Byggmax Group AB (publ)

Hello everyone and welcome to the Big Macs Year End Report. My name is Nadia and I'll be coordinating the call today. If you would like to ask a question, please press star, followed by one on your telephone keypad. I will now hand over to your host, Carl Sunderland, CEO to begin. Carl, please go ahead.

Well, thank you. Thank you very much. And again, a warm welcome to this conference call where we will present Big Mac's fourth quarter and year-end report of 2024. As you heard, I'm Carl Sandlund, the CEO of Big Macs, and with me is Gena Lothors, our CFO. As usual, the presentation is available on our website, and we will guide you to the correct page during this call. And I'll begin with a brief business update and also a little bit on our priorities. And after that, Helena will walk you through the financials. And once the presentations are finished, we will, as usual, open up the floor for any questions from you. And with that, let's start and go to page number two in the presentation. And, well, as you have seen, we concluded 2024. with a fourth quarter where sales and profitability continued to improve compared to the year before. Our net sales in the quarter increased by 7.6%, and the increase is driven both by more customers, but also by a higher average transaction value. And sales in Sweden and in the rest of the Nordics developed quite similar during the quarter, both increasing by 7% to 8%. The fourth quarter is always one of our smallest due to season, but profitability continued to improve for the third consecutive quarter, and the improvement is driven by increased sales in combination with a strong gross margin and high operational efficiency. In addition to a better result, we continue to strengthen our balance sheet, which have been a priority for us during the year. And we reduced our net debt by 35% compared to the year before. And as you saw with this performance and foundation, the board has proposed a dividend of 0.75 sec per share, an increase from last year's 0.5 sec per share. Before we get into more details on the quarter and the priorities and stuff, on slide three, a short overview for those who may not know us that well. Big Max was founded in 1993, and today we have grown to 211 stores across four markets, establishing ourselves as the leading discount player for consumers in the Nordic region. Our foundation, our base, is built on a strong selection of products for home renovation and maintenance, where 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 of home delivery of heavy building materials and more customized products. We are a true discount retailer, and offering the best prices requires maintaining the lowest cost. And our store design not only keeps operational costs low, but also ensures an efficient shopping experience, something that is highly appreciated by our customers. A key part of our DNA is our culture and values, and we have a very high employee engagement. which allows us to quickly drive change and make improvements, which is a true strength, of course, but it's also a key driver for our high customer satisfaction. On page four, we have some macro context, because as you all know, we saw a deep decline in 2022. We saw a challenging 2023, and also a 2024, which got off to a slow start. The consumer market remained cautious as high inflation and interest rates continued to squeeze household purchasing power. And many consumers delayed larger renovation projects, while smaller projects, particularly maintenance and outdoor work, continued to appeal to their customers. In addition to an overall lower demand, we observed this through a shift in product mix with a relatively higher demand for items tailored to these smaller projects. During the year, we began to see a slight improvement of macro factors with inflation back to more normal levels and in some markets, reduced interest rates. And this resulted in gradually improving consumer confidence. And of course, it's always hard to estimate the future, and there are always risks related to macroeconomic factors and uncertainty. But it's encouraging to see that some of the factors which have have historically been drivers for demand in our industry, such as how transactions and consumer confidence are developing in the right direction. On page 5, you see that the sales for a full year of 2024 ended at 6 billion Swedish cents. Due to the weak market, this is a decrease by 2% compared to the year before. We had lower sales in Q1 and Q2, while the second part of the year was stronger, as Helena will come back to. Despite lower full-year sales, we managed to improve our profitability. An EBITDA of 233 million, or 3.9%, is an improvement compared to 2023. And the improvement, as you will hear later on, is primarily driven by strategic actions and operational excellence. Despite inflation and more stores, we have lower hour costs. And in addition, we have, through optimization in our offering and successful purchasing, managed to have a strong gross volume. And as