Alligo AB (publ)

Good day and thank you for standing by. Welcome to the Aligo interim report third quarter 2025 conference call and webcast. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be the question and answer session. To ask a question during the session, you need to press star, one, one on your telephone keypad. You will then hear an automatic message advising your hand is raised. To withdraw a question, please press star, one, and one 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 live event. Please be advised that this conference has been recorded. I would now like to hand the conference over to our speaker today, Glenn Johansen Olenvik. Please go ahead, sir.

Thank you, Nadia. Welcome to Aligo Q3 Report 2025. Presenters today, as since Quite a while back is our CFO, Irene Wittson-Volmbelander, and myself, Kling Ullambik, CEO. It's always, it feels, a very busy day when we report, so we will keep it swift as always. We focus on highlights and will not go through too many details that everybody can read on their own. So this is Aligo, a quick, quick flyover. 9.5 billion sector turnover approximately. Sweden is the biggest country by far. and even bigger if you consider the earnings. It's actually two or three shops less compared to last time. We have co-located a couple of more stores, but the biggest uptick with some 26 stores from the beginning of the year was the acquisition of Batterilager. So as of today, 239 shops. This is a busy slide, but it's to illustrate something we're quite happy with that we can We can run an integrated, fully Nordic business and at the same time see investment opportunities in adjacent or in actually the product assortment that we actually have in integrated businesses. But for different reasons, it doesn't really make sense to integrate them. So we have our 13 very nice product media companies. We have our six welding companies. And we have Vatterilagret, as you know, a nice acquisition we made. And then we have some other businesses. So those together amount to 20% of our sales. But 80% of our turnover is, of course, in the integrated businesses with the two main brands, Swedol and TOOLS. And we are a true Nordic organization, as we will see on the next slide. So this is our organization with three sales organizations, one per country, Sweden, Norway, and Finland. And then we have the Nordic functions supporting those sales organizations. This is, according to us, the most efficient way to run our business. And what is new, since we've shown this picture earlier to you, is in the top left corner, Nordic operations, where we have said that in our type of structure, in our type of business, this is many times The Nordic operations are included in the Swedish operation, but to make this a true equal support to all countries, we have put the Nordic operations in a specific box, and I mean Nordic sales supporting operations. Like the segments, industrial and construction, those two segments are placed under Nordic operations. Retail, shop development, marketing, real estate, and some other functions. So now all countries equally can have the same support and we can run much better through Nordic sales organization. And having done that, we have also recruited a new company manager for Sweden in Daniel B. who will join at the year end around. Acquisitions, three completed acquisitions, one big and two small ones. This year, 29 stores were added. Battery luggage is obvious, but also two acquisitions within the product media area. And they amount to around 300 million in annual sales. And we've got some 98 new employees into the group. Some highlights, Q3. Market situation, as we have written in the report, is very much the same. We've said that quite a while. And I see all reporting companies say more or less the same thing. It's the same market conditions. There are some hesitance, some cautiousness from the customers. But it's very much the same. About every day, every week, every month, every quarter we put behind us takes us one step closer to hopefully a better market climate. We have done, we think, whatever is possible. We have been pushing for sale for quite some time. That we have communicated many, many times. And it has not slowed down in any way. We have done the cost reductions very early on. through this downturn. I think you can all agree that we were quite early on identifying the downturn and taking actions. And the highlight, if you can say that, about cost savings, it's a terrible activity, but it was the first quarter of this year with a plan that, as you know, which we have delivered on to the decimal. We have been able to focus on acquisitions while downscaling costs. We are working very hard with reducing inventory levels, and that is a tricky thing that we are struggling with. We see good performance, or better performance, I should say, but there's much more to be done. We need to reduce the number of own brands, and we need to look over the partnership we have with our suppliers, and not having, even if we reduced, you know, by many, many thousands of suppliers, we need to do much more, and we think we are able to do that going forward. price adjustments we after this high inflation period there are some product areas where we could be perceived as expensive or more expensive and that we are addressing and we are around halfway through that delivery capacity is good best being the last or the last central warehouse we built it's back on track mainly some minor adjustments left but It has a good delivery capacity. And microeconomic factors is very much the same, but luckily at least we can benefit from better exchange rates between tech and the dollar. That's some positive things with all these disasters. Then a slide with six boxes where we tick at least five of them. Revenue we grew thanks to acquisitions. Organically, we are still in minus, a little bit less minus, but we're still in minus. We improved the cash flow. The adjusted EBITDA is up. The margin went up from 6.4 to 7.2. We are super happy about that. And the gross margin, as you