Dustin Group AB (publ)

Great. Thank you very much. Thank you. So, good morning and most welcome, everyone, to our fourth quarter presentation and full year presentation and conference call. I hope you're all well. Despite the turmoil in the world, but here on I thought of the call is said myself, Thomas Ekman, and Johan Carlsson-Sifo, and also Fredrik Setterström is also in the room here as well. So, today we present our fourth quarter results and full year results for fiscal year 2021-2022. But before we go into that, just to start with the other news we also sent out this morning, as you might have seen in the press release, I have today, this morning, announced my resignation as CEO to the board. I will, during 2023, take on the position as CEO of Axel Jonsson, who is, as you also might know, Dustin's largest shareholder, holding 29% of the shares. It's acting, of course, but however, here now is the focus on Dustin, and I will stay on and secure a thorough handover to the next CEO. We're of course also a recruitment process for that is being initiated as we speak. But without further ado, let's go into our Q4 and full year presentation. And for your reference, as you see on slide two, we have a dot net loss. But I think we can move directly to slide three for financial highlights. So see how we are improving and performing now during Q4. We reported strong organic sales growth at 15% for the fourth quarter. mainly driven by strong demand for hardware. Our sites and our active work in purchasing has created a high degree of availability for our customers in a market that has still been affected in various ways by disruption in supply chains and the overall unstable geopolitical environment. Zooming in on our market, the availability for standard hardware, such as PC and mobile phones, is continuing to normalize, as we also saw in the end of Q3. But the more advanced hardware, and in our world, higher margin products like infrastructure, network, and AV equipment, it's still scarce, but it is improving, which is, of course, encouraging to see. Total net sales were 5.7 billion SEK, up with 18.2% versus last year on reported level. And the organic growth, as I said, was 15%, of which SMB showed just about flat at 0.2%. and LCP at a very good 24.6%, and B2C at a negative 20.8%. Obviously, that's an effect of much less campaigning, but also less demand in the consumer segment. Given the geopolitical instability with the continued Russian invasion of Ukraine, increased energy prices and overall inflation, we can see the same signs as we have seen in previous crises, as our SMB customers are the first ones to react. by the larger corporates are slower and public sector continue to suspend on IT. Our LCP segment logically therefore also performed strongly in the quarter with a very strong growth while slightly lower margins compared to last year but sequentially improved margins since Q3. Also encouraging. And the quarter I think clearly shows our capability to actually define demand, make use of it and deliver. Market share wise we have again strengthened our position in our different geographies. And continuing on gross profit was 880 million SEK compared to last year's 758. And that gave us the gross margin at 14.2%. The change there versus the change versus gross margin versus last year is mainly attributable to an altered mix with higher share of sales within LCP together with, of course, the high organic growth in LCP as well. Our adjusted EBITDA was 202 million SEK versus last year's 229. That gave us the beta margin at 3.5 for the quarter versus last year, 4.7. Down versus last year, but slightly up sequentially from Q3, 3.4, which is in the right direction. Overall, the beta margin was affected by the current customer mix towards LCP and product mix of standard hardware or lower margin products within LCP. Integration of our acquired operations is proceeding as planned, and short-term, obviously, we do carry a bit more costs due to that, also affecting the EBITDA. Actions affecting comparability, both minus 12 million SEC, consequently then giving us an EBIT at 147 million SEC compared to last year's 157 million SEC. EPS, earnings per share, 0.73 SEC per share, a 12% increase versus last year's 0.65%. And cash flow improving from operating activities was 104 million SEK, a good increase versus last year's negative 222 during the quarter. Showing a good positive underlying cash flow generation, which we of course also see encouraging increase. Our leverage at the end of the quarter was 3.9 versus 3.4 for full last year. Increase from currency fluctuations as well as inventory levels versus last year. However, inventory is sequentially down from Q3. And given that there are obviously questions in general on inventory levels in the market or in the industry, it is good to remind that the majority of our inventory relates to customer-specific or pre-ordered inventory with very low risk. Come back to that also later on. So apart from an intense quarter in general, from an operation perspective, we have continued to do the integration work with our Benelux companies, where clear steps have been taken. One of those is that we announced reorganization for the group, now valid from October 1st, where we merged our SMB segments to one for the full group. I am then responsible