BHG Group AB (publ)

Hi and welcome. My name is Gustav Orn, CEO of BAG. I'm here together with Jesper Flemme, CFO, to present our Q4 report. We will also be available after the presentation to do our best to answer your questions. Slide two please. We are proud to present what we regard as a strong quarter from BAG. After a long period of declining sales, with a gradually improving sales trend during the last year, we now in the final quarter of the year show growth. Sales is up 2% in total and 0.5% organically. We also continue our streak of improvements in earnings, now with a fifth consecutive quarter of profitability improvements. This quarter with a significant improvement in earnings with an adjusted EBIT of 107 million SEK, almost doubling last year's results. The improvement in earnings comes from top line growth, a reduction on direct selling cost and cost reductions on SG&A. This improving our profit margin to 3.7% adjusted EBIT margin. A cash flow of 337 million SEK and a cash conversion of 150% is to be regarded as super strong in the quarter, driven by a strong sales during the Black Friday campaign period. We unchanged continue to prioritize profit over cash flow. Slide three, please. A few words about market development. Market remains challenging, but we also see continued signs of market recovery, where improved macro indicators are turning into demand. The strongest recovery we see in our largest market, Sweden, where these data points also come from, and where we have approximately 50% of our total sales. Inflation is gone, interest levels are coming down or is projected to do so in most of our main markets, at what speed and rate can be debated. Housing transaction and the intention to renovate have improved through most of last year. And even if we saw a small setback at the end of the year, the tendency is unchanged, continued improvements. These improvements have a positive effect on demand in our categories but with some time lag. This means in summary that disposable income which we see as the main driver of demand is on the rise and these improvements also driving positive development in consumer confidence that has been seen a long and improving trend since it hit the bottom in 2022. We should, as mentioned, be mindful that we see differences in the initial stages of recovery between different markets, where Sweden is further ahead in the recovery versus markets as Finland, Norway and Germany. Slide four, please. If we take this to our categories, staying in Sweden, where we have the best data points, looking at the sales trend from Statistics Sweden, or Statistiska centralbyrån, we see a gradual improvement of sales in our categories all through last year. Our outlook is that the market is still challenging, but in recovery, and we believe in continued gradual improvements all through the coming year. Sweden leading the way but with the same tendency but from lower levels and with some time lag in most of our markets. With this said we are all painfully aware that there is significant geo uncertainty which makes it difficult to estimate the risk of setbacks and recovery speed. Slide five please. As I mentioned, we have since the extreme growth during the pandemic operated in a very challenging market, and we have not seen growth since the first quarter of 2022. Volumes versus previous year has gradually improved through all quarters of last year. And of course, we are super pleased to show organic growth in the last quarter of the year, even if it is by a slim margin. Slide six, please. So, super happy to report growth in the fourth quarter. Now trying to clarify where it comes from. From a category perspective, the main growth comes from continued recovery in capital intensive categories as windows, doors and floors. Categories that has been subdued in the last few years that we now see improving from low levels. We also see improvements in home interior, primarily in our private living segment with Nordic Nest and Svenssons as the main drivers. From a year perspective, the main growth comes from our key markets of Sweden and Finland, where we, as mentioned, see Sweden leading the market recovery. And more surprisingly, we also see growth in Finland, a market which we from our data points unchanged regard as challenging. also in germany we see growth primarily from from premium living driven by nordic nest but also from some of our home improvement entities that has recently launched in germany to be noted germany unchanged still a challenging market slide seven please We are currently in the final stages of the restructuring phase and we are pleased that we managed to do and at large achieve what we set out to do. We have from a structural view done a massive consolidation into fewer and larger platforms. We do however still have one platform left to finalize and this is the consolidation of the Nordic do-it-yourself powerhouse. A complex consolidation involving several entities in different geographies into one platform that enables localized offerings with consolidated support functions. This, we estimate, will take some additional approximately 15 months before we have fully finalized. But the main consolidation job is about to be finalized and we are approaching the platform structure of seven platforms that was our target state. We have significantly reduced our fixed cost levels and implemented scalable structures and solutions to enable leverage on cost with increased volumes. And we have dramatically reduced our inventory levels, thereby freeing up cash to reduce our net debts and strengthen our balance sheet. Slide eight, please. Looking forward, now leaving the restructuring phase and entering the next phase, we are doing so with a well-defined plan for profitable growth. In short, and as explained in our Capital Markets Day last year, we have initiated the plan to take us from the low post-pandemic profitability levels to the pre-pandemic levels of 5% and then with market normalization to the 7% EBIT margin that we have in our financial targets. The profitable growth plan is divided into three main components. Growth, driven by operational focus and growth initiatives in all three business units through continued category and geographic expansion. Creating the powerhouses from consolidation. As mentioned, finalizing the structure consolidation journey that has been a major focus for us the last two years. consolidating into fewer and larger platforms and thereby simplifying our business creating scalability and realizing synergies and continued focus on efficiency improvements both from focus on running operations and from new initiatives including focus on areas as group-wide agreements Leverage our size to get better terms. An area where we this year demonstrated the potential with substantial savings from a group wide agreement on last mile deliveries. Using automation and AI to improve efficiency in areas such as product content generation, AI powered customer service platforms and marketing. And automation and fulfillment. As an example from this year, I can mention the finalization of the third phase of our investment in NordicNest's warehouse in Kalmar, where we now in the fourth quarter can see the efficiency improvements with increased volumes in the Black Friday campaign period. And finally, to achieve the 7% EEG margin we have in our financial targets, we will need some help for market normalization. Slide nine, please. Before I leave it to Jasper, a few words about the 2025 tactical focus. To secure that we take our share of a gradually improving market, which means that we are back to focus on market share, we must secure that we grow faster than the market. To ensure that we maintain the cost levels that we have worked so hard to get down and thereby realize the cost leverage with growing volumes. In short, if the phase we are leaving has been about driving down costs in a declining market to secure profit, looking forward, it will be about securing cost levels in a gradually improving market and thereby driving improved profitability. And finally, secure that we don't lose focus on the customer in everything we do. Retail will unchanged be about product price and securing a positive customer experience through the complete customer journey. This will be the only way to secure customer retention and thereby over time a long-term successful business. And with that, I will hand it over to Jesper to take us through the numbers.

