Dustin Group AB (publ)

Hi and good morning everyone and welcome to the Q4 presentation for Dustin Group. As said before, Julia and myself are in the room together with Fredrik from IR. But let's start with a short introduction to Dustin at a glance on slide two. Dustin is an IT reseller which is based in IT hardware and software products. And as you can see in the graph, up to the left-hand side, 82% of sales is IT hardware and 18% is software and services. Software and services has, in the last years, taken a larger share of the total sales and has increased in importance. Our assortment is primarily sold online. 60% of sales go through our online platform. The share in the Nordics is about 80%, and in the Benelux the share is lower. However, as you know, we have recently launched our online sales model in the Benelux, and the aim is that we will move to similar share as in the Nordics when it comes to online sales. We're present in six markets in Europe, with our main markets being Netherlands and Sweden. And as you can see, our key customer focus is B2B, representing 98% of our sales. That's Dustin in brief, but let's now move to Q4 and the result. So, as in the last five quarters, sales was affected by a weak market with continued general cautiousness by the customers in many of our customer groups. Sales in the quarter was 4,988,000,000 or 2% below last year. In SMB organic growth was negative 9.6% while LCP grew by 4%. In LCP the growth came from winning new tenders in the public sector. Gross profit at 644 million was down 101 million or 16% while gross margin ended at 12.9% down from last year's 14.6%. The new contract in LCP has a negative effect on gross margin while gross margins in SMB remain stable. Adjusted EBITDA at 28 million compared to last year's 142, with an EBITDA margin down from last year's 2.8% to 0.6%, mainly as a result of the lower gross margin in LCP and lower volumes in SMB. Items affecting comparability was 7 million compared to last year's 20 million. EBIT was at negative 25 million compared to last year's 75 million. Cash flow from operating activities ended up negative 355 million compared to last year's 23, mainly coming from a seasonal high working capital. Leverage ended up 4.0 compared to last year's 5.0, the main effect being the repayment of debt after the rights issue. Some other highlights from the quarter was the announcement of the new organization for strengthening customer focus and increased efficiency. And we will come back to that later in the presentation. But let's dive into the numbers now in some more detail. Julia.

Thank you, Johan. Yes, and we wanted to start on page four by looking at what is driving this performance development in Q4 compared to last year. Last year, we had an EBITDA of 142 million SEK. And as Johan said, SMB has still been affected by cautious market and lower volumes, and this impacted the results by roughly 34 million SEK compared to last year. In addition, we've done a normalization of our internal cost calculations or the standard cost calculations for services, and this has led to an additional cost of 13 million affecting Q4, also coming in as SMB. But the biggest impact comes from the LCT segments, 47 million SEK, where the main driver is the lower margin on new public framework agreements, and a bit of a negative mix between countries. We also saw a shortage of 21 million SEK due to an adjustment to a previous insurance case also affecting LCP. Overall, the S&A was stable. These were the main drivers of why we landed at a low EBITDA of 28 million SEK in this quarter. If we move to the overview of the S&B segment on page 5, we see that sales landed at 1.3 billion SEK, 12.4% below last year. The granular growth was 10%. As Johan mentioned, the continuous economic uncertainty is still affecting the demand in all our markets and most of our customer groups. And as in previous quarters, we saw low demand for computers and mobile phones, while the share of software and services sales increased somewhat to just above 15%, due to a positive trend for contracted recurring services in the Nordics, combined then with the weak hardware sales. As in previous quarter, we saw some clearance of supply stocks ahead of the launch of AI-adapted PCs, which put some pressure on the gross margin. But this has partly been offset by better mix and continued price discipline. In addition, we had the 13 million second cost related to harmonization of our COGS calculations for service offering, as I just mentioned. But excluding this, the gross margin was stable in S&D compared to last year. Our cost saving programs have had a positive impact, but have been upset with cost inflation So the lower volumes combined with the larger six cost-based short-term has led to negative operational leverage and hence the lower segment, the result and margin. All in all, the segment margin ended at a low 0.7% compared to 4.4% last year, and the total segment result was 9 million compared to last year's 64 million. Going on to page six, we look at the LCP segment. The sales in LCP was at 3.7 billion SEC in the quarter, up 2.2% year-on-year, and the organic growth was 4%. The public sector was an important driver of this improvement, coming from several new framework agreements, while the performance in large corporate was slower. From a geographical perspective, the sales performance was positive in Sweden, Denmark, and Netherlands. Gross margin declined in the quarter, as we said, mainly due to the high share of new framework agreements, with initially lower margins, and an overall high share of public agreements. Margin was also impacted by country mix. In addition, the result was burdened by this 21 million SEC link to the adjustment of the previous insurance case. We continue to see an increase in take-back, which is positive and had a positive impact on both margin and EBITDA. The one will come back to this shortly later in the presentation. But overall, the margin declined and costs were fairly stable, leading to a segment result of 54 million SEC versus 104 million SEC last year. And the margin ended at 1.4% compared to 2.9% last year. Coming to page 7, we look at the net working capital development. Net working capital landed at 170 million SEK, which was higher than both last year at 30 million, and a clear increase versus the previous quarter that was at minus 205 million SEK. The increase with the previous quarter is mainly driven by seasonality. Inventory landed at a low 826 million SEK, which was linked to large sell-out volumes at the end of the quarter. We do expect inventory to increase somewhat in the coming quarter, but in general, it's now at a balanced and normalized level where we target to stay, with some minor movements up and down, still able to deliver on our service levels. Both accounts receivables and payables increased versus last year, mainly related to the high sales at the end of the quarter, where receivables had a slightly even higher effect. In addition, we saw some increase in other debts, mainly linked to tax and VAT liabilities, and also liabilities related to personal costs. But overall, the high net working capital is given to a large extent by seasonal and timing effects, and we do expect it to come down in the coming quarter. As I said before, we always have some timing effects in individual quarters, but our long-term target for net working capital remains to be around minus 100 million. Moving on to cash flow and capex on slide 8 and summarizing what we've covered in the previous slides, we see that the cash flow for the period was minus 470 million SEK, coming down from