for both the Nordics and the Benelux, headed by Rebecca Talmark, and the same for operations, headed by Salma Sbysht. which is now merged into one, catering for both Nordic and the Benelux as well. And this will enable us to extract more synergies than we previously expected. We now have identified an additional 50 to 70 million SEC annual synergies. And then obviously the news from this morning, as mentioned earlier, that I will take on the position of CEO for Axel Jansson in 2023. But now Johan, you can take us through the financial for different segments and how we have performed in Q4. Okay, let's move to slide 4 then, an SMB segment in some more detail. Sales for the quarter ended at 1,529,000,000, representing an organic growth of 0.2%. Reported sales was down due to the movement of customers between the segments in the Netherlands. In the quarter, we saw that the economic uncertainty is now affecting our smaller SMB customers and the consumers. This effect is similar to the previous economic slowdowns in the last 15 years. However, in the quarter, we also saw better and better supply situations for standard hardware, and the situation for SMB is now close to normalized. Especially, this affected the larger SMB customers where sales were growing. Overall, from a geographical perspective, Finland, Norway, and Sweden showed the best sales performance. The share of software and services was down from 19.2% last year to 13.2%, mainly as a result of the customer moves mentioned above. Segment margin improved from last year's 10.3% to 10.8%, and the improvement was a result of improved availability of advanced hardware, good sales at strong margins in the recurring services and good sales of private label products. This was to some extent offset by strong sales of computers and mobile phones. Segment result ended at 166 million compared to last year's 170. After the brand change in the Benelux, we are now setting up the online business and the operational processes in the same way in the Netherlands and Belgium, as we have in the Nordics. This will increase our possibilities to use the competence we have in the Nordics to further develop the online-based business to the SMB segment in the Netherlands. And with that, we conclude SMB, and we move to LCP on slide five. Sales in LCP was 4,105,000,000 in the quarter. That was an increase of 33.9%, of which 24.6% was organic. During the quarter, we saw very strong sales in both the public sector customers and the large corporates. As for the SMB segment, availability of standard hardware continued to improve, and in the Nordics, the backlog was down by 300 million. However, in the Banlux, it continues on high levels. This had a positive impact on inventory levels, which we will come back to later in the presentation. Price increase had some effect on sales development, and our estimate is that it impacted around 3%. From the geographical perspective, growth was strongest in Denmark, Netherlands, and Belgium. Segment margin at 6.8% was down from 7.5% last year, but up from Q3's 6.4%. Compared to last year, the high share of standard hardware had a negative impact on margin, and also the recent price increases had somewhat negative impact. Strong sales of private label products affected margins positively. In the quarter, we also saw strong demand for our circularity offerings, such as take-back. And more and more customers see this as an integrated part of the service we provide. And we continue to slide six on B2C. Sales in the B2C was down by 18.7% to 110 million. The main reason for the lower sales was the economic instability and continued low level of price campaigns. Segment margin continues to be at high levels at 8.3%, mainly due to the lack of price campaigns affecting margins negatively. Segment result was 9 million, down from 11 million last year. Then moving to slide seven on networking capital. Networking capital was 80 million compared to last year's negative 256 million. The higher networking capital continues to mainly be attributed to the Benelux region, where the change to an asset-light business model is continuing. The change in the model will be implemented gradually during financial year 2022-2023, as we are changing the IT platform and moving towards a global organization for purchasing. We look at the networking capital details. Inventory in the quarter was 1,340,000,000. down 130 million from the previous quarter, but up compared to last year by 325 million. It's important to remember, as Thomas mentioned, that approximately two-thirds of the inventory, or 850 million, of the total dust in inventory is pre-ordered by customers and awaits delivery, and is not exposed to price risk. This represents approximately 20 days of sales. The other third, or $450 million, is related to our online sales and private labor. This part of the inventory remained at the same levels as last year. Moving to accounts receivable, that was up $710 million, mainly as a result of higher sales, but also a shift towards more LCP with longer payment terms. Accounts payable was $3,790,000. or 643 million higher than last year. The majority of this comes from higher business volumes. In total, we saw a reduction in the inventory in the quarter over quarter. And it is our view that we will see inventory normalizing back to levels