Byggmax Group AB (publ)

Welcome to the Big Macs Interim Report Q1. My name is Carla, and I will be the coordinator of your call today. During the presentation, you can register to ask a question by pressing star followed by one on your telephone keypad. If you change your mind, please press star followed by two. I will now hand you over to your host, Carl Sandlin, to begin. Carl, please go ahead.

Thank you. Thank you very much. And again, welcome to this conference call where we will present Big Mac Group's report for the first quarter of 2024. And as you heard, I'm Carl Sandlund, and with me I have our CFO, Lena Northorst. And as usual, we will be speaking to a presentation that you find available on our website, and we make sure to guide you to the right page during the call. As usual, I start with a short business update and focus areas. And Helena will cover the financials. And after that, we open up for questions from you. But let's start and head into the presentation. On page two, you have a short intro. As many of you know, the first quarter of the year is part of our low season. and it's the smallest quarter of the year. We say that the cohort developed in line with our expectations. We knew that the weak macro environment would continue to impact consumers' behaviors with hesitant customers, especially when it comes to larger projects and investments, so nothing unexpected in the quarters. We have a slight decrease in number of customers compared to the same quarter last year, but in line with what we have seen during the last couple of quarters, the decline in sales is primarily driven by a lower volume due to fewer large projects. And at the same time, we continue to have stronger sales and development of products related to smaller projects, such as paint or gardens. We also see some customer behaviors more similar to those before the pandemic, with more customers making their purchases in the stores, and especially during nights and weekends. And this is partly on the expense of e-commerce in the quarter. Overall, the decline in sales is slightly lower than the last quarters, and there are some differences between the markets. The Swedish markets, which started to decline at first, show a stronger development. For example, we worked in London and Denmark in the quarter. And then I will come back to this and cover the finances. But we see significant effects from the measures we have implemented. We have a very strong operational excellence, leading to lower costs. And our focus on balance sheet has effect. Our net debt is 430 million Swedish lower than the same period last year, corresponding to a 30% decrease year over year. So we have continued our efforts to further improve Big Macs, everything to be ready and fit for growth when the market returns again. If we move to page three, for those who don't know us that well, this is Big Max. We were founded in 1993 as a challenger in a business-to-business focused industry. And with 211 stores on four markets, we are now the leading player on the consumer market, offering high-quality products to the lowest possible prices. The Nordic region has a long DIY tradition. Buildings made from timber, a relatively large share of the population with access to multiple houses, and the home as the pivot point of people's social life make this a large and attractive market. And on this market, our foundation is a strong assortment for renovating and taking care of people's homes. We sell building materials, product for bathrooms, storage, paint, and floor, but also garden houses and conservatories. And carefully selected store assortment is complemented by a wider online range of products, both to ensure attractive options, but also to enable our customers to personalize products to their needs. We are the low price leader in this market, which is an attractive position as we experience a general consumer trend towards discount and low price. And offering the best prices, of course, also requires the lowest possible cost. And our unique store design enables both low operation costs but also a very efficient shopping experience for our customers, something that we see as highly appreciated. We care. We care about people, society, and the environment. And the commitment and the strong values within the Big Max groups are seen both in high customer satisfaction scores, but also in a very high engagement index among our employees. And we also have strong sustainability ambitions. both for our own business, but also when it comes to the entire value chain. And we think it should be easy for our customers to make sustainable choices. So overall, we think we want that everybody should have the right to have a fantastic home, and we work very hard to make this happen. Size-wise, on page number four, we are a 6 billion company. We delivered 156 million Swedish in EBITDA. We're a margin of 2.6% last 12 months. And this is the result negatively impacted by the weak Nordic consumer market that we have experienced the last two years or so. We have a strong operating cash flow, and as mentioned, we managed to reduce our net last year. On page five, in the current weak consumer market, price becomes even more important for the customers. And in these times, the Big Mac's business model, based on low prices, is perhaps more relevant than ever. We see in Byggrapporten, which is a survey