Byggmax Group AB (publ)

and good morning everyone and welcome to the Big Mac's Interim Report Q3. My name is Emily and I'll be coordinating your call today. After the presentation there will be the opportunity for you to ask any questions which you can do so by pressing start followed by the number one on your telephone keypad. I will now turn the call over to our host Big Mac's CEO Carl Sandlin to begin. Please go ahead.

Thank you very much. And again, welcome to this conference call where we will present Big Max Group's report for the third quarter of 2024. As you heard, I'm Karlsson Lund, the CEO of Big Max, and with me is Helena Lathorst, our CFO. And as usual, the presentation we will be discussing is available on our website. And during the call, we will guide you to the correct page of the presentation. And as you heard, I will begin with a brief business update, and then I will walk you through the financials. And once the presentations are finished, we open up the floor for any questions. So with that, let's flip to page number two in the presentation. And as you already might have seen, we continued to deliver on our priorities in the quarter. Our profitability continued to improve. And we strengthen our balance sheet with optimized inventory and lower net debt. We have a strong operational focus during the summer season. And the main priorities are to serve our customers, secure logistics and efficient inventory management. And in my view, we have been well prepared during the summer and delivered strong. Our net sales in the quarter was in line with last year. Like-for-like sales was up 1.3%, and that is a better sales performance than we have seen in quite a while. Similar to what we mentioned the last quarter, there were differences in demand between different categories. In addition, there were variations between the markets we operate in with the strongest performance in Sweden, where sales increased by almost 4% compared to last year. For seven consecutive quarters, we have managed to reduce our costs. And successful cost control in combination with a strong gross margin improved the profitability, and we delivered an EBITDA of 249 million in the quarter. In addition to a better result, we continue to reduce net debt, and we are now at 488 million, and that is 142 million lower than last year. Helena will come back to the financials in a minute. This year's efforts to secure strong operational excellence have been successful. It has secured an improved position to build from, and from that foundation, we continue to our efforts towards our long-term targets. Before we get into more details of the quarter, on slide number three, a short overview for those who may not know us that well. BigMax was founded in 1998, and today we have grown to 212 stores across four markets, establishing ourselves as the leading discount player for consumers in the Nordic region. Our foundation is built on a strong selection of products for home renovation and maintenance. We offer everything from building materials, paint and tiles, to flooring and more. And our in-store assortment is enhanced by smart online solutions, providing an even wider range, but also home delivery of heavy building materials and customized products. We are a true discount retailer. and offering the best prices requires maintaining the lowest possible cost. And our store design not only keeps operational costs low, but also ensure efficient shopping experience for our customers. And cost focus is an essential part of our DNA. Another key part of the DNA is our culture and values, and we have very high employee engagement. which allows us to quickly drive change and make improvements through strengths for the organization. And our amazing employees really makes the difference because so far this year, we got feedback from 500,000 customers in our stores, and 90% of them gave us the highest ratings. If we move on to page number four, you see that we, size-wise, are a 5.9 billion company, and we delivered 208 million in EBITDA last 12 months. We have a business model that is efficient with high cash generation, which is seen in a strong cash flow, 678 million last 12 months. So to summarize, We have a strong discount position, the part within retail growing the most. In combination with high customer satisfaction and relevant assortment, this enables growth. We have a sound combination of store and e-com, two shelves complementing each other. And in the last years, we have made significant investments in our store network, something that's enabling increased volume. And that is all we have from cash flow, allowing both for dividends to shareholders and investments in profitable growth. On page five, we have some macro context. And during the last period of time, there have been a slight improvement of macro factors with inflation back to more normal levels and at least in some markets reduced interest rates. And this has resulted in gradually improving consumer confidence. As you know, it differs between the markets. And in Sweden, where the consumer confidence has improved the most, we saw the relative strongest sales development in the quarter. In the rest of Nordics, we still experience more hesitant consumers and a slightly weaker development, even though it's a little bit better than before. And also as mentioned, there were variation in demand between categories, also this quarter. Demand for products related to outdoor and smaller projects developed better, while there still was a weaker demand for the larger indoor projects. So in total, still a cautious market, but not with the same decline as before. And in this market environment, we improved our profitability as seen on page number six. As you've seen in Q2, our sales were down 5.5%. In Q3, it was more or less flat. So it's improved cost, optimization of assortment, high gross margin, and a great performance by our employees that are drivers behind this result. We are still below our long-term targets, but it's encouraging to see that we are able to improve despite the quite cautious market. In the quarter, our EBITDA margin was up two percentage points versus last year, reaching the margin we had in the same quarter in 2022, and then actually a somewhat higher margin than the US right before the pandemic. On page number seven, you see an illustration of one of our main accomplishments, because despite last year's inflation and more stores in our portfolio, we have managed to reduce our cost for seven quarters in a row. All parts of the organization, of the group, have really contributed to this. We have Introduced new way of working, stores, improved energy efficiency, minimized waste, and reduced our overhead to give some examples. The reduction in the last quarter was less than before, perfectly natural, as we are approaching the second consecutive year of reductions. Already a year ago, we implemented lower operational costs in the store, more efficient way of working, and so on. And this summer, we managed to further improve this somewhat. And in addition, there were some effects also from reduced administration. Strong cost control could impact customer experience or operational performance. And this is something that we have managed carefully. And it's encouraging to see that we continue to have strong customer satisfaction in the store, actually higher than last year, and that we have lower waste. So in summary, strong delivery on operational excellence. Another priority is seen on page number eight. We have optimized assortment and inventory. Earlier during the year, we analyzed store assortment to set the right inventory levels for every product. We also decided to discontinue with certain products. In addition, a key area has been to secure a smart inventory build-up and management throughout the high season, and we have performed better than before when it comes to this. And you see some of the effects on this slide. The total inventory is substantially reduced, but that is only one side of the equation. In addition to lower inventory and less tied-up capital, we have managed to increase product availability in the stores. Compared to last year, we have improved our service level, something that creates opportunities for sales. If we move to page number nine, since the third quarter is part of our busy summer season, we try not to introduce too many changes and news during the quarter. Our main priorities are to deliver the best customer experience and securing strong operational focus, which we have accomplished. At the same time, we have made some commercial improvements, and one example is our made-to-order offering online. We have both increased the number of products within the categories, such as border walls, windows, sun blinds, etc., but we have also improved customer experience and back-office processes. And we saw good effects from this in the quarter. Furthermore, we have analyzed the entire online range. As mentioned before, we adjusted our store assortment earlier this year. Now we're made similar to online. Changes include adjustments to the assortment, where we also have discontinued some products, as well as optimized price freight options. And those changes resulted in a strong bargain, but a short-term and a slight decrease in sales. Before handing over to Helena, please turn to page number 10. This year's efforts to secure efficiency and strengthen balance sheets have created an improved position to build from. We have high customer satisfaction, widespread network of upgraded stores. We have managed to reduce our cost and cost per store. And together with adapted inventory levels and reduced net debt, we are stronger than before. And from this foundation, we continue our work towards our long-term targets. We have a clear roadmap built on three main pillars. The first pillar We are a discount retailer and recognize the potential in simplicity. And by refining our assortment, boosting efficiency and so on, we will always continue to streamline our operations. And second, the commercial investments we have made over the past year have significantly amplified our revenue potential. And going forward, we will try to make sure to fully capitalize on these investments. And finally, We will continue to enhance our offering and optimize our SOAR portfolio to meet and exceed market demands. With that, over to Helena and more financials.