around 1 billion to 1.1 billion in the coming two quarters. It makes us continue to believe that our networking capital target range of negative 100 to 200 million is realistic. To bridge the time it takes to implement the asset-light model in the Vanellux, we have initiated a project to sell part of the receivables related to the public sector. We expect this to be implemented in the first half year of FY22-23 and have an impact of around 500 to 800 million. Leverage, that is net debt in relation to the 12-month rolling at the TA at the end of Q1 was, at Q4, was $3. where our target is to stay in the range of 2 to 3. The higher net working capital and currency differences affected net debt and leverage upwards. Moving to slide 8 and cash flow. Cash flow for the quarter was 8 million compared to last year's 130 million. To look at the parts, we see that cash flow from operating activities before changing networking capital was 212 compared to 201 last year, mainly as a result of better operating results. Changing networking capital was negative 108 compared to negative 423 last year, where the main difference in last year would come from the acquisition of CenterPoint. Cash flow from investing activities was negative 45 this year, of which 35 was related to IT investments, compared to 3,072,000,000 last year, where the acquisition of CenterPoint affected the numbers. Cash flow from financing activities was negative 51, compared to 3,424,000,000 last year, and last year was affected by the refinancing of CenterPoint. Total investments in the quarter amounted to 66 million compared to last year's 65. CapEx related to IT development amounted to 34. And of these 34, 14 was investments in the IT project in Centerpoint, where we are moving the ERP system to the cloud. Investment in tangible and intangible assets decreased from 24 million last year to 20 million before this year. And finally, investment in assets related to services. Service delivery was 11 million, and that was down from 15 million last year. All in all, 45 million out of the 66 million in CapEx was affecting cash flow. The others were changes in lease or rent contracts. And with that, we move back to Thomas. Good. Thank you, Johan, for that. Round two. And then we proceed to slide number nine. Let me elaborate a bit on our integration and synergy development. As we have previously announced, we believe that when we did acquisition of Central Point last year that it would be possible for us to extract synergies at an estimated 150 million SEK annually. They would come from an order they are starting to surface from both revenues and costs. On the revenue side for SMB in Netherlands, the merge to one organization for SMBs in the Netherlands, that's where we will be working in the same way, in the same platform. or on the same platform with the same offering portfolio and synergies will be realized in full by year 2023-2024. Same for LCP tender, where we, given our size, now have a larger portfolio of contracts and by that being less dependent on certain deals, which then ensures that we can choose more thoroughly and with better quality what contracts to hunt for. Turning on to slide 10 and look where we are now. We have taken good steps in the foundation for the realization of our synergies. We have rebranded to Dustin in the Benelux. It's fine life. Everything is Dustin now. Integration of Benelux entities is ongoing according to plan. Private label was launched in late Q2 and now starting to show traction with about 10 million sec of private label sales in the quarter, which is a really good start. And in the reorganization now from October 1st, we also established a group-wide procurement and vendor management organization to make use of our sites in full. So we're improving our purchasing power, obviously, and be an even stronger and better partner to our vendors and the distributors, and of course, also to our customers. Also, launch of our common cloud-based ERP platform in the Benelux is ongoing with a completion plan during this fiscal year, during 2023. And so far, we have taken steps of extracting approximately 50 million sec of the earlier expected 150 million sec. So we are on schedule there. However, during this work and with the new structure, we have also identified an additional 50 to 70 million sec in cost synergies coming from better processes, efficiency gains, as well as streamlining of our central functions. And that leads us to quality improvements and less cost. And combined with that earlier 150 million SEK, we therefore raised the target to approximately 200 to 220 million SEK in total. And all that should be fully implemented by the end of our fiscal year 2023-2024. So improving there. Continuing then to slide 11 for an update on our 2030 commitments and the current actions we do towards reaching those. For the full year, 2021-22, we increased our circular revenue share to 25%. As you might know, our target is to reach 100% until 2030. So good development there, compared to last year's reported number, 12.4. Now we're also in former central point numbers in this, so we have both grown organically as well as through the acquisition. And the same is valid for take-back. We have taken back 423,000 products this year, which is great. And you can compare that to the 296,000 end of Q3. Our