Axfood AB (publ)

Welcome to the Axfood Q4 2023 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now, I will hand the conference over to speakers CEO Klaas Balco and CFO Anders Lexman. Please go ahead.

Thank you and good morning everyone and thank you for joining today's call. Now as you can see on the headline we are continuing to take market share in this exceptional time and as you've heard with me today I have our CFO Anders Lexman and together we will go through this in more detail and present to you Axel's year end report for 2023. In the investor section of our website you will find the presentation material for today's call and a recording will, as usual, also be made available after the presentation. So with that, I would like to get started and please turn to page number two. And here you'll find today's agenda. First, a brief market overview, and then I will give you a review of our fourth quarter performance. And after that, Anders will take you through the financials. And following Anders' part, I will talk about the progress we are making with some of our strategic initiatives and investments for the future. And also, I will cover the outlook for 2024 that we are presenting today, as well as the board's dividend proposal before we open up for the Q&A session. So we are now on page number three, but let's get straight into page number four, and we will take a look at the development during the final quarter of this year. First of all, market growth amounted to 6% during the fourth quarter. This was the same level as the price inflation, which continued to decline on a sequential basis. In other words, market growth held up quite well. And actually, if you look at the end of the quarter, we saw volume growth for the first time in two years. While it's positive that volumes are growing again, we expect the market dynamics to continue to be impacted by price consciousness. Let's go to the next slide, number five. And then Axfood's retail sales grew 9% in the fourth quarter, which was significantly higher than the market. This performance should be seen in the light of significantly higher comparison figures for Axfood than the overall market. I therefore think it is meaningful to also analyze our figures on a two-year stack, where our growth amounted to a full 28%, doubling the rate of the market, which was 14%. Please go to the next page, number six. And in e-commerce, our sales increased slightly more than 8%. Market growth turned positive for the first time in more than two years. But obviously, we once again outperformed. Our share of consumer sales from e-commerce was slightly more than 5%, one percentage point higher than the penetration of the market. On a two-year stack, Axfood growth was 4%, also that better than the market. And if you go to page number seven, we have also included a slide on that shows our 10 years performance in terms of market share gains over the last years. But let's go now into page number eight. Our consolidated net sales for Axfood grew by just over 5% during the fourth quarter. Strong sales performance in Axfood's concept drove the overall growth. Dog app sales to external companies however came in softer which clearly held back the overall net sales growth with the growth in the fourth quarter and consistently high growth over the course of the year we actually passed 80 billion sec in net sales for a full year for the first time ever please go to next page page number nine in total group operating profit amounted to 744 million sec and the operating margin was 3.6 percent substantially increased versus year ago But this development was largely due to easy comps with higher cost affecting comparability in the prior year period. The adjusted operating profit, which exclude items affecting comparability, amounted to 850 million SEK. This increase was mainly the result of strong growth and effective cost control. But higher rental levels and salary increases, however, had a negative impact on profit. And the adjusted operating margin was 3.9%. And if we then go into our various segments, and I would like you to turn to page number 10 and Willis. And I really want to emphasize Willis' unique concept in the market. In the fourth quarter, Willis once again gained market share through robust volume development, and the loyalty of existing customers remained strong. Our share of sales from campaigns was still high. However, compared to prior year, it was actually slightly lower. In all, total like-for-like growth in the segment amounted to 9% and 7%, respectively. Willys' market share in the fourth quarter was approximately 15%, which compared to 13% two years ago. I think this is clearly a very strong development. However, we see continued great potential for Willys to take more share, both in stores and online. Operating profit. increased 10 amounted to 469 million sec corresponding to an unchanged operating margin of 4.1 percent the strong growth in like-for-like sales and effective cost control compensated for the cost associated with our higher rental levels and salary increases With that, please go to page 11 and look into Hemshöp's segment. Hemshöp continued to strengthen its position in the traditional food segment and once again succeeded in outperforming market growth. For several years, Hemshöp has worked now to consolidate its position with a high rate of store modernization, investment in price value and important progress in the area of sustainability. This has created the right condition is now helping to further boost HempShop's impressive performance, creating a solid base. Net sales increased 10%. Total and like for like retail sales growth was 8% and 7% respectively. Stores within HempShop banner performed better than the Tempo stores. And similar to other countryside and smaller store formats in the market, Tempo is facing some challenges due to consumers' preference for price value over convenience. Our operating profit amounted to 77 million SEK and the operating margin was 3.9%. Positive effects from the growth and effective cost control were offset by negative effects from higher rental and salary levels. Now, let's move on to Snabgo's page 12. SnubGhost's market has shown a gradual deterioration during the year, and many cafes and restaurants are facing some challenges. SnubGhost has, however, delivered a stable performance with higher sales and profits and flexibility and ability to adopt its offering. Sales during the quarter increased 6% in total and 5% on a like-for-like basis. An increase in the number of customers and sales to consumers through member-based SnubGhost Club contributed to this growth. Our operating profit amounted to 58 million SEK, corresponding to an operating margin of 4.6%. The increase in profit was primarily driven by the growth in like-for-like sales and effective cost control. However, negatively impacted by again, higher staff and rent levels. Next page, number 13. Net sales for Dagab increased 4% in the quarter. And as I mentioned before, strong growth in sales to Axfood's own concept was somewhat offset by soft sales development to external customers, including smaller store formats and the service trade. Reporting operating profit amounted to 248 million SEK. This year, we had 71 million SEK of costs related to our logistical restructuring compared to 186 last year. And also last year we had 46 million SEK integration costs for the Bergendal food acquisition. The adjusted operating profit amounted to 390 million SEK and the adjusted operating margin was 1.7%. The increase in profit was primarily due to growth, synergy effects on Bergendal food and more neutral currency effects with the strengthening of the Swedish krona. Let's now turn to page number 14, and it's time for me to hand over to Anders to walk you through the financial development. So please go to the next page, number 15, and Anders, please go ahead.

