Scandinavian Tob Grp Ord

Good day and thank you for standing by. Welcome to the Scandinavian Tobacco Group full year and fourth quarter results webcast. At this time all participants are in a listen only mode. After this week's presentation there'll be a question and answer session. To ask a question during the session you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question please press star 1 1 again. If you wish to ask a question via the webcast please use the Q&A box available on the webcast link anytime during the conference. Please be advised that today's conference has been recorded. I would now like to hand the conference over to your first speaker today, Torben Sand. Please go ahead.

Thank you, and welcome to all to Scandinavian Tobacco Group's webcast for the full year and fourth quarter results 2024. My name is Seth Torben Sand, and I am Director of Investor Relations and External Communications, and I am, as usual, joined by our CEO, Niels Frederiksen, and our CFO, Marianne Hrøslev-Bach. Please turn to slide number three for today's webcast agenda. Nils will start the presentation by giving an overview of the highlights of the year, as well as an update on our key strategic achievements. Then he will switch focus to an update on developments in our core markets, as well as insights to recent trends and developments in our product categories. Marianne will take over with an overview of the financial performance in our three commercial reporting divisions, where after she will turn the focus to key financial developments for the group, including an update on cash flow, leverage, and capital allocation. Nils will conclude the presentation with an update on our financial expectations for 2025. After the presentation by management, we will conduct a Q&A session where we will be more than pleased to take any questions you might have. And before we start, I ask you to pay attention to our disclaimer on forward-looking statements, which can be found at the end of this slide deck. With this, please turn to slide number five, and I will leave the word to Nils.