you see, we have a business model which is efficient with high cash generation. seen in a strong cash flow of 860 million from operating activities during the last year. On page six, we have an overview of some of the key focus areas that we mentioned during last year. Over the past year, we have focused on these three main areas, which is strength and the balance sheet, operational excellence, and improving our customer operating. And this focus has really touched every part of the organization, from the work in our stores to e-com to admin and business development. And through hard work and dedication of our teams, we have now built a business that is both flexible and robust, making us very well prepared for the future. And to give some more flavor, please move to page 7, because one of the focus areas, as you know, are the has been to strengthen the balance sheet. An optimized inventory has been one key to succeed with this. One factor is naturally to adapt the inventory level to much lower sales. But another has been to optimize our assortment, where we have both added products, but we have also decided to discontinue certain parts of the assortment. And in addition, we have really analyzed the entire assortment even more in even more detail ensure the right inventory levels for each and every product at all times the key area during the year was to secure smart inventory build up and management throughout the high season where we achieved better result than before resulting in good product availability in stores and optimized working capital and it is something that, of course, will be important also going forward, not to least secure product availability matching the demand. And you see some of the effects on this slide, right? The total inventory is substantially reduced, and combined with a lower investment level, this has also reduced our net debt, which is 35% lower than last year and almost 50% down compared to 2022 end of year. On page eight, you see the second focus area, operational excellence. Despite last year's inflation and more stores in our portfolio, we managed to reduce our costs for the second year in a row. And all parts of the group have contributed to this. We have introduced a new way of working in the stores, improved digital tools, reduced external spend, to give some examples. And, of course, a strong focus on cost could potentially impact the customer experience or operational performance. But this is something that we have managed carefully, and our stores are in great shape. The waste levels are lower than before, and it's truly encouraging to see that we continue to maintain a very high customer satisfaction in the stores. If we move to page nine, Because while strengthening the balance sheet and achieving operational excellence, we have also made significant commercial improvements throughout the years. We opened four new stores during the year, three in Sweden, one in Norway. At the same time, two stores were closed as their lease agreement expired. And as always, we continuously aim to improve the store experience. One example last year was implementing more self-service checkouts at more stores, something that makes it more efficient for our customers, and it also frees up time for our staff to, for example, focus on serving their customers to a larger extent. And we have also made improvements to our online channels. If you please turn to page 10. One example is our major order offering, where we both have increased the number of products, such as stores, windows, sun blinds, etc. We have also improved the customer experience and the back office processes. When it comes to our modular houses, which we talked about earlier, we have added more options. Customers can choose size and design and now also add garage doors or lofts with glass panels and so on. And finally, we have also expanded our private labor range of greenhouses and conservatories with several new products ready for the 2025 season. Those improvements combined with an overall adjustment to our online assortment where we have discontinued some categories as well as optimized freight options and so on have resulted in a stronger margin. Before handing over to Helena, please turn to page 11. This year's efforts, as you have heard, have established a strong foundation to build from. We have managed to reduce our cost, and together with that, after the inventory levels and reduced net debt, we are stronger than before. And from this solid foundation, we continue to work toward our long-term targets. We have a clear roadmap, and it's built on three main pillars. First, we are a discount retailer, and we always focus on efficiency to leverage our cost position. Second, our commercial investments over the past year have significantly amplified our revenue potential, and going forward, we will strive to fully capitalize on these investments. And finally, we will continue to enhance our product offering to meet and exceed the market demands. With that, over to Helena and some more financials.