know, and we have communicated many, many times, we have been focusing on cost and contribution gross margin. And we continue to have that in mind. Because as you know, the gross margin that you arrive at in a slow market is many times the gross margin you are stuck with when things turn back. So the whole trick is for us to get volume growth with this high gross margin. Then we will have a super nice future. So highlights from the Q3. Continued extremely high sales focus. We are running our growth initiatives. We are working very much with sales efficiency, what targets to put on different sales roles we have, and adapting the pricing system and the pricing levels. We do that constantly. We know how to do it. It takes some time, and it's necessary for us going forward. Acquisitions, I've said we don't need to repeat that, but we have a good pipeline when we feel it's time to hit the throttle again. Operations. We are very much focusing on tools Finland and we will not stop that focus. We have even more focused on getting the gross margins up in Finland. It's normally the Finnish organizations wherever I've been has a decent cost structure but we need to improve our gross margins of Finland and we and the management team in Finland are extremely focused on that. Assortment management. We are a reasonably new organism, and of course, when we establish assortments and things happen, you fine-tune that a bit. We need to arrive at a position where we say, this is now our assortment, and we can do a more structured way of developing assortments. Capital efficiency, we have said we were 24, and we are up at 28, and we should come down to 24, so that's a target we will come back to. Turnaround Finland, as I said, gross margin is a super focus. The team is very dedicated. We are learning from each other within the group. Norway did in the Q3 some really good initiatives bringing the gross margins up. It's a hard work. It's intellectually no challenge, but it's super difficult to really make it happen in the everyday life. We are all trying to help our Finnish colleagues to do the right thing in turning the gross margin up in Finland. The financial targets are super clear. There's no changes there. The organic growth being 5%, as we've said, and we have always said that we have hoped to add another 5% in a normal environment with acquisitions. Our debt ratio is down at 3.1, and we don't see any reason why we shouldn't be around last year's level at the year end, because Q3 is our weakest quarter from a cash flow perspective, and Q4 is our best. The EBITDA margin, we will start from where we are today, and we were close in 2023 before the market started turning sour. But it's still there as a target, clearer than ever. And the dividend, of course, we are in line with what we have set. And also the sustainability targets, they are all developing in the right direction, meeting the supply standards. Customer satisfaction index, we're actually above our target in all countries. Sick absence is at a targeted level. CO2 levels, we have a good plan in order and we are executing on it. And female in management positions are slowly, very terrifying, slow development, but at least in the right direction. So an update on our portfolio. We say we go for growth and we have very clear targets and they are, of course, Nordic. And services are a very important area for us because they are part of our assortment, which our competitors have. And then we need to differentiate in other ways than price and how to do that. Then you add services and we think we are pretty good at that. So the laundry service is developing nicely. You need first to win the contract and then you need to exchange the garments. So it takes a time before it ramps up. But from a process perspective, everything is in place and it will continue to have this nice development. To develop our shops is also a very important thing. I think we have a great part of the organization in the group. We have a good way of running our shop sales and it needs to be developed a little bit more. We have a very focused initiative for the construction industry. We think we are well positioned, we have the right brands, and we have a strong position in Sweden, but we also need to develop that in Norway and Finland. And then all brands, and I think we can skip to the next page directly. So then we have our Björklädde, probably the oldest workwear brand in the Nordics, and Uniburn being the real premium from a price position. And then if you take the mid-range, From a quality perspective, it's actually premium, both Gesto and Ampro, but priced a little bit more attractively. For you who has been around for quite some time, you remember when we launched Gesto in 2014, that was our affordable line in those days. But it has developed. It has become almost perhaps a little bit too good. But it's priced in the mid-range. And the same thing with Ampro, super quality product. in tools, but priced as very attractive at price level. And then the affordable, the 1832, we launched to meet competition with lower priced products. And since it's us putting our names under it, it's affordable in price, but in quality, very, very good. And then we're pro well in tools just to meet competition. shop assortments from low price competitors so our dear customers don't feel that they need to go somewhere else to buy that. So I think we have a very good set of own brands, potentially two wide assortments. We are focusing on scaling it down in a number of articles, but we'd like to increase the sales of own brands a lot. Market position. It's an analysis we do every year around these times when annual reports have come out. And as it looks, it's a very mathematically advanced model behind it. From a Nordic perspective, we are keeping our market chance potentially a little bit up in Sweden, flat in Norway, a little bit up in Finland. But if you look at profitability and market share development, we come out okay, to say the least. Especially from a profitability level, we are on a very good level. Financials.

