Dustin Group AB (publ)

Good. Thank you very much. Good morning, everyone, and most welcome, both our existing, of course, new and potential new shareholders, to our second quarter presentation and conference call. I hope you are all well. Here on my side of the call is myself, Tomas Ekman, and Johan Carlsson, CFO, and Fredrik Seppeström, also a head of IR in Lund as well. So, today we present our second quarter result for our fiscal year, 21-22. To start with, I must say, this has been, of course, a very special quarter, starting the quarter with more or less open markets and societies in December, with then relaxed corona restrictions to complete lockdowns in all our markets in November, December and January, causing a lot of challenges, of course, and then to fully open markets again in February, and then a couple of weeks later into a catastrophic phase of the Russian invasion of Ukraine. So a lot of turmoil, but despite all this, we continue our growth journey, and this quarter with the 80% reported growth and a very strong 12.2% total organic growth. Margins, which we'll come into later on, were impacted by mixed effects driven by high deliveries of low-margin products and temporary cost increases due to a lot of sick leaves in the middle of the quarter, and also, of course, a higher share of LCP sales in general. And as always, I've said this before, but I'm always very proud of everyone in the industry group for doing their utmost every day to deliver a great customer experience. And this second quarter very much put the light on the skills and competencies and engagement we have in the group, given the turmoil in the world and the effect, of course, it has on us as humans and our work. The supply chains are continuously disrupted and are driving an intense work in sourcing and delivery. But despite all the challenges, as I said, we managed to have a double-digit growth and capture the demand from our customers. And the second quarter, once again, shows that availability and delivery capacity, it is the driver of the high growth and drives the generated high growth. And that, of course, builds on our cash-generative and asset-light business models. So let's proceed in the presentation. And for your reference, we have Dustin at the glass on slide two. But I think we can move directly to slide three for the financial pilots to see how we are performing and improving during this quarter. The strong organic growth at 12.2%. We have strengthened our position in the markets and our productivity and position in the value chain, of course, benefited our performance. Our beta margin was impacted by customer and product mix effects, as well as temporary cost increases due to corona lockdowns. Adjusted to beta increased to 275 million sec, while the beta margin came in at 4.2%. Our S&P segment performed strongly on both the growth and margins in the quarter, and our LCP segment had a very strong growth, while slightly lower margins due to high share of sales of low margin products, such as PCs, Apple mobile phones, and software. The market trends that we build our strategy on, the online shift, growth mobility, cloud services, demand for predictable IT costs, focus on security and integrity, and, of course, sustainability, they have continued during the quarter to increase in importance. And that, of course, makes also our long-term position better. So total net sales were 6.6 billion SEC, up with 80% versus last year on reported level. And the organic growth, as said, was 12.2%. LCP at a very good 17.2%, and BTC a negative 22.4%, as an effect of much less campaigning due to the overall shortages of products. Overall, good organic growth and strong, which shows not only a good underlying demand, but of course also our capability to make use of it and deliver. Gross profit was 904 million SEK compared to last year's 591 million SEK. That gives us the gross margin at 13.7%, down from last year's 16.1%. The change is mainly attributable to an altered mix with higher share of sales from LCP and within LCP. And that, of course, relates to the acquisition of CentralPoint, together with higher organic growth also in LCP. Our adjusted EBITDA increased to 275 million SEC versus last year's 201 million SEC, and as said, that gives us 2% for the quarter versus last year's 5.5%. And the EBITDA margin was affected by the customer mix towards LCP and the product mix of lower margin products within LCP as well as the temporary costs I talked about before here for sick leave in December and January. Item selecting comparability was minus 13 million SEC and that consequently giving us an EBIT of 220 million SEC compared to last year's 177. And EPS Earnings per share was 1.27 sec per share versus last year 1.34. Strong cash flow from operating activities at 388 million sec versus last year's 218 million sec. And our leverage at the end of the quarter was 3.3 versus 2.0 last year. Increase obviously because of the acquisition of Central Point and the dividend payoff during this quarter. And we are working our way down in leverage So apart from an intense quarter in general, from an operational perspective, we have continued the integration work with Central Point and former venture companies in the Benelux. We've also come further with our Nordic integrations with, for example, now Danish Exato now fully integrated. So Johan, you can take us through the financials on our different segments. Yes, on slide four we see SMB. Sales for the quarter in FFD was 1,941,000. That was an increase of 20.2% over last year, representing an organic growth of 10.1%, as Thomas mentioned. Sales growth continued to be strong, despite the challenges in the global supply chain, and with a very high underlying demand. During the quarter, we saw strong demand for hardware in general, but computers and mobile phones in particular. All customer groups in the