Thank you, Torben, and welcome and good morning to everyone on the call. When I reflect on the year we've now left behind, I'm pleased to report good progress in our strategy rolling towards 2025. We've grown our company, not only measured by net sales, but also by the platform we have strengthened for long-term success. We've invested in new growth opportunities, improved efficiency, and we've returned almost 1.5 billion kroner to our shareholders in a combination of dividends and share buybacks. Although 2024 became a challenging year with a volatile business environment and low visibility, we delivered a solid financial performance which was within the expectations we communicated in March last year and which were updated in November with the impacts from the acquisition of McFarland. For the first time ever, our group reported net sales exceeding 9 billion kroner, with growth being driven by the inclusion of McFarland for six months and by our growth enablers. Our core cigar business continues to be impacted by declining markets. The EBITDA margin of 22.6% was lower than the year before, but it was within the original guidance we communicated one year ago, despite the adverse impact of investments, whether in our growth enablers or in strengthening our market positions in the core categories. The free cash flow before acquisitions came in at $930 million, 931 million kroner for the year and adjusted earnings per share was 13.7 kroner. I'll now give you an update on some of the progress we are making with our strategy. Please turn to slide number six. More than four years ago, we launched rolling towards 2025 and we're now in the final year of the existing strategy period. Since its launch, we've added strong brands, We've expanded our product portfolio to nicotine pouches, and we made multiple acquisitions and launched a sustainability strategy. This year, we will develop and announce our strategy beyond 2025, and we expect to do so during the fourth quarter. As I mentioned in my opening remarks, we continue to make good progress with our strategy. Let me now give a few highlights on the recent developments. Acquisitions have been and will continue to be an important part of our vision to become a larger and more profitable company. In 2024, we acquired McBarn at a total transaction value of more than half a billion kroner, and McBarn has strengthened our position within the smoking tobacco categories, pipe tobacco and fine cut tobacco, and it has also added valuable brands to our portfolios, and when fully integrated, we expect synergies in the level of 150 million kroner with full impact in 2027. The main cost synergies will be within sales and marketing, head office functions, and the combination of our manufacturing footprint. With an expected return on invested capital well above our group ROIC, Denmark Bar & Acquisition is a good example of how we can continue to create value through M&A. We've also made significant progress in our sustainability agenda. Our annual report is now compliant with the EU Corporate Sustainability Reporting Directive, and we are proud of the progress we're making across our climate-related actions and in being community pioneers. The third highlight I would like to mention is the importance of our growth enablers. Combined, our NGP business, our retail stores in the US, and international sales of handmade cigars delivered double-digit net sales growth in 2024, and now account for 10% of group net sales. We will continue to invest in new cigar superstores, our international expansion of handmade cigars, and in the rollout of our nicotine house brands. We do so to further strengthen the platform for our future growth, and we are closely monitoring that they meet our financial criteria for delivering adequate ROIC over time. The retail superstores already do exactly this within three years of opening, whereas the payback for our NGP investments will take longer. However, we expect our NGP category will approach a bit of break-even this year. Please turn two slides to slide number eight. The market for hand-made cigars in the U.S. remains challenged by uncertain consumer sentiments. We estimate consumption declined by approximately amid single-digit incentives last year, and in the first months of this year, there's been no change in the development. Reflecting upon these uncertainties in U.S. consumer spending, we do not expect to see an improvement in the next quarters ahead of us. The move towards more value for money demand in the market that I addressed in last quarter's webcast and a higher promotional activity are putting pressure on the overall price mix for handmade cigars. we will continue to respond to protect our market share. However, given these US circumstances, our strategy to invest in growth opportunities across the handmade cigar category has turned out to be successful with valuable contributions to overall performance of the category from both our retail stores and international markets. Although the international sales of handmade cigars showed a lower than normal growth at 2% in the fourth quarter, this growth enabler has delivered has delivered double-digit growth for the past four to five years, and we expect growth to continue. In our retail superstores in the U.S., growth of handmade cigars was 6% compared with last year, and remember that total growth in our retail stores is even higher when we incorporate bar sales. Part of the growth stems from the opening of new stores, and during the quarter, we opened two new stores. Please turn to slide number nine. The total market for machine world cigars in Europe in our key markets is estimated to have declined by 2.8% compared with the full year decline rate of 3.5%. Consequently, the acceleration in volume declines in Europe at the beginning of last year eased off through the second half, although it remains uncertain whether this is only temporary or a sustainable improvement. The coming quarters will provide important data points in this respect. The initiatives and investments we have taken to recover market shares have stabilized our position, but it will take time to reach the full benefits of the actions we are taking, and these will continue in 2025. Our market share index remained unchanged at 28.1% versus the third quarter, but was slightly up against the full year market share at 27.9%. We will continue to invest in rebuilding our positions, although there is no assurance of a straight line recovery, and we must foresee fluctuations quarter by quarter. Smoking tobacco delivered a 50% increase in reported net sales, mostly driven by the inclusion of McBarn, but also driven by 12% organic growth, reflecting a strong performance in particular in fine cod. Part of the growth in the quarter is the result of phasing between quarters, which will impact the first quarter of this year. With this, now please turn to the next slide. I will now move to our product category next-generation products. During the fourth quarter, the category increased reported net sales by 9% compared to last year, while full-year growth was 118%. Behind these different growth rates, there are several important factors to be mindful of. Firstly, our nicotine pouch brand XQS, our global dry brand, continues to impress with high double-digit growth rates driven by market share growth in Sweden, which now has improved to more than 10% and a good development in the UK. Secondly, the discontinuation of SYN, the third-party nicotine power product distributed via our online business in the US, does impact growth significantly. The distribution was stopped from the 1st of July 2024, and this implies both organic growth and reported growth are impacted significantly. by the discontinuation from the third quarter of 2024 and will continue to be so until the second quarter of 2025. When the distribution was discontinued, it accounted for about 3% of group net sales. Overall, we are very pleased with our investments in the nicotine pouch market and in particular the performance of XQS. We are executing according to plan and a key milestone for us in the coming quarters is to integrate the McFarren brands ACE and GRID into the combined STG portfolio. With the addition of these two brands to the portfolio, we decided to seize the sales of the start brand. In total, we have invested less than 250 million kroner into our NGP category, including the acquisition price of XQS in 2023. We remain committed to deliver value from these investments over time, and with the category approaching a beta break even in 2025, we are getting closer to that. With this, I'll now leave the word to Marianne for more details on the divisional performance. Please turn two pages to slide number 12.

