Alligo AB (publ)

Welcome to Aligo Q4 Report 2024. And let this mark the end of this crappy year. Look at this beautiful picture of a number of stock batteries, which is a little hint of what we are going to talk about in a few minutes. That is our Batterilaget acquisition. Presenters today, as always, Elias Midsombon-Berlande, our brilliant CFO, and myself, Some highlights, we have included less and less pictures, slides describing the Aligo Group, and now it's only this one left because we think you slowly but surely are learning more and more about the group. So we're not many slides presenting the Aligo Group as such, but here we are called Sudol in Sweden, tools in Norway and Finland mainly, and a number of subsidiaries in different businesses. We will come back to that later on. So some two hundred and twenty stores throughout the Nordic countries. So highlight continued week market, as I said, a crappy year. We did a very, very good twenty twenty three, potentially looking like a little bit too good, considering that the market had already started to turn down in twenty twenty three. And we, as everybody else, have planned for a good and stable market upturn starting second half of 2024, which did not materialize, as you know. So we had throughout the year and the Q4, we had a weak market. We many times talk about the construction industry and the manufacturing industry, but close to half of our group is also in other segments, transportation, oil and gas, and different segments. which also had a difficult year. But throughout the year, oil and gas has been stable in Norway. And we do see some positive signals. A lot of different reporting companies have been talking about that. They see positive signals. Some are seeing an increase in uptick in oil intake. And we see positive signals, but they are not yet visible in the sales figures. We see signs of recovery in Finland, but if you look at the Q4, in all honesty, we had a weak Q4 2023 in Finland as the whole industry came to a stop. It was actually a date, 16th of November. So we had easy comps for the Finnish case. We think we as a management team are doing a fair job. We have been driving sales like crazy. I've never seen so many sales initiatives and allocating so many resources to push sales as we are doing and have been doing. We've been doing a lot of acquisitions during the year. We have concluded 11 and signed nine, which is quite impressive as we are at the same time trying to adjust the cost base and drive sales. We're working constantly with the inventory levels. There's still a lot to be done, but we think we are taking steps forward. And then some price adjustments, which we need to be very careful with coming out of this high inflation period where the price increases were very, very high, not to end up in a position where we are perceived as super expensive. So to do that in a balanced way to keep our healthy contribution margins But not to price ourselves out to the market is a specific task to do. Delivery capacity is good. Sweden and Finland, we had issues, you know, with the startup of Besti, our new central warehouse in Norway, which we moved into during Q1 2024. And then to be clear, we had over six months of disturbances, but now during Q4. We have stabilized it and it's performing nicely, nice enough for us to actually press the button and go with JEEVS in the first of February this year. Macroeconomic factors, we consume everything which is available from macro statistics to peers, to everything we can find. And it looks like it should have a better development going forward. GDP wise, construction segments, Inflation should be on a decent level. So it looks like it's stabilizing. Q4 in brief, totally 2% up, helped by acquisitions, of course. So the organic is minus three. Cash flow, okay. And for the full year, actually a pretty good cash flow. EBITDA 214 compared to 308 last year, leaving us with an 8.3 EBITDA margin. And a gross margin of 41.1, mainly burdened within quotation marks of lower positive effects of supplier bonus agreement. Of course, when we buy less, you have less bonus outcome. And that normally is a Q4 effect we have, which was less this year than previous years. So acquisitions. We managed to acquire Batterilaget, a very nice business, the largest acquisition since we formed Aligo. It's strengthening our battery offer that we already have, of course. We are not super small in the battery segment as we are. And that is a very strong compliment to our offer. Completed in 5th of February. Sustainability climate targets for scope 1, 2, and 3 sent into site-based target initiative a validation and we are taking steps in the sustainability area. One proof of that is the ranking that Domestika Industria does where we two years ago was I think number 37 and last year I think we were at 27 and now we are at number 20. So we have no ambition to be number one but if you are among top 15-20 I think it's good because it's a competitive disadvantage not to be good in sustainability. And then operations. We have talked many times in this forum about the poor performance of the original tools business in Finland. And nobody historically has ever been able to really turn it around. And in all honesty, I thought we could turn it around in a couple of years, but it is a tough nut to crack. And we are putting in more efforts to turn that development around. The ERP system in Norway, we actually went live last Monday, and it went well, touch all the woods existing. So it looks like it has started up nicely. And we are now launching the Recare, which was previously known as Smartware, but the real brand when we now launch it is Recare. We'll come back to that. So I said acquisitions. We actually designed nine acquisitions from 750 million in turnover during the year. Nice, well-run, profitable businesses. And we are super happy that we managed to do this, even if it looks like an effect is that our leverage is a little bit higher from 1.6 to 2.4, I think. That's a natural effect of this. But there are acquisitions that we really wanted to do and managed to perform. So just a quick introduction to two of them of a little bit of a different theme and from two different technical areas. One is Corema that we managed to acquire during Q4, 155 million turnover business operations in Gothenburg and Sundsvall, very much of an industrial profile. large industrial customers, which is complementing the other five separate businesses we had within welding. Well established customer base and we through acquiring Korema, we also as a side effect got the positive strengthening of our fastening offer. And as you know, we are launching our own brand in within Fasteners and Korema has a good competence within Fasteners. positive side effect of acquiring Corema. Then if we switch to Svenska Batterilagret, super happy to be able to acquire this very nice company. 27 stores at around Sweden, 275 million turnover and have a wide battery assortment. Everybody I talk to these days, they all have different relations too. It seems like a lot of people know about battery longer, much wider than I could ever imagine. So strong in-car batteries, lithium batteries for tools and other equipment, solar panels. So super strong player within the battery segment and has, of course, both B2B and B2C customers. So they are super welcomed to our group. They had the first management team meeting yesterday as a legal group. So, high speed. Irene, over to you.