segment performed well. However, the On the services side, the standardized managed services performed well while the consulting business was down from last year. This is a result of higher standardization of the service portfolio and in line with our strategy. From a geographical perspective, sales were strongest in Norway to 11.0, despite a negative effect from customer moves affecting margins negatively with 0.3%. Private label continues to contribute positively as we are increasing sales in both Nordics and Banalax, and also using the supply chain challenges to our advantage was improving the margins. However, the quarter was also affected negatively from high share of computers and mobile phones with lower margins, and my higher cost for delivery coming from the high sick leave due to COVID. The delivery cost issues was mainly affecting December and January and is now back on normal levels again. In summary, we saw the same trend in demand for IT products and services in Q2 as we did in Q1. Then move to slide five and the LCP segment. Sales in NCP was $4,553,000,000 in the quarter, which was an increase of 139.3%, of which 17.2% was organic. During the quarter, we saw a very high sales increase in both public sector and large corporates. As our quarter 2 contains the end of the calendar year, we also had strong sales software in the was up by 300% compared to the same quarter last year. From a geography perspective, growth was strongest in Sweden, Norway, and Denmark. Segment margin was at 6.5, was down from 7.2 last year. As said before, product mix was affecting margins negatively as software was increasing in shared states. Further to that, large inbound deliveries to fulfill large rollout commitments further weakened the margins. Also, higher cost of delivery, as mentioned in S&P, was affecting the S&P margins. However, private label product increased as we were expanding in the Nordics and launching in the Benelux, and this contributed to a higher margin. The customer transfers We then move to slide six, and B2C segment. So B2C segment lost 20.5% of sales, went up to 9.6% from 8.6% last year due to the lack of price campaigns, which usually affects the margins negatively. Segment result was 13 million, which was down from 15 million last year. Let's move to slide seven, and the net working capital. The net working capital continues to perform well. It was negative 433 million compared to last year's negative 549 million. We can compare it to Q1 of this year. Networking capital in this quarter was approximately $100 million lower. But as in previous quarters, we have seen negative effects on inventory levels coming from turbulence in the supply chain. But this has been compensated by longer payment terms to suppliers and more effective payment process from customers. We look at the details of working capital. Inventory in the quarter was The main reason for the increase was the inclusion of Central Point, adding 476, and higher purchase volumes to reduce the risk of shortage of components. Accounts receivables was up 1,351,000,000, mainly as a result of Central Point adding 995,000,000, and higher business volume coming from the strong organic growth. Moving to accounts payables, which was 3,000,000,000, 784, 1,753 million higher than last year. Again, central point added the majority of that difference compared to last year. In total, we continue to see strong performance in the area of wooden capital, where we continue to stay in or below our target range of negative 100 to 200 million. And our leverage, as we heard before, that is the net of the quarter was 3.3, including rolling 12-month numbers for Centrepoint. And as you know, our target is to stay between 2 and 3. The effect compared to last quarter was mainly coming from dividend and slightly higher net debt due to currency differences in the debt number. We then move to slide eight and look at the cash flow. We can see cash flow for the quarter was 15 million compared to negative 32 last year. We look at the parts. Cash flow from operating activities before changing net green capital, 278 million compared to 207 last year. And change in net green capital was 110 compared to 10 last year. Cash flow from investing activities was negative 75 compared to negative 18 last year, where majority comes from capex investments. Cash flow from financing activities was negative 298 compared to 231 last year. The main difference being the investments, they were at 90 million compared to last year's 43. CapEx related to IT development amounted to 40 million. That was 31 million above last year, mainly coming from IT investments in Central Point, where we are moving the ERP platform to the cloud. Investments in tangible and intangible assets increased to 40 million from 24. All in all, $64 million out of the $90 million in capex was affecting cash flow. The others were changes in lease or rent contracts. And with that, moving back to Thomas. Good. Thank you, Johan. And then continuing over to slide number nine. And let's do a little detail in our EBITDA margin developments. As you know, our target range long-term is between 5% to 6% EBITDA, and we're not back there yet, but we are on our way. The challenging turmoil in the markets in general obviously affects us as everybody else, and to give you some flavor to it, you can see the graph at the left-hand side of the slide showing development. What has affected the margin in Q2 is, as we have been into before here, you are from U1 as well, is the customer mix with strong share of sales from LCP and within LCP. It has been a higher share of basic hardware in both segments, as well as large software roll-offs within LCP. And to that, the temporarily higher cost connected to the extensive absence due to corona lockdowns at approximately 15 million SEK. We have also seen higher irregularities in inbound deliveries caused