Thank you, Niels. We will now turn the focus to look at the financial performance, which we report from the three commercial divisions. I'll start the overview with Europe-branded. Reported net sales for the fourth quarter increased by 7% to 848 million kroner, with organic net sales decreasing by 4%. The acquisition of McBaron impacted reported net sales by almost 11%. The main drivers for the development in organic growth are decreasing net sales of machine-rolled cigars and smoking tobacco being only partially offset by increasing net sales of handmade cigars and next-generation products. Price management remains a key factor in all core categories, but the execution might be more tactical in certain product categories to protect or improve market share positions. EBITDA before special items decreased by 7% with an EBITDA margin of 21.6% compared to 24.7% in the same quarter of 2023. The margin development is driven by increased investments in sales and marketing to regain our market positions in machine road cigars, the continued investments in the NGP category, as well as the impact of financial consolidation of McBarracks. With this, please turn to slide number 13. In the quarter, reported net sales for the commercial division, North America branded, and rest of the world increased by 17%, with McBaron impacting growth by 14%. Organic net sales increased by almost 4%. The main drivers for the organic development were a strong finish of the year for smoking tobacco, in particularly fine cut tobacco to global travel retail. Part of the fourth quarter growth relates to facing between quarters which will impact first quarter 2025 growth. EBITDA before special items increased by 41% with an EBITDA margin of 39.3% versus 32.6% in the fourth quarter last year. The strong increase in EBITDA is driven by the increase in net sales and lower operating expenses, as well as the inclusion of net bearing. The EBITDA margin was primarily impacted by lower operating expenses. The 21 million kroner refund of certain import tax payments does only marginally impact the margin improvement. A similar refund of 12 million was included in the first quarter of last year. I'll now turn the attention to the financial performance in our North America Online and Retail Division. Please turn to slide number 14. Reported net sales for the fourth quarter were unpowerful 2023. The inclusion of McBaron impacted reported net sales growth by 2%. Organic growth was negative by 2.4%. However, excluding the impact from the discontinuation of the third-party distribution, which Nils mentioned, organic growth was positive by 3.5%. The development in the underlying organic net sales growth is primarily driven by our retail business with 17% growth, whereof 6% relates to the same store sales and the remaining growth from opening of new stores within the past year. The number of active consumers at file within the past year declined in line with total market decline, but it was offset by a higher spending per customer. EBITDA before special items decreased by 8%, with the EBITDA margin decreasing to 13.4% from 14.7% in the fourth quarter in 2023. The declining EBITDA margin reflects continued investments in promotion to maintain market share. Please turn to slide number 15. I will now move from our commercial divisions to an update on group performance. Focus will be on the development for the fourth quarter. Reported net sales increased by 8% to 2.5 billion kroner. The impact from McBaron acquisition was close to 9%, while the impact from exchange rate developments was immaterial in the quarter. Excluding the impact from acquisitions and exchange rate developments, organic net sales growth was negative by 1%. The organic growth was impacted by the discontinued third-party distribution business by almost 2%, leaving a more like-for-like growth positive to close to 1%. This gives you a better sense of the underlying development in the business during the quarter. The underlying growth was driven by our nicotine-powered brand, Extruet, and smoking tobacco. In a moment, I will revert to the development in EBITDA and the margins. Special costs were 148 million kroner in the quarter relating to the integration of McBaron, the implementation of our ERP system, and reorganizations, which includes costs for establishing a new service delivery organization. Net profit for the quarter declined to 221 million kroner from 268 million kroner as a result of the higher special costs and higher taxes. The adjusted earning per share, which excludes special items, increased by 5% to 3.8 kroner per share. The free cash flow before acquisitions was 604 million kroner, impacted by operational performance, lower taxes paid, and a positive contribution from working capital by 164 million kroner. Now please turn to slide number 16. In the previous slides, we talked about the organic net sales growth development and the drivers behind it, and now I'll focus on the margin development. The EBITDA margin increased to 24.3% in the fourth quarter from 22.7% in the fourth quarter of 2023. The increase in the margin is primarily driven by the increased net sales leveraging operating expenses. For the full year, the EBITDA margin was 22.6% within our guidance range of 22 to 23%. The decrease compared with 2023 relates to a lower gross margin as a result of changes in country and product mix, and particularly investments in the French recovery, the strong growth in NTP, and the inclusion of MacBaron. Now please turn one slide to slide number 17. I'll now turn to our net debt and leverage position with a focus on the full-year developments. During 2024, the net interest-bearing debt increased by $1.4 billion to $5.4 billion. The main drivers for the development were capital allocations totaling $1.5 billion for the year and the acquisition of McBaron at a value slightly more than half a billion Danish kroner being partially offset by the free cash flow generation for the year. As a result, the leverage ratio increased 2.6 times compared to 1.9 times at the end of 2023. By the end of the third quarter of 2024, the net debt was $5.8 billion and the leverage ratio 2.9 times. At this point, I expect the leverage ratio around our leverage target of 2.5 times by the end of 2025. Please turn to slide number 18. Our shareholder return policy is anchored in a commitment to deliver annual growth in the ordinary dividend per share and to distribute any excess capital. In 2024, we returned close to 1.5 billion kroner to shareholders. A dividend of 8 kroner and 50 øre is to be proposed at the annual general meeting in April. We have increased the ordinary dividend per share for nine consecutive years with a total increase of 70% since we became a listed company in 2016. In the chart, you can see that over the past five years, we have returned almost 6 billion kroner to our shareholders, either as dividends or through share buybacks. These achievements underline our commitment to deliver on our shareholder return policy. However, let me also remind you that when determining whether excess capital should be returned to shareholders, we do prioritize investing in the growth of our company if these investments can meet our criteria for creating value. The McBaron acquisition and the investment in our retail superstores are such examples. With this, I'll now leave the work back to Niels for an update on our expectations for 2025. Please turn to slide number 20.