Thank you, Carl, and good morning, everyone. As mentioned, I will comment on our fourth quarter and the financial year result, with focus on our improvements in profitability, cash flow generation, and debt reduction. I start with an overview of our Sales performance in the fourth quarter. Please turn to slide 12. Sales in the fourth quarter increased by 7.6%, reaching 1,073,000,000. We saw as mentioned growth across our markets, both in Sweden and the Nordics. And the sale is mainly like-for-like increase. At the end of 2024, we had 211 stores, a net of additional two new stores contributing with 0.3 increase to the total revenue. Our gross margin remains strong, supported by three factors. Purchasing achievements, granting to improve margins, an optimized e-commerce offer, improving margins through freight pricing and delivery efficiencies. And lastly, product mixed impact. Due to the mild weather, demand for energy-related products was lower and offset by growth in other categories. Overall, this was a strong quarter with same growth across all marshes and sustained high gross margin. Moving to profitability on slide 13. Our EBITDA for the quarter increased by $22 million compared to last year. It is important to note that the fourth quarter is not a peach season or do-it-yourself project, and it is typically one of our smaller quarters in terms of revenue. However, despite this, we delivered strong results. The gross profit improvement in this quarter was driven equally by higher sales and improved gross margins. In total, a gross profit increase of 30 million in the quarter. At the same time, we continue to focus on cost efficiency. Although after two years of cost cutting, our operating expenses are slightly up versus the same period last year. Our cost focus will remain. We have created a cost structure for lean and efficient processes that allows us to scale when volume grows. On the next page, 14, looking at the bigger picture, sales gradually improved quarter by quarter in the second half of the year, as shown on this slide. Third quarter sales grew by 1.3% like-for-like, and fourth quarter sales grew by 7.6% like-for-like. The growth trend was largely driven by our Swedish market, which showed strong performance compared to the Nordic. Overall, Sweden, which is the largest and most important market, maintained stable sales levels with only a small decrease of 0.2% in 2024. Growth sales decreased by 2.1%. While a pending and volatile market, Some momentum is seen in the second half of the year. Now, please move on to slide 15, presenting our full year probability performance. For 2024, EBITDA increased by 54 million to 233 million. Our EBITDA margin improved by one percentage point, reaching 3.9%. This improvement, it is still a cautious market, and the improvement is driven by a stronger gross margin supported by better purchasing, pricing strategies, and e-commerce improvements. It is driven by cost discipline. where we maintained the lean organization, and as mentioned, efficient operations achieved an OPEX reduction of 4% in 2024 on already a reduced level. Depreciation effects from IFRS 16 increased due to inflation and increased number of stores. Largely, we improved probability despite market challenges, as a result of higher product margin and further efficient gains in both stores and administration. I will now move on to slide 16 and cash. Cash generation remains our key strength of our business. For the last 12 months, cash flow from operating activities increased to 860 million compared to 788 $781 million last year. A strong cash flow performance was driven by higher profitability, disciplined working capital management, and carefully prioritized investment. Investment levels remained low in 2024, focused on selected store openings and store upgrades. By maintaining strong cash generation, we continue to strengthen our financial position and maintain flexibility for future growth. Finally, on slide 17, we have achieved successful debt reduction in 2024. We reduced net debt by 350 million, bringing it down to 680 million from 948 million last year. Our net debt EBITDA ratio improved significantly, dropped from 2.8 times to 1.6 times. Additionally, our 12-month average net debt EBITDA ratio is now well below our financial target of 2.5 times. We continue to have strong relationships with our banks, And our long-term credit facility of SEK 1.5 billion, of which 882 million available, provides us with operational flexibility. And by that, thank you. I hand over back to Carl before we open up for questions.