Thank you. As Clay mentioned, of the six quarters, we now have a quarter with improved profitability across all countries. despite the continued wheat market. Revenue increased by 2.1% in the quarter, driven by a 6.3% growth from acquisitions, but contracted by a negative organic growth of 2.7% and adverse FX effects. The organic sales growth was weakest in Sweden, but it was significantly impacted by large project orders to the decent industry last year, and also the loss of Norfolk volumes this year. Adjusted for this, the group's organic growth was flat. Sales within the manufacturing sector in Finland recovered, although from low levels, and Norway continued to benefit from a strong oil and gas sector in the quarter. EBITDA reached 158 million, representing an improvement of 21 million, or 15%. And this increase was driven by improved results across all countries, following stronger gross margins in Sweden and in Norway, cost reductions, and contributions from acquired businesses. The enhanced gross margins are due to positive customer mix effects, better sales and assortment management, as Jane mentioned, and to some extent reduced purchase costs in US dollars. The impact from stronger margins, cost reductions and contributions from acquired businesses is illustrated in the APJ bridge. And we have 100 million cost saving program implemented in Q1 has further reduced the cost base in Q3 And as you can see in the chart, the cost reductions have offset the annual salary increases and inflation effects on other expenses. Sweden has the highest share of SMEs and own brands, followed by Norway, while Finland has the lowest. And this directly correlates with profitability in each market. The higher the shares, the greater the profitability. And the market downturn has primarily affected small and mid-sized customers. However, the decline related to SMEs is now less significant, and their share has increased from 68% to 73% in the integrated Swedish business. Additionally, the share of own brands in Sweden has increased from 26% to 30%. as sales of our own brands primarily derives from the store channel. And as you can see in the graph, there is also a slight positive development in the share of SMEs and own brands in Norway and Finland. Moving on to some highlights of each market's development. Starting with Sweden, the Swedish market remained weak with organic growth declining by about 6%. However, if adjusted for the large project orders to the decent industry, the growth was slightly positive. The improvement in EBITDA is due to better gross margin resulting from more favorable customer mix as well as cost savings and contribution from acquisition. Moving on to Norway, the oil and gas market in Norway has remained strong. but the growth in this segment was lower compared to the first half of 2025. EBITDA was slightly better than last year, driven by cost reduction and a higher gross margin resulting from positive customer mix effects, but also improved sales and assortment management. Moving to Finland, there was a safe recovery in Finland, but from low levels last year. And while our recent acquisitions have had a positive impact on results, the old tools business remains challenging. And as Glenn mentioned, the main focus is on improving trading cross margin in the direct safe channel. Moving on to cash flow, you can see that we had an improvement when it comes to operating cash flow driven by improved EBITDA. and repayment of preliminary tax. We have an ongoing capital efficiency project, and we have reduced the inventory levels of external brands, but the investments in our own brands counteract this progress. And networking capital as percentage of sales is about 29%, and we aim for 24%, which was the level in 2022. Investing activities in the quarter mainly relates to the add-on acquisitions within product media, and the organic investments are lower than last year, and the capex to depreciation ratio was 0.5. The next step at the end of the period was 2.1 billion, an increase from previous year, primarily due to higher acquisition pace and lower operating cash flow. And the ratio of net debt to EBITDA was a multiple of 3.1. And the ratio is higher than last year due to a combination of lower EBITDA and increased net debt. And typically, the debt ratio increases from the second quarter to the third quarter, since Q3 is the richest cash flow quarter. However, the debt ratio has actually decreased slightly from Q2. expected to continue to decline. Our covenants relate to interest coverage and equity asset ratio, and they are fulfilled at the end of the period, and there is still good headroom before reaching the threshold. So in summary, despite the temporary increase in leverage, we maintain a solid financial position and expect leverage to be well below the financial target level by year end. Sending it over to you, Clint.