Thank you, Marianne. In my opening remarks, I addressed the challenging business environment throughout last year, and 2025 will be no different. Current geopolitical and macroeconomic uncertainties are higher than normal and do make projections for the coming year more difficult. Consequently, the ranges for our expectations for net sales, and in particular the EBITDA margin, are broader than normal. As we get more tangible data points in the coming months and into the high season during the summer, we expect to be able to narrow the ranges. The uncertainties include volume and price developments for our core categories, cost developments, and supply chain stability. In our base assumption, we expect the market for machine world cigars in Europe to decline close to the 3-4% decline rate we saw last year, and we expect the consumption of handmade cigars in the U.S. to decline by another 2-3 percentage points. However, consumer confidence is challenged in many of our core markets, and it's difficult to forecast consumer behavior precisely. Reported net sales are expected in the range of 9.2 to 9.7 billion kroner and include the full impact from the inclusion of McBahn by 3%, a positive impact from exchange rates of slightly more than 1% at current exchange rates, whereas the discontinued distribution business in the US and the divestment of a small, lightest business in France combined will impact growth negatively by almost two percentage points. This implies that we expect a flat to slightly positive growth in mid-sales, excluding these factors driven by our growth enablers. The bidder margin before special items is expected in the range of 20% to 23%, reflecting the low visibility we have at this point for important margin drivers. Additionally, we remain committed to strengthening our platform, which is important for further growth, although it may temporarily impact profit margins, cash flow, and return on invested capital. We are prioritizing actions that will strengthen the company and our market positions in the future, also at the cost of near-term profitability. Consequently, the range for the EBITDA margin is wider than normal to reflect this. However, we do not see us delivering at the bottom of the range, but we find that we must have the flexibility to react to circumstances which could be unexpected price competition where we prioritize to protect market share over short-term profitability. Free cash flow is expected in the range of 800 million to 1.1 billion kroner and will be impacted by CAPEX investments of up to 300 million kroner, including factory consolidations and the opening of two new retail stores in the U.S., as well as about 200 million kroner in special costs in relation to the Malphion integration and one process. This concludes our presentation for today's call. I'll now hand the word back to the operator, and we are ready to take questions.

Thank you. As a reminder to ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. If you wish to ask a question via the webcast, please type it into the box and click submit. We will now take our first question. Please stand by. And the first question comes from the line of Nicholas Ekman from Carnegie. Please go ahead, your line is now open.

Thank you. Yes, I have a couple of questions and I think I'll start with the last topic here with the guidance for 2025. Can you elaborate just a little bit more here on the risk of ending up in the low end of the range here? Because the low end of the range that basically would require organic sales to be declining and a margin contraction of more than two percentage points. Just what are your main concerns here? And if you do see competition increasing, for instance, you do see that you have to make evasive maneuvers to protect your market share. Aren't there mitigating factors that you could do on the cost side, for instance, to mitigate this, and particularly with synergies from McBaron, for instance? So just trying to see what the risk of ending up in the very low end of the range here is.