Thank you very much, Claes. For the full year, net sales for the group increased with 10% to 81 billion SEK. Retail sales increased by 14.3%, which was clearly higher than the full retail market in total. where growth amounted to 7.5%. We also, for the full year, had a lower growth for Dagab's external customers. The operating profit excluding items affecting comparability of minus 249 million SEK increased by 373 million SEK to 3.6 billion. The increase was mainly explained by the strong growth and effective cost control, partly offset by lower gross margins in the segments and increased costs related to, for example, rental levels and personnel costs. The operating margin excluding items affecting comparability was unchanged at 4.4%. Items affecting comparability pertained entirely to parallel warehouse operation during the transition to the new logistics center in Bolsta. Last year items affecting comparability included a capital gain of 221 million SEK for the divestment of mat.se and structural costs of 263 million SEK connected to the restructuring of Dagab's logistic operations. Then turn to page number 16. For the full year the cash flow compared with last year was 304 million SEK higher, the relatively weak cash flow from operating activities in Q1 due to negative networking capital was compensated in the second and fourth quarters by strong underlying operational performance. The cash flow from investment activities of 2.2 billion SEK was significantly lower than last year, as we now have a lower pace in automation investments. Investments in our retail operation and joint group functions was in line with last year. At the end of the fourth quarter, we utilized approximately half a billion SEK of our credit facilities, 0.3 billion SEK more than in Q4 last year. And then turn page to page number 17. If we then look at the financial position, the net debt has decreased compared to previous quarters due to lower utilization of the credit facilities. This was also reflected in the lower net debt ratio, which amounted to zero at year end. The equity ratio at year end has been very stable over the last couple of years, and the equity ratio in Q4 amounted to 23.9%, well above our target of 20%. And total investments excluding leasehold for the year was 647 million lower compared to last year. And again, we see now a lower pace in investments related to the logistics entry in Bålsta. We have established 12 new Groupon stores during 2023, which was three more than last year. And we will get back to the investment outlook for 2024 later in this presentation. And then let's turn to page number 18. Looking at the capital efficiency, we have a positive developing net working capital in absolute terms. However, in relation to sales, we saw a negative trend during the year due to the higher inventory levels related to the ongoing warehouse transition. The ratio is now minus 3.2. A reversal of this effect is expected gradually in the coming quarters. as the warehouse transition progresses. The capital employed has increased over the last years, mainly due to the recognition of leasehold debt in Bålsta and in Landskrona, and higher capital expenditures, which have had the diluting effect on the return on capital employed. However, the return on capital employed is now quite stable, at little more than 20%, looking back at the recent quarters. And that ends my part of the presentation, Klaus, and I hand over to you again.