made among 2,000 people in Sweden and Norway during Q1, that best price and price guarantee is the most important and growing aspect when choosing where to buy building materials. And therefore, it's, of course, really satisfying to see that we maintain our leading position, especially in Sweden. and that before the fifth consecutive year have the lowest prices in Norway when it comes to impregnated timber for a terrasse. So really good and strong results, which is appreciated by the customers. If we move to page six, as mentioned, to be able to have the best prices, cost is key. And we continuously secure the industry's lowest cost level And compared to the same quarter last year, we have five more stores in our portfolio, and we have experienced quite high inflation. And despite this, more stores, high inflation, we have managed to reduce our operating costs by 9%. And this means that we are on a pre-pandemic level when it comes to cost per store. Even though we have experienced some 20% inflation the last couple of years, we have managed to mitigate this cost increase by substantially improved efficiency both in the stores but also in other parts of the company. And I would say that the development is driven by a very strong cost focus always and in all parts of the entire organization. but also from the infrastructure, how we design our stores. If we look at the quarter, we see effects from more efficient scheduling of personnel in the stores, adapting both opening hours, but also the number of employees in the stores to when the customers want to do their shopping. but also from general operational excellence. Within all parts of the business, we focus on how we can further improve way of working and lower external costs while maintaining a very high level of quality in the stores. In addition to this improved efficiency in the stores, the lower costs come also from reduction of overhead and administration, which we made during the end of 2023. And these costs have been reduced by approximately 20% compared to last year. Overall, the cost reduction is slightly, but only slightly lower than the one that we saw in 2023. And that is mainly driven by the fact that Q1 is a low season, a smaller quarter. And also due to the fact that comparables is getting tougher as we started the cost reduction already in the beginning of 2023. But all in all, substantial reduction, and that is from a very low starting point, which I think really proves how deeply rooted cost focus is in the Big Mac's DNA. On page seven, you find another dimension of operational excellence, which is optimizing the assortment and the inventory levels. This involves everything from carefully decide which products to offer, source them to the right price, secure efficient logistics bills, and also to adapt the stores to be able to sell the product to our customers. And during the quarter, during the winter, we have made thorough analysis product by product to secure the right inventory levels for every part of the assortment. including which products to discontinue and where to further improve service level and logistic close. And this has resulted in a significantly lower inventory level than last year, down 15% compared to the same period in 2023, but also at the same time, we put a lot of effort in securing a good and smooth ramp-up to prepare for high season. So despite the lower inventory levels, we have a higher service level, and that is product availability in the stores than last year. And we have managed to take deliveries to the stores without increasing man-hours. So this is an important area for us to ramp up volumes, to make sure that our stores are ready for increased demand, and at the same time secure that we have high capital efficiency and optimized inventory levels. And we are satisfied with how we managed this during Q1. And the focus on optimizing both assortment and inventory levels is something that we'll continue In addition to offer the lowest prices, we're constantly also working on improving our customer offerings, as you see on page number eight in the presentation. During the quarter, we opened two new stores in Sweden, one in Klippan, Skåne, and one in Umeå under the Big Mac Studio concepts. We have announced two additional store openings during the spring. Later this week, we will open a new store in Bergen, Norway. And this will be our fifth store in the Bergen area. And a couple of weeks later, we will welcome a new store in Meldestrand to our portfolio. But it's not only about more stores. It's also about better stores. And as earlier communicated, we have completed our store upgrade program. And all stores, with some very, very few exceptions, are now what we call the Concept 3.0, which includes an updated store design and improved product display in the stores. We're also continuously improving the overall customer experience in the stores. And then one example is a new and enhanced checkout area. which will further improve customer interaction and increase efficiency in the stores going forward. In addition to improving the physical store experience, we have continued to enhance our online channels. We see potential in offering customized products online. A couple of examples are the possibility to buy tinted paint on our site or to configure windows and doors online. which is now available on more markets. Another feature