Thanks for the question. When we have been working with setting the guidance for 2025, we are of course looking into the future. As Niels also said in his comment, we do not expect to be at the lower level of the guidance. There has to be extraordinary circumstances to be at that level. There's no doubt that we have half of our turnover in the U.S., and U.S. consumer sentiment is currently low, and it is very difficult to predict how the U.S. market will develop. So we are focused on the U.S. market. We are looking at it, but we also want to make sure with the guidance that we do have the freedom to react if circumstances arises. So to put it a little more short, both the lower level but also the upper level of our guidance range, we think there has to be special circumstances to reach those levels. Our ability to react, we always have some levers to react and also on the cost side. I also think it is important if you look at the last three to four years, we have done significant cost-cutting and initiatives to do costs, so our ability is also declining. But we are, as a management team, also committed to looking into new initiatives, which we already are doing. And there will always be some kind of ability to take out costs in the short term.

Thank you so much. That's very clear. And sticking to the U.S. market, there's a lot of changes here happening in that market, of course. There's discussions about tariffs. You have the Doge initiative, which could, I guess, potentially impact the regulatory environment as well. Are you seeing any of these changes impacting you already now? Or is there anything, any particular area where you are worried that something might happen that could either be negative or positive for your end?

Yes, let me start with the last point you made, Niklas, around the regulatory area. And here we are seeing the regulatory agenda around tobacco and nicotine products becoming less of a priority. So we have seen the flavor ban and we've seen the nicotine level discussion being parked. We've also won certain court cases for the handmade cigars that give us a strong starting point for that potentially over the next five to seven years with very, very limited regulation. So the regular tariff side, you can say for the industry, I think one has to view as a positive. When you then look at tariffs, we are actually less concerned around tariffs. You can never ignore the threat of tariffs, but almost all of our handmade cigar products and those of our competition is imported. And we still believe that the countries of origin, which is Dominican, Honduras, and Nicaragua, are probably low on the list of the current administration. But it can, of course, not be ruled out, but we think they are relatively low, and it will be something that hits the industry in Chorzom. The biggest area on the tariff that we are following is that we do import certain accessories from China, and that's where there is, of course, an impact from the tariff, but it's also an area where we feel that our suppliers have tried to put themselves in a good inventory position. Then the last point, which is around the doge and also around consumer sentiment, is what concerns us the most, because lack of certainty, unemployment rates, is things that can translate into consumer behavior that is not good for our category. So this is what we are following the most closely and this is where we believe the risk for our business is the highest. And there you can also say the upside is the highest because if we get a situation where the U.S. consumer confidence let's say, goes back up, we believe that also will affect our handmade cigar business potentially positively.

Thank you for a long and elaborate answer. Very clear. Third question is on buybacks. You make no mention of buybacks here. You talk about the net depth being a little bit above your target, etc. Do you Do you see 2025 being a year where you pause buybacks? Do you think you can resume them later this year? What are the discussions with the board on that topic?

Thank you, Niklas. Currently, we're not anticipating to issue or initiate a new share buyback during 2025. Our leverage is at our target level, and we would like to gain some flexibility in our capital structure in order to be able also to do acquisitions or invest where necessary. So 2025 is currently a year where we're posing share buybacks.

Very clear. And some nifty-gritty questions here as well. Extraordinary items here, 148 million. Can you give us a split here? You talk about McBaren reorganization and the ERP system. What is the approximate split? And the same question for 25 when you talk about, I think, 200 million in special items. If you can say something about the approximate split for that as well.

Yeah, so maybe let me just, when we talk reorganization, Just put a few words on that. So there is around one-third included in reorganizations because we are looking at our back office and will establish during 2025 a solution delivery center in the southern part of Europe. That has been announced. That is around one-third. On one process, if I remember well, that is a little bit above one-third, and then the remaining is MacBaron. This is high-level indication.

Okay. I'm sorry. Was that for Q4, or is that 25? That is 25.

No, no, no. So that is Q4. That's 148. Yeah, sorry.

Okay. Okay. Very good. Excellent. And just a quick final question. Net financials for 2025, will they be likely at a similar rate as in Q4 or any reason to assume it will be higher or lower?

They will be higher because we will have the new bond, which we issued back in November, that will have a higher interest rate than the current bond.

Do you have an approximate guidance for what it could be on a quarterly basis?

No, but it would be around the three percentage points higher.

Three and a half percentage points higher on the 300 million euros issued.

Yeah, so I think it's around 20 million per quarter.

Excellent. Thank you so much for taking my question.

Remember, Niklas, it's only from the beginning of the year to August, because we already had it rolling in most of the second half of the year.

Yeah, so therefore not significantly higher than what you had in Q4.

Yeah, you can take Q4 as a good start. kind of track for the quality.