Thank you, Carl, and good morning, everyone. I will walk you through the third quarter results with focus on financial performance, margin improvement, cash flow, and our continued commitment to debt reductions. We start with an overview of the sales performance in the quarter, and we are on slide 11. Sales in the quarter increased by 0.3%, reaching 1,965,000,000. As mentioned, still our sales performance for the quarter shows a mixed picture with large variations in demand between market and categories. The consumer continues to be hesitant, although our sales growth decline has gradually improved quarter by quarter versus last year. Unlike for LifeSafe, saw a growth of 1.3%. By region, Sweden performed notably better compared to other Nordics with a growth of 3.6%. We have had four new store openings this year. Three in Sweden and one in Norway, combined with one closing in Norway. The net of three new stores in 2024 contributes with a net of 0.3% to sales. Store openings are all related to the first two quarters. Foreign exchange impact in the quarter, primarily by a week and up, reduced sales by 1.3%. In summary, sales in line with last year and development in Sweden stronger compared to other Nordics. Moving on to slide 12, and a strong gross margin improvement in the quarter, an increase by 180 percentage points. The product margin in the quarter benefits from a slightly untypical product mix for the season. With a higher degree of maintenance, paint, outdoor and garden in combination with less of the larger heavy building material projects. Also, initiatives are taken to our e-commerce offering. By streamlining the assortment, applying a minimum order value and optimizing right alternatives and terms. All having a positive impact on our gross margin. In addition, product margin also improved by intense purchase in negotiations, pricing strategy, and uses of supplier cash discounts. Altogether, more than one rider behind the strong gross margin improvement in the quarter. On slide 13, We have an improved probability in the quarter. EBITDA increased by 39 million from 210 to 249 million, and EBITDA margin increased by 2%. Improved performance is driven by an enlarged gross margin combined with continued cost discipline. Modest sales growth combined with a strong margin improvement is the main driver in this quarter. while the decreased costs have been the main contributor in previous quarters. We have focused on reducing our cost level to mitigate sales volume during the last two years. Costs have been reduced, both in store and administration, quarter by quarter, to align with lower volumes. We have accomplished lean and efficient processes, combined with an ability to scale. We maintain our cost focus also in this quarter and cost decreased by 2%. Depreciation is in line with last year, meaning that inflation in store rents and high number of lease stores accounted for as depreciation according to IFRS is balanced by lower investment levels. Overall, we have improved our EBITDA, showing that we are well positioned to handle different market conditions. On page 14, talking about cash flow generation. Rolling 12-month cash flow from operating activities amounts to 678 million versus 843 million last year. The 2023 figure is mainly enlarged by action to reduce inventory, while inventory now have reached a more stable level. Hence, our cash flow remains robust, supported by enhanced profitability, continued effective working capital actions together with a firm ranking of investments. Our strong cash generation continues to strengthen our financial position and provide flexibility. On page 15, We have made significant progress in reducing our net debt, which now stands at $488 million, down from $630 million in Q3 last year. Our net debt EBITDA covenant is at 1.3 times compared to 1.6 last year. Our average net debt capital ratio over the last 12 months is below our target of 2.5 times. Additionally, we have credit facilities committed, ensuring a lucrative position for operational flexibility. The strength of the financial position allows us to be well prepared for future opportunities. In conclusion, we have achieved significant milestones showing improved profitability in the quarter, continuous drop cash flow, and reduced net debt position. Thank you. And I hand over back to Carl before opening up for questions.