by the disruption in supply chains, making it slightly harder to exactly forecast estimated time of arrivals for products. And it is somewhat, of course, difficult to assess the short-term effects from both lockdowns in China as well as the Russian invasion of Ukraine and what might be the effect of all that. But I can assure you that we have our eyes on the margin ball. to reach our target of being between 5% and 6% of data. And it is actually, as you also heard from Johan, it is also the share between SMB and LCP. SMB has a good, continued good performance with strong margins and good performance on growth. And the higher share of LCP sort of pushes down the margin somewhat. But that is also why we're working hard to increase the share of SMB sales in our profiles. Good. Continuing then on to slide 10 to give you also an update on our value creation agenda. During the quarter, we have continued our rebranding activities in the van life with now all the former Vinciera companies rebranded to Dustin. We have also initiated the rebranding of Central Point, and that will now take place in May, which is very exciting, of course. We have also launched our private label product that's here from Johan. in the later part of the quarter, and that's, of course, very exciting, given, as you know, that Price Able is a good contributor to our margins. And the initial response also in the van life is very positive, so that is very promising. Several group initiatives are also ongoing. Now we're setting up a global procurement and vendor management team that's being set up, as well as the launch of our group common cloud-based ERP platform. And that is built now from the Bandai side, and that will be integrated also to the Nordics. And this platform we aim to complete during the next fiscal year, 2022-2023. And as previously announced, we plan to invest approximately 50 million tech to extract the estimated annual synergies of 150 million tech. And those will be fully implemented in the year of 2023-2024. So we have a solid agenda to speed up our ability to reach our long-term targets. And continuing on the long-term agenda theme, let's move to the next slide, slide 11. And let me just give you some quarter highlights connected to our 2030 commitments. During the quarter, we have launched our in-house take-back service also in the Nordics to increase circularity. We have a production facility south of Sweden to cover for the Nordics, and we also have the facility in south of Netherlands to cover for the Benelux. for around 5 million SEK, which may not sound so much with 5 million SEK, but it's a very important milestone to start off this in the way we do. And we can already now see the margin contribution possibilities this will give to us going forward. And we have also financed our solar cell facility, which enabled us a greener warehouse and lower electricity costs. And all in all, we work hard to fulfill our 2030 commitment, and we are on a good way there. So before going into Q&A, let me just sum up our second quarter results on slide 12. Net sales grew with 80% on report 11 to 6.6 billion sec, where organic growth for the group was 12.2, with S&B at a strong 10.7, LCP at an equally strong 17.2, and B2C at a minus 22.4%. Gross profit at 904 million SEK versus 591 million SEK, and gross margin came in at 13.7% versus last year's 16.1%. A change in sales mix, as we've been into, with higher share of S&P sales and higher share of or vast deliveries, actually, of basic hardware and software is behind the change in gross margin. And adjusted EBITDA came in at 275 million SEK, giving us an EBITDA margin for the quarter at 4.2%, due to the flow-through of the reasons for the drop in gross margin and the extra cost due to the temporary restrictions. EBITDA at 220 million SEK, an increase from last year's 177 million SEK, and EPS at 1.27 SEK per share versus last year's 1.34%. On balance sheet, Orenström operating cash flow at 388 million SEK and leverage ended in the quarter at 3.3. So solid growth in the quarter with the mixed effects negatively impacting the market right now. The pandemic is still present in the world and teaching us a lot and not the least new way of working. The escalation of the war in Ukraine and the Russian invasion of Ukraine also puts pressure and of course we sincerely hope for an An end to that. The market trends continue to accelerate with distinct changes in customer behavior. The IT service demand is there, and there is an increased demand for instant availability online, as well as security, mobility, and remote management. Security and knowledge around cybersecurity is obviously a big topic at the moment and will continue to be given the overall uncertainty in the world. We have extensive experience and knowledge in that, and we can serve our customers in all our markets in those areas. And for us, I must say, the last years has meant that our position is clearly strengthened and shows that our asset-light business model is very robust. So, in short, we are well positioned. And with that, Johan, I think we can conclude our presentation and are happy to take any questions you might have. So, operator.

Thank you. If you wish to ask a question, please dial 01 on your telephone keypads now to enter the queue. Once your name has been announced, you can ask your question. If you find your question is answered before it's your turn to speak, you can dial 02 to cancel. Our first question comes from the line of Daniel Tolshan of ABG. Please go ahead, your line is open.

Yes, thank you very much. I start off with a question related to software. You say that software sales are up 4x in the quarter, but that is not affecting the margin that much. It's actually diluting the margin. How should we think about that in the future, and what type of software is it? Is it like Microsoft licenses or anything else?