners are all investments which will bring growth. Short term, these investments will increase the cost of doing business ratio. Many of the investments in Denmark have the purpose of supporting our everything under one roof concept. I am happy to note that customers appreciate this, which further increased our store visits and market share in Q2. Geopolitical tensions and uncertainty. A&O buys 88% of all goods in Europe and the rest in Asia. More than 99% of our sales are within Scandinavia. As we speak, we do not see any signs of geopolitical tension in our numbers and order backlogs. However, the worrying situation in the Middle East has been driving up price levels. We have chosen to increase inventories by approximately 5% with regards to assortment, where we deem the supply situation to be less reliable than usual, or where prices are expected to rise further. For the time being, and to the best of our perspective, we do not see this having a material impact on A&O in 26. But I do want to stress that the current geopolitical and macroeconomic uncertainty increase uncertainty to current outlooks. Now, Per, please take us through the financial performance.

Thank you, Niels. Number of sales days were the same as Q2 last year. Q2 sales showed a growth of 11.6%, organic growth excluding VVS Experten was 10.6%. As Niels said, highest ever Q2 revenue. Sales in Q2 continued the high activity level we saw in March, and as Niels said, the growth was higher than what we had expected. Margins improved from 24% to 24.6% and improved in both segments. Approximately 0.2 percentage points of the margin increase was caused by price increases. Margins appreciated by increased cross-selling and the fact that recent M&As have brought higher margins. Cost of doing business ratio was 17.9% of revenues and at powered last year. High investments in the business mitigated the scale impact. In addition to normal cost inflation, the quarter includes approximately 10 million cost related to the impact from strategic investments in growth initiatives. EBDA came in at 113 millions, 21% higher than Q2 last year and EBT came in at 62 million, 18% higher than last year. Earnings were slightly higher than expected. Now let's turn to the margins. Q2 margins improved from 24.0% to 24.6%. and as I said, margins appreciated in both segments. AO took advantage of the positive mix effect related to higher margins from recent M&As. Furthermore, AO gained from the positive cross-selling margin impact following our everything under one roof concept. The margin pressure is still intense, especially in projects. Let's leave the margins and turn to the segment info. The B2B segment accounted for 83% of the Q2 revenue and the B2C segment accounted for 17%. We are quite satisfied with the segment performance. B2B revenues grew 10.9% and margins improved 0.4 percentage point in Q2. Cost increased 10% in B2B and consequently the EBDA margin amounted to 11.5% compared to 11.0% last year. B2C revenues increased 15%. Organically, B2C grew 10%, while 5% came from the VVS expert in sales. B2C margins increased by 1.8% and ended at 33.1%. The margin increase mainly relates to continued price management. The B2C segment EBDA margin increased to 10.5% from 9.1% last year. Finally, indirect non-allocated cost amounted to 4.6% of revenue, up from 4.5%. The increase is mainly due to investments in growth activities. Let's turn to the investments. The highlighted band shows the normal level of maintenance investments in A&O, estimated to be close to 100 million on a yearly basis. Please note that we have increased this due to the increased size of the A&O business. It used to be 60 to 100 million. The investments in Q2 2026 amounted to 48 million, at par with Q2 last year. Tangible assets included 19.5 millions, whereof approximately half related to the finalization of new warehouse capacity. Intangible assets amounted to 28 millions, mainly relating to investments in IT and digitalization, and software related to the new warehouse. Full year investments excluding M&A's is expected to be at the same level as last year Q2 cash flow from operations before changes in working capital amounts to 114 million being 20% higher than Q2 last year Cash tied up in working capital has increased 60 million compared to Q2 last year. The increase being partly due to higher activity and partly due to us increasing inventories where we deem supply to be less reliable due to the geopolitical situation. Interest bearing debt over EBDA was 2.7 compared to 2.9 times EBDA end of Q2 last year. Let's turn to the updated guidance for 2026. We increase organic revenue due to higher than expected sales in Q2. The previous range was 6.4 billion to 6.6 billion, and now we expect 6.55 to 6.7 billion. The new guidance implies a rest-of-year growth of 5% to 10%. On top of the new organic revenue range, we add 50 million related to rest-of-year sales from GMV cables. Summing up, the new revenue guidance will be 6.6 to 6.75 billion revenues, including GMV cables. Looking at earnings, we expect the increased organic revenue to contribute with additional 15 million earnings. and we expect JMV to contribute with approximately 10% EBITDA margin, thus approximately 5 million earnings. In other words, the underlying earnings guidance thus implies an updated EBITDA expectation of 480 million to 520 million and an EBT range of 280 million to 320 million, both up 20 million. We estimate approximately 20 million transaction costs related to the acquisitions of GMV cables and EBT. The transaction costs relate mainly to advisory fees, etc. Summing up, we expect the earning range to be unchanged 460 to 500 million EBITDA and 260 to 300 million EBT, but now including transaction cost of 20 million. Whilst the new guidance includes the impact from GMV cables, and estimated transaction cost, the guidance does not include the impact from electroimperture and the financial cost related to the acquisition from closing to end of year. We will issue an updated guidance end of August, which includes the rest of year impact from electroimperture and the associated financial costs. As Niels said, we are following the macroeconomic and geopolitical situation closely. We don't see the uncertainty reflected in current numbers, neither in Q2 nor in the order pipelines. The most significant risks towards our guidance are that the margin pressure will increase further during 2026 and that the geopolitical and macroeconomic tension result in lower consumer investment appetite and market activity being more volatile than normally. So this concludes the presentation and we are ready to take your questions.