Thank you, Helena. Please move to page number 18. As you've seen, we have a very strong discount position, the part within retail growing the most. In combination with high customer satisfaction and a relevant assortment, this enables growth. We have a sound combination of store and e-commerce, two channels really complementing each other, especially in our industry. And the last year, we have made significant investments in our store network, something that may have increased the volume. And as you heard from Helena, we have a strong cash flow allowing both dividends to shareholders and investment in profitable growth. Finally, to summarize our presentation on page number 19, you find our key messages again. As you have heard, as you've seen, we continue to increase sales and profitability in the last quarter of 24. Sales was up 7.6% in the quarter. Looking at the full year of 2024, we had 6 billion second sales, down 2% from the year before, driven by a weak market, especially during the first part of the year. But despite lower sales, we managed to improve profitability through our strategic actions. In addition, we delivered on our priority to strengthen our balance sheet year end, and that is 35% lower than the year before. So we have used the time wisely. We have a better position to build from, and our employees, they are already ready to welcome more customers in the future. And going forward, we will continue to improve our customer offering. We will strive to capitalize on our commercial investments and drive volume in our store network. And we will leverage our cost position and logistics efficiency. So Big Mac is really ready for 2025. With that, we thank you for your attention, and we are now happy to take your questions.

Thank you. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If you would like to remove your question, please press star followed by 2. When my parents ask your question, please ensure your phone is unmuted locally. And the third question goes to Benjamin at Wollstead of ABG. Benjamin, please go ahead.

Hello, thank you. Two questions for me. First off, 7.5% life-like growth in Q4. I was wondering if you could give an indication of whether this is driven by larger or smaller projects primarily.

Thank you, Benjamin. Well, the growth in the fourth quarter of 7.6% is driven both by more customers. So we have more customers returning to us than we had the quarter before. but also from an average order value. So it's a combination of customers returning to a larger extent, but also from the fact that the customers are, on average, buying for a larger amount than the same quarter they lost it.

And do you dare put a figure on the AOV improvements?

No, but it's 50-50 split of it, so something like that. It's a combination.

Perfect, thank you. I was also wondering if you could expand a bit on gross margins. The increase in Q4 is lower than Q3, and I'm thinking how much of the improvement in Q3 was attributable to both good weather driving high margins garden product sales, and also still cautious consumers, less wood, which are lower gross margin on average. How much of the improvement in Q3 would you say was temporary, and how much should we extrapolate, basically?

Well, it's a question that is really hard to answer, and I think that The difference between Q4 and Q3 margin is maybe not that large. As you mentioned and as we said in Q3, overall the gross margin growth is driven by several factors. We have made adjustments to our assortment, both in stores and e-commerce, where we are adding and removing products. We have successful procurement processes, both when it comes to price but also logistics. And as you said, right, we had a quarter where we had the demand weighted towards more high-margin products than usual. So it's multiple factors contributing to the same outcome. I would say that, you know, our own underlying, you know, performance improvements are the same during the quarters. And then we have two quarters with, you know, a little bit difference in demand and so that also impacts the the overall margin. I wouldn't say that the margin difference between the two quarters are that significant.

Right, perfect. That's all for me. Thank you very much.

Thank you very much.

Thank you. As a reminder, if you would like to ask a question, please press star, followed by one on your telephone keypad. And the next question goes to Nicholas Ekman of Carnegie. Nicholas, please go ahead.

Thank you. Can I ask, you set a target earlier in 2024. You set a new target for a margin of over 7%. If we assume that growth were to continue at the same pace as we saw here in Q4, how long do you estimate roughly that it would take for you to get there? Hi, Niklas.

Well, we don't provide guidance on when we will reach our financial target. But of course, that is a priority to us, right? To reach all our financial targets, the growth, profitability, the leverage and dividends. So we will do our utmost to secure that we reach the target as soon as possible and to always strive to improve Big Macs. But unfortunately, we don't give them exact guidance on when that will happen. As mentioned, focus will be based on the thing that we made last year will be to continue to improve the customer offering. to secure or strive to fully utilize and get leverage on our commercial investments, volume in sales in the store network, and then also, of course, to catalyze and get leverage on our cost position and efficient logistics.

Very good. Thank you. I guess a different angle. We've now seen quite a few quarters with cost reductions and inventory reductions. how sustainable do you see this to be? I mean, this quarter, for instance, we saw OPEX increasing for the first time. Do you see that that will have to increase as sales start to normalize again? And the same thing on inventory. Are the current inventory levels sustainable, or will you need to invest in inventory if demand picks up considerably?