is the possibility to design customized complementary buildings online, as we have presented before. The customers can design a personalized building, which is based on readily available modular options to very attractive prices. We have now added more features to this, which makes it even easier for the customers to design the houses that they want. So these are some examples of how we continue to strengthen our offering, and we see results of these improvements, and from the high engagement among our colleagues around the Big Max Group in very high customer satisfaction in the stores. So overall, we have delivered on our prioritized areas to continue to develop the customer offering with more stores and a better customer experience. to further increase efficiency and to adapt inventory levels. And as you saw, also to strengthen our balance sheet and reduce our net. Before handing over to Helena on the financial, I just want to give a very, very short update on sustainability, page nine. This is an important area to Big Max. And as mentioned in the beginning, we have high ambitions. both for our own business but also for the entire value chain. Last year, our own emissions were down 52% compared to 2010. And we have also reduced the volume of timber going to recycling substantially. But we also want it to be easy for our customers to make sustainable choices. And therefore, we are happy to have introduced a new building board product in the store assortment. It's made from recycled packaging waste and has substantially lower climate footprint than similar traditional products. And we offer that product to a very attractive price. So this is just one small example of what we do to promote good and sustainable products and to reduce overall use of resources. And with that, over to Helena and the financials.

Thank you. On the coming slides, I will comment on some breakdowns on the financials, and I start with sales development on slide 10. We consider marketing sales in line with expectations in the first quarter of the year. things decreased by nine percent during this quarter and as mentioned it is still in low season although it is a lower rate of decline than we have seen in recent quarters. Still Also in line with previous quarter, larger projects continue to have a weaker development and some positive signs on a smaller development, a smaller project still remains. Looking into gross margin, we have a strong gross margin at 33.9%. There is a solid underlying product margin in this period. We have some negative impact from a product mix that has a bigger impact, even a small quarter, and some negative impact from scales, from logistics, where we have lower volumes. In this quarter, currency has a minus 0.5 impact on sales. We have two new stores open in this quarter, and in the last 12 months, we have another five new stores. And new stores contributed with 1.2% on sales in the period. We move on to the next slide. We can see that our strong focus remains, and we have in having further impact from continuous efficient operations in the quarter. The slide illustrates the effect from Big Mac's strong actions to mitigate negative gross profit development from declining sales. If we look into the like-for-like OPEX, we have succeeded in savings of 32 million, almost compensating for the material part of the gross profit decrease. The store contribution from cost savings is driven by both stores and admin, but the reduced administration and overhead is the main driver in this small quarter. We have increased costs of $5 million from the store portfolio, where we have net five new stores in a rolling flow period. Depreciation increased by 11 million due to high investment activities in the last year, in combination with decreased number of leased stores. In summary, a very successful cost reduction. Costs are 9% lower compared to the first quarter of 23, and this is in a high inflation environment and with five more stores in the portfolio. Slide 12 shows the focus we have had on improving cash flow and its results. We have reduced our investing activities in the last 12 months, combined with operational working capital improvements, mainly inventory, and this has strongly contributed to our cash flow from operating activities. Over the 12 months, Cash flow is almost five times as strong as the same rolling 12 months last year, and it must be $964 million. Investing activities is focused on... smaller investments in-store and five new stores in the period, and it's decreased by 45%. Inventory is, as Callum mentioned, optimized to be more in line with season and has decreased by 15%. Finally, on the next page, the work to optimize cash flow and reducing the net debt has yielded results. Net debt, excluding lease liabilities, has decreased by $430 million, comparing with the corresponding quarter last year. It is significantly reduced net debt position. It's driven by decreasing cost levels to meet combined with optimized inventory and low investment activity. It's a strong improved net debt position. Average net debt leverage in the last 12 months is below our target of 2.5, although we have the seasonality within the year. We have committed credit facilities of 1.5 billion and unutilized facilities of 487 million at the end of the quarter. Ambitions and actions to further reduce net debt leverage remain. And action five.