Approximation. Yeah. Okay. Super, super. Thank you so much for taking all my questions. Absolutely.

Thank you. We will now take our next question. Please stand by. And the next question comes from the line of Damian McNeill from Deutsche Numis. Please go ahead. Your line is now open.

Thank you. Morning, everybody. Thank you for taking the questions. First question is back on guidance. I was just wondering if you could provide any details on what's happening to input costs and what is included in your guidance assumptions with regards to input costs is the first question. Second question is on the NGP business. I think if I heard correctly, you're indicating you'd be approaching breakeven in that business in FY25. Can you sort of give us an indication of the volume growth that you're anticipating to get to that breakeven number and some of the considerations about whether you could do more or less? in terms of that growth in NGP. And then just the North American cigars stores. Can you just talk about how some of the newer format stores are performing and the degree of conviction that gives you about the new stores that you're opening over the next couple of quarters, please?

Thank you, Damian, for the questions. Let me take the first one. So when we look at the overall input cost for our operations, we do not see our cost base increasing significantly into 2025, but the cost per cigar is impacted as the volumes are declining. When we look at the inflation impacts, both on salaries, then it follows country inflation. We have seen some increases in tobacco, but as I said, our cost base into 2025 is more or less stable as we have been able to offset that with other impacts. However, due to declining volume, the cost per cigar will go up.

Yes, and let me talk to the two other points. First of all, when you look at our nicotine pouch business, I think it's important to remember that our main focus is really Scandinavia, with Sweden and Denmark and Norway as the main focus area, along with Finland. And then it's the UK and certain export markets. So the growth momentum we are seeing at the moment is primarily driven by Sweden, where we have really strong brand momentum and we are growing market share month on month. But we also launched into the other Scandinavian markets and are seeing good progress, but also slower progress than we saw in Sweden. So that's the main focus of that business. And those markets contain what I would call reasonable potential for further volume growth, especially the UK. We are optimistic around. But I also would say that the bigger question on the nicotine pouch business, of course, is what will happen in Europe. Will we get Europe opening up? And this is where there is potentially bigger opportunities. And then you have, of course, The U.S., which for us is a market that they're not able to access today, but which could over time also be a potential market. So when we think about the nicotine pouch business and we talk about even for 2025, it's very much about our Scandinavian and UK and export business. And if there is a new change in market opportunities or in market access, that situation would need to be revisited. Then let me talk about the... Yes, go on.

Just before we move on to the next question, just in terms of the growth that you're seeing in Sweden, can you talk a little bit about where that growth is coming from? Are you taking share off other nicotine pouch players or are you converting traditional snus users into nicotine pouches?

When we acquired the XQS brand, we acquired a brand that was available in limited distribution in Sweden but was doing well in the parts where it was distributed. What we were able to do with our organization is that we've been able to scale up distribution so that today we are almost at the level of the other major market players. We've also been able to put a more professional marketing support behind the organization. So our market share growth so far has really been driven by distribution expansion and by delivering strong innovations into the market. We can see that the brand XQS is well known for innovations and we see innovations take market share. So the market share is certainly coming from other players and there is a let's say, four key players in the Swedish markets where we are now catching up to be very close to number three. So the other main players there is BAT, it's Philip Morris, and it's a brand called Loop. So it is coming from both the bigger players and the smaller players, the market share that we are taking.

Okay, thank you. Thank you.

Then let me talk to... Turn a little bit to the retail store question that Damien also had, because I think it's still early days for our more recent retail stores. And the reason I say that is that most of them have only been open for one to one and a half quarter, but the initial results are positive. And important to remember, these are the first wave of stores that are based on new location criteria. So we've basically been working over the past 12 to 18 months to improve our identification of best locations. So I think we need to ask for another couple of quarters before we can call out whether we actually see a better performance of these stores than the original stores. But all our stores in a difficult environment is showing that they are competitive and that consumers are willing to or seem willing to go out and spend the money for a good time that luckily involves the smoking of cigars as well.

Thank you, Niels. Very clear.

Thank you. There are no further questions on the phone line. I would now like to hand to the room for any questions on the webcast.

At this point, there are no questions in the webcasts.

There are no further questions on the phone line. I would now like to hand back to the room for any closing remarks.

Okay, but thank you all for listening in to this webcast and we look forward to meet and talk to you again in about a quarter's time from now. Thank you and goodbye.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.