Hmm. Well, starting with OPEX, as we mentioned before, despite high inflation and increased number of stores, we managed to reduce our costs for two consecutive years. And that was from an already very efficient start. And naturally, it becomes increasingly challenging to achieve further cost reduction. Something, as you say, right, is also seen in our last quarter where the cost quite naturally increased by slightly less than 2%. That said, we are a discounter. Cost focus is deeply embedded in our DNA. The most important thing is to continue to strive for high efficiency and make sure that we are ready when the customers return and to get leverage on our very good cost position and efficient logistics. But, of course, we also need to be ready when the customers return to be there for them and not stopping sales that way. And when it comes to the inventory, it's a similar answer, I guess. Over the past year, we have focused heavily on this inventory optimization, not only adjusted stock levels to sales, but also made changes to assortment. If we compare the inventory we are reporting now with the same time two years ago, I think it's nearly 30% lower. Naturally, inventory optimization remains a key priority to us to ensure strong sales while avoiding excessive capital tie-out. But the inventory value factor is based on seasonality and sales development, and we should not, you know, we should not hinder sales by the inventory levels.

Super. Thank you so much for taking my question. Thanks, Niklas.

Thank you. The next question goes to Asilov Tveit of AAT Invest. Asilov, please go ahead.

Yeah, hi. Also here from AAT Invest. Hi, Karl and Helena. Do you hear me? We hear you. Hi. Hi, hi. Just one question regarding the investment or investing activities for the CapEx, which you reduced heavily from 146 million SEC in 2023 down to 80 million last year. What should we expect in your CapEx in 2025? Because I think you would like to start to invest again in new stores and upgrade your concepts further.

Yes, we think, as you mentioned, it has been a strong focus, although we have four new stores in this CapEx level. So I think to remain slightly maybe higher investment levels, but we can do some expansion also on the lower investment levels for the coming year here. It's two closings and four openings in this year, and we don't foresee that much increase in investments 2025.

Okay, so around 100 million, is that a good estimate?

As good as any whatever. No, but I mean, it's not totally unbalanced with the level we have reached this year. We think we have had I mean, we have IT investments to increase efficiency. We have a maintenance, and we still have our tracks. We have done investments also in this year. So there will be a small increase, but it's not a huge thing coming up.

Okay. Thank you very much, and good luck. Thank you. Thank you.

Thank you. The next question goes to Magnus Rahman of Kepler Chevroo. Magnus, please go ahead.

Thank you. Yeah, I mean, we've seen an improvement in macro science here, such as consumer confidence during 2025, maybe particularly in Sweden. But any material discretionary demand recovery has yet to be seen. And, I mean, you showed here in your presentation a slight difference improvement from trailing 12 months over the past two quarters. But we are now, I mean, one or two months from entering your high season, which would last for about two quarters. So in that backdrop, how certain do you or do you feel reassured of the recent sales development that there will be a significant recovery in your high season this year? Or, yeah, how are you thinking here?

Thank you, Magnus. Well, I think we need to, again, start looking at the 24 and development during that year. It started very weak, right, with a very cautious consumer market where many households really held off the larger renovation projects. And during the year, we saw several macroeconomics factors, as you say, began to move in the right direction. And that also made us and others observe a gradual improvement in the market conditions. We don't have this kind of large order book and so on, right? So it's always difficult to predict the future. And there are always macroeconomics risks and uncertainty. However, it is encouraging to see that several... underlying drivers, such as the housing transaction, the interest rates, disposable income, all are moving in the right direction. For us, the most important thing is to remain adaptable to the prevailing market conditions. And we are really ready for an improved market. And we are ready for the market. I think that is something that really demonstrated during last year where we improved our profitability. So we follow this very closely, of course, and we are really ready with the short lead times.

Right. So, yeah, just to follow up, what I'm trying to get at is that if you see that there might be a risk that a meaningful recovery will have to wait until your high season 2026, and if that would be the case, do you feel that you have made any bets currently on sort of pre-season on a strong recovery or do you see that you have a very good flexibility here regardless of how it plays out?

Yeah, I would say that we during the last year or years have really built a robust and flexible operations business which really makes us ready for the future. So, no, I wouldn't say that we have put any bets, but at the same time that we really are ready for a positive market development as well.