Thank you, Gustav. And slide 10, please. I will start the financial part of the presentation by taking a step back and summarize what has been achieved from a financial perspective over the past couple of years. Firstly, we have reduced SG&A by over 400 million SEK over the past 12 months. Secondly, we have reduced our inventory by 2.1 billion SEK compared to the peak level at the end of Q2 2022. and thereby managed to generate a cash flow from operating activities of 2.1 billion SEK over the past two and a half years. Lastly, we have reduced our interest-bearing liabilities by 2.2 billion SEK during the same period. To summarize, we have delivered on our promise. Turning now to page 11 and sales development. We are very happy to report growth after more than two years with a contracting market. Net sales increased 2% reaching 2.9 billion SEK and organic growth was 0.5%. All three segments developed in the right direction during the quarter. Home improvement grew by 2%. Value home contracted during the quarter but improved by seven percentage points compared to Q3. Freeing living grew by 5%, although facing tough comps with 8% organic growth in Q4 of last year. Market-wise, we achieved growth in our three largest markets, Sweden, Finland and Germany. Turning now to page 12 and profitability. Adjusted EBIT almost doubled year-on-year and amounted to 106.7 million SEK in the quarter, corresponding to an EBIT margin of 3.7%. Segment-wise, Premium Living had a very strong quarter with an adjusted EBIT of 62 million SEK, corresponding to an EBIT margin of 7.1%. The greatest improvement was seen in the home improvement segment, improving adjusted EBIT by 42 million SEK compared to last year and reporting a solid EBIT margin of 4.0%. Moving on to slide 13 and the EBIT bridge. The EBIT margin improved by 1.8 percentage points compared to last year. As in the previous quarter, the reduced fixed cost base in combination with efficiency improvements in our last mile operations drives improved profitability and more than compensates for the somewhat lower product margin. The slightly weaker product margin for the quarter compared to the same period last year was primarily driven by a long Black Friday campaign period and negative currency effects. Organizational costs have decreased 20 million SEK compared to Q4 2023, one third of which relates to divestments. All in all, our EBIT margin amounted to 3.7% in the quarter. Slide 14 and cash flow, please. Cash flow from operating activities amounted to 337 million SEK driven by EBITDA and a positive working capital development in turn driven by reduced inventory levels in line with our seasonal profile. The right hand graph showing the development in liquidity walks us through the starting pivot position of 370 million SEK adding the cash flow from operations and the impact of investing activities. And finally, deducting the financing activities, which are primarily related to utilization of a revolving credit facility and amortization of both term loan and leasing liabilities, but also include interest payments. Bringing us to the period end, 473 million SEK of equity at hand. Slide 15, please. The group's net debt amounted to 1.0 billion SEK at the end of the quarter, and net debt in relation to LTM adjusted EBITDA ended at 3.3 times, supported by a favorable working capital position at the end of the year following the normal seasonal pattern. On top of our liquidity at hand, we had unutilized credit facilities at the end of the quarter of 800 million SEK. Acquisition related liabilities amount to 479 million SEK at the end of the quarter. Cash flow wise, 280 million SEK will be paid out this year and another 100 million SEK in 2026. With that, I will hand it back over to you, Gustav, to summarize and conclude.

Thank you very much, Jesper. Let me do my best to summarize this. The macro trend remains positive and is improving in most of our main markets. We are unchanged positive and plan for a gradually strengthened demand in 2025. For the first time since the first quarter of 2022, which was basically when we came out of the pandemic, we see growth in the fourth quarter. We saw a steady improvement in earnings through all of last year and in the fourth quarter we see a significantly improved result versus last year with an almost double profit. We are in the final stages of the restructuring phase when we have at large done and achieved what we set out to do. Now entering the next phase, the implementation of the defined strategy continues. We are humble, but we feel confident and well prepared to capitalize on the coming market rebound. Thank you very much for listening and now happy to do our best to try to answer your questions. Thank you.