Yes, thank you. To ask a question, please press five star on your telephone keypad. There will be a brief pause while questions are being registered. Our first question comes from the line of Christian Turner from SEB Bank. Please go ahead. Your line will now be unmuted.

Thank you. I have a couple of questions. First one goes to the organic growth in the B2B segment, which picked up quite nicely in Q2 compared to Q1. So I'm just wondering whether you think there's any sort of weather-related impact considering the cold weather we had in Q1, and how we should take that into consideration for the second half of the year.

Hi, Christian. Well, yes and no. Of course, you could have the... It's a right thought that you might have had a catch up from the cold February or cold Q1. But the growth we have seen since March has been pretty steady. So actually, I think it's only a minor impact from Q1.

That's comforting. Then my other question relates to the position of electron return. So can you just broadly maybe talk a bit about the potential synergies? And obviously, ideally, if you can quantify anything, that would be hugely appreciated.

Well, first of all, the synergies we see ahead of us are definitely growth synergies. So this is not a cost synergy acquisition. Actually, Electron Protection is in pretty good shape and we won't have the other cost synergies, I believe, than the one we may have and hope to have from supplier comparisons between our prices and their prices. So the main synergies will be growing their business, so assisting Electrum Patern in growing their business in Norway and Sweden. Further to that, and as you know, in their 34 shops they have electricity assortment, and we would like to, if relevant, to add on assortment from our shelves needed for their customers to do a one-stop shop basically. So one synergy we hope will be expanding their assortment with relevant parts of the AO assortment. On the other hand, you know, they have this own brand, Namron, and obviously it will be part of our evaluations if Namron would fit the Danish market. We don't know yet, but that will definitely be an interesting investigation. So that would be the main synergies. It's a little bit early for us, Christian, to quantify the synergies. But there will be a press release late this month with a revised guidance and then we will have the October and the February webcasts and we will gradually become more familiar with the numbers and the potentials in the electron pattern.

Fair enough. Then probably just my last question here on Sweden. So it seems Electron has sort of entered that market with a limited presence but an ambition to grow more. And you can say A&O in Denmark has done the same, not necessarily in the same segment. But can you maybe just help us understand how we should think about the strategy for the Swedish market now you have sort of two

You're right that Electrum Bussan, they have a strong position back home in Norway. We have a strong position back home in Denmark and combined we are agreeing that Sweden is a very interesting growth market for both. both brands and when I say both brands you should also see this as a sign that we will we will grow the Swedish market with two brands So it will still be Elektro Butikken and Elektro Butik and A&O, those two brands. You should definitely expect more shops to pop up in Sweden, both in A&O as you know, but now also in Elektron på Tørn. That will be an interesting journey. We will not combine the shops, Christian. You will see separate shops for Elektrobutik and Elbutik and A&O.