Thank you very much. Thank you, Magnus.

Thank you. The next question goes to Peter Hermanrod of FCA Holdings. Peter, please go ahead.

Peter, please go ahead. Yes, hello. You mentioned it shortly that there was no demand in the quarters for energy-related products due to low power prices. Am I right in interpreting that as that you're kind of, the winter products have been used, but the year-round source is actually growing more than 7,000 tons?

Hi, Peter. I'm not really sure that I got your question. What's your question? If our year-round assortment is developing better, do you see some winter products?

Yeah. Some products are winter-related, like the energy products. I'm trying to see how is the case development for products that we sell both winter and summer. And if All the products you sell in the winter are weaker than 7,000. Maybe I was thinking that the products you sell for summer and winter would be better than 7,000.

Well, thank you.

We have a natural, strong seasonal difference between the different borders where, you know, the demand for outdoor projects, that kind of stuff is actually lower during the winter period. So this kind of timber material, building material products and so on is lower during the winter season. So it's a little bit hard to say, you know, what is the standard product between different borders or seasons. What we can say is that during the year, as I mentioned, we saw, especially during the first parts of the year, a slower demand, more hesitant customers when it comes to the larger renovation projects, while the smaller ones, same thing, outdoor garden and so on, maintained a higher demand during the year. During the last quarter, as we mentioned, we see both more customers, but also higher average order value or transaction value, which, you know, indicates that also some of the customers from low volumes are also interested in buying the larger programs. So it's a little bit, you know, the difference between the categories between different seasons.

Thank you, and as a final reminder, if you would like to ask a question, please press star, followed by one on your telephone keypad. And the next question goes to Espen Langström of Spurbank. Espen, please go ahead.

Hello. Thank you for taking my question. I see that you expound the private label range within some categories, and I was kind of hoping that you might share some insights of how large the private label share of total sales is today and how this private label share, how the gross margin is on private label compared to the branded labels.

Thank you. Hello Espen, thank you for your question.

Well, we don't disclose the total share of private name across our sales. From all of you, I want to say that in our main categories, timber products and so on, there's maybe less private labels in general than in many other retail and discounter sectors. What we have made during the year, we have, in certain categories, increased the private label assortment. And from a general perspective, right, when it comes to private data, you have a high growth margin, but also you need to build inventory to a larger extent. So that is from a very overall perspective. What we've tried to do here is to increase in certain categories where we see potential. For example, when it comes to greenhouses and conservatories, we've seen potential to increase the number of private labels, which we'll now put into the market and see how they work during the season to come.

Okay, that makes sense. Also, one final question just on the life-for-life growth in other Nordics. and I guess which was close to 8.5% if I'm seeing the numbers right here, which compared to my kind of channel checks of more of a flat market. Can you give me some more insights of kind of if there was a market share gain in that quarter and what drove sales in all the Nordics?

Thank you.

Yeah, well, if we look at the year again, we saw that from a macro perspective, it seems like the Swedish market picked up a little bit earlier than the other Nordic markets. I guess it's interest rates cuts and so on supporting this. So as Helena mentioned, if we look at the full year, we were more or less flat in Sweden sales-wise and minus 20%. I think it's 6% in the other Nordic countries. But as you mentioned, right, so during the fourth quarter, we saw that also the other Nordic markets picked up. And this is, of course, a combination of different factors, right? It's also from a low baseline. But hopefully also seeing that macro in the other countries is improving. When it comes to the market share, we see that – No prices is increasingly important to customers, especially during those times. We have a strong offering when it comes to this. We feel confident that we strengthen our positions, especially in our core categories or our prioritized categories. Thank you very much. Thank you.

Thank you. We have no further questions. I'll hand the call back over to Carl for any closing comments.

Well, I only want to say thank you a lot for your participation and thank you a lot for your questions. And if not before, we're looking forward to meeting you again after our first quarter of 2025. Thank you.

Thank you. This concludes today's call. Thank you all for joining. You may now disconnect your lines.