Yes, thank you. As Cain mentioned, the trend as seen throughout 2024 continued into Q4. We developed and streamlined the business and continued working on reducing the cost base. Revenue increased by 2% in the quarter, negatively impacted by one trading day less, ethics effects and a mild winter. The negative organic growth in Finland and in Sweden continued. However, sales in Finland slightly recovered while sales in Sweden were weaker. Overall, the group had a negative organic growth of minus 3%, offset by a sufficient giving growth of 6.8%. EBITDA reached 214 million SEK, a decline from 308 million last year, and the result was weaker in all markets, but primarily in Sweden, driven by decreased volumes within the SME segment and larger customers within public administration and the green tech industry. The decrease in profitability was due to weaker demand, reduced supplier bonuses, and adverse mix effects impacting the contribution margin. Cost savings and the acquired result partially offset the declining gross profit. And as shown in the EBITDA bridges, cost reductions have balanced the annual salary increases and the inflation effects related to other expenses. As you can see on this slide, Sweden was hurt during 2024 because the wheat market primarily impacted small and mid-sized customers and the share of SMEs decreased from 62% to 56%. In addition, larger industrial customers to a greater extent by fixed assortments of external brands and the share of sales of own brands decreased from 24% to 22% in Sweden. There are several parameters that impact the contribution margin. We have an unfavorable customer segment mix across all countries. And in Norway, the oil and gas sector shows positive sales trend, making up a more significant portion of total sales. However, this customer mix negatively impacted the group's contribution margin by 0.5 percentage points in Q4. And furthermore, the decline in sales related to SMEs implied a negative impact of 0.2 percentage points on the group's contribution margin in 2004. Moving on to some highlights of each market development in 2004. And when it comes to Sweden, the market continued to be weak, and the growth was negative at around minus 9%. The drop is primarily related to SMEs but there was also decrease in public administration and the green tech industry which had a positive sales trend earlier this year. Cost savings and acquired results positively impact EBITDA but couldn't fully compensate for weak organic sales, unfavorable mix effects and decreased supplier bonuses. In Norway the oil and gas This market has continued to be strong, but the result is behind last year due to a drop in gross margin and higher costs for temporary employees and freight in the new logistics center. In Finland, the manufacturing industry clearly slowed down in Q4 last year, and low comparable figures imply a slight recovery in Q4 this year, and organic growth was negative at minus 4%. While our recent acquisitions have positively impacted the results, the old tools business is struggling. And during the quarter, a project was initiated to reverse the negative profitability trend. As you know, the fourth quarter is seasonally the strongest quarter from a cash flow perspective. However, operating cash flow was slightly lower than last year due to lower EBITDA. We have continued to focus on reducing inventory levels with investments in our own brand somewhat contracts. The four years investing activities were mainly related to the completion of 11 acquisitions, and we have deprioritized organic investments in favor of acquisitions. capex to depreciation ratio amounted to a multiple of 0.9 which aligns with our long-term target level the higher cash flow from financing activities is explained by the higher usage of our credit facilities which is partly contracted by increased amortization of leasing liabilities and dividend paid Net debt at year end was 1.6 billion, an increase from last year due to acquisitions, increased dividend payments, and decreased operating cash flow. The ratio of net debt to EBITDA was multiple of 2.4, which is higher than last year due to a combination of lower EBITDA and higher net debt. The acquisition of battery ladders was completed in February, and therefore, leverage is expected to remain at this level in the short term but gradually decrease. Our covenants relate to interest coverage and equity assets ratios and they are fulfilled at the end of the period and there is still good headroom before reaching the thresholds. Moving on to our performance in 2024 in relation to our financial and sustainability targets. And obviously, due to the weak market, organic growth didn't meet our target levels, and that has resulted in a setback for the EBITDA margin trend. The decreased profitability and the high acquisition pace have increased leverage, but we still have a solid financial position, and leverage is well within the financial target range. The board of directors proposes a dividend for 2024 of 2 SEK per share, which corresponds to 36% of net results compared to 35% last year. Furthermore, throughout the year, we have progressed in our sustainability efforts. For instance, concerning responsible supplier relationships, 77% now meet our supply standard requirements compared to 67% last year. And furthermore, we submitted our science-based targets for reducing Scope 1, 2 and 3 emissions to FPTI for validation. Handing it over to you, Klain, for summary and outlook.

Thank you. So Q4, in summary, it concluded a super challenging year. and was not in line with our long-term development as we would have wished. But I think we did everything in our powers to come out okay at the end. I'll find some market stabilizing, but as I always say, we have huge opportunities even in a little bit of a weaker market. High acquisition pace, nine acquisitions signed during 2024, adding close to 750 million specs. Korema Batterilaget you have listened to. We have initiated a project in Finland, TTA Tools Turnaround, to really get the grip of the profitability of the original tools business in Finland once and for all. And we have a strong financial position to continue to do investments in our own operations or doing acquisitions and to do dividends. So we have a super strong position. We have our concept brands, Sudol, Tools, and many other local brands. We have our strong own brands in workwear and in tools, which gives us a very, very strong position in the market. We continue to do acquisitions, and we have identified, as we say, technology areas where we do acquisitions. Welding is one, battery is another one, and that will create synergies in the group. And we also continue to improve and make more efficient and streamline the existing operations. And we are, as we speak, launching now this re-care. I'm not allowed by our sustainability team to say it's a circular offer, but it's more circular than the competitors offers that they are calling the circular offer of laundry, sewing, reuse, and then disposal in a good way. And we have a continued cost cautiousness, and we are running cost reductions programs continuously. So it looks a little bit better further on into the future. So that concludes that section. Back to you, Raz, for Q&A.