Excellent. Thank you so much.

Thank you, Christian.

As a reminder, To ask a question, press five star on your telephone keypad. We will have a brief pause while questions are being registered. As no one else has lined up for questions in this call, I will now hand it back to CEO Niels A. Johansen for written questions. Please go ahead.

Hi, this is Per. We have had a number of written questions. First one, do you see any scope to consolidate the warehouses logistics of Electrum Baturne with existing AO capacity over time? The answer is no. On the contrary, we plan to keep the warehouses logistics of Electrum Baturne extremely busy in the future by expanding in both Norway and Sweden. And as I also answered the question, this acquisition is not a cost synergy acquisition, it's a growth and sales acquisition synergy and we are looking forward to to harvest those positive synergies. Then we have another question related to the net debt EBDA. Going forward, how long time do you expect it will take before net debt EBDA return to our targets? Well, it's a tricky question. Obviously you should see us prioritizing to deleverage. And by deleveraging, it will be paying back debt. It hopefully will be mainly by increasing EBDA, but it will also be by paying back or reducing net debt. When it's tough to answer, it depends on the future. investments, future wishes, future plans, but you should expect us to haunt a rarely fast reduction of leverage. I'm not sure I can get closer to it than that. Then another question is, do you expect also to refinance the debt Electrum Return had in NOC? Well, as you might know from the Electrum Returns accounts, the major part of the interest bank debt in elektronbetjern is IFAS 16, lease debt. Actually, the bank debt is quite low in elektronbetjern. So we may refinance the debt and we may not. That's not clear yet. Then a third question. Do you expect that the new debt will impact the payout ratio of 50%? In A&O we basically feel, and you also know our capital allocation policies, we feel that paying out a solid dividend is It's a part of being an A&O shareholder and we would like still to pay out dividends. Obviously, this is a decision that we will take together with the board at the end of the year, but we like paying out dividends. Then we have another question. How much of the inventory increase is driven by price versus volume? Inventory has increased approximately 60 million this year. and around 30% is due to prices and around 70% is due to additional volume. So... Then regarding Namrun, what is needed to be able to launch it? Regarding Namrun, what is needed to be able to launch it in the DK markets? Do you think it's already possible to do in 2027? Well, we think that first of all, we have to take the decision if and when we will do it in Denmark. But assuming we have been taking that decision, then I would expect it to be possible in 2027. Not in the beginning of 2027, but within 2027. Then we have another question related to the finance cost. What would be the cost of borrowing percent related to electric return acquisition? and this goes for the bridge financing and then the I guess of the 800 million Danish or 760 million Danish. The borrowing cost will be if we lend it in Danish kroner it will be kyber plus less than 1.5% and if we borrow it in NOK then it will be nyber plus less than 1.5%. Then we have another question related to our property portfolio. Can you estimate the loan to value for your properties after having paid for the electron return purchase? Well, we don't disclose that, but even after the the refinancing of property space. You know, what we will do is basically to increase the loans in properties only up to the original main chair. So the loan to value will still be pretty low even after the financing. So there will be a basis for utilizing the property portfolio more than what we have done now. Can you update on progress in the new brands or sites that you have established in Sweden the last 18 months? Yes. Sure. As you know, in 2024 we bought the Valentuna site with one aim to get a hold of a very, very interesting site, but also to spearhead our further growth in the Stockholm area. and we did and we opened another three, four shops since then. What we have seen is that Growth is picking up rather fast. Typically, we are in break even, EBDA break even within the first 12 months. And we see the growth. It typically takes approximately, you could say, around three years for it to become a mature shop. but it goes to break even within the first 12 months and some of the shops has been break even faster than the 12 months. Great. Great. I think that's all. Thank you for the many good questions and the big interest we have seen in this webcast. We are looking forward to issue the updated guidance, including elektron på tøren, end of this month, and then we will be looking forward to host the next webcast late October. See you. Bye.