facilities, both in Växjö in Sweden, covering the Nordics, as well as in Viken in the Netherlands, covering the Benelux, is growing and taking on more volumes. And I think that the demand for take-back is increasing among larger corporates and public sector, and we believe that we can soon see a much clearer or a clearer mix of second- and first-hand products in larger contracts. which is obviously great for us, but it's also great for the environment. Not to say the least. And with that, we also have mentioned in Q3, we also launched our carbon calculator in the end of the third quarter, to help companies to get an overview of the climate footprint of their IT products and how to reduce it. They also can see an increased attraction on that. But all in all, we work hard to continue to fulfill our 2030 commitment on that. So before going into Q&A, let me just sum up the full year results for 2021-22 on slide 12. Net sales grew with 57% to 23.6 billion SEK, where organic growth for the group was 11.4, with SMB at a strong 9.1%, LCP at a very strong 15.9%, and BTC at a minus 23.6%. As you know, our financial priority is to be on 8% organic growth, so well on that. Gross profit ended at 3.4 billion SEK versus 2.4 billion SEK last year, and gross margin came in at 14.7% versus 16.5%. Change in sales mix with a higher share of LCP sales and vast deliveries in standard hardware is behind the change in gross margin. And the adjusted EBITDA increased 29% and came in at 979 million SEC versus last year's 759 million SEC, giving us an EBITDA margin for the full year at 4.1% compared to last year's 5.0%. Margin is affected by lower gross margin coming from customer mix and product mix, as well as that we, for the moment, carry more cost due to the integration of former center point and obvious debt-to-year. And what we have behind us now has been continuously affected by higher distribution costs due to overall disruptions in the supply chains. EBIT increased with 31% to 758 million SEK compared to last year's 576 million SEK. And EPS, earnings per share, increased with 10% to 4.22 SEK per share, which is also 3.62 SEK per share. And cash flow from operating activities had a very strong increase at 245% to 584 million SEK versus last year 169 million SEK. A good cash flow generation. And leverage as you want was into only that 3.9 towards EBITDA. Given it's about our target, as you mentioned, for rational reasons, though, we are very active in working it down. We're active working at working capital and continuously focused on cash. So, all in all, a good year with robust organic growth, with mixed effects impacting the market in the short term. The pandemic is still present over the world, although we have, during this year, learned and accepted how to deal with it. The change among our customers to a new way of working is for sure here to stay, which over time also increases our potential market. The continued escalation of the war in Ukraine also puts pressure on humans, creating worry, and we sincerely hope for an end to that. We see signs of, as mentioned earlier, we see signs of a more cautious market in SMB, especially like earlier crisis where the smallest SMBs are the first ones to react, but also the first ones to come back. And the market trends, however, continue to accelerate with distinct changes in customer behavior. The IT service demand is there, and there's an increased demand for instant availability online as well as security, mobility, and remote management. IT is also, of course, a big enabler for companies to be more efficient in their way of working in platforms and the tools they use. So IT is very central for most companies. especially when times are getting tougher. Security is obviously a big topic now and will continue to be, given the overall uncertainty in the world. We have extensive experience for that and knowledge and can serve our customers in all our markets. And for these last years has meant that our position is clearly strengthened and shows that our business model is very robust. All in all, we are very well positioned, although obviously affected by the geopolitical instabilities. I'm as always, just before we go into a queue, I'm always very proud of everyone in Dustin Group for doing their utmost every day to deliver a great customer experience and driving our competitive edge. This year has been extraordinary with a lot of unpredictability, but despite all that, we have continued to deliver and giving our customers a very good experience built on reliability and trust. With the continued integration work, we have taken clear and important steps to build one Dustin with one brand One culture, one platform, and a unified offering in all our markets. So with that, Johan, I think we can conclude our presentation and are happy to take any questions you might have. 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 is 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 Torsen of APG. Please go ahead, your line is open.

Yes, thank you very much. I start off with a question on SMB. Can you give us a feeling on how SMB developed during the quarter? Did you see a slowdown and hence negative organic growth in the end of the quarter, for example? And also, what type of products or services and regions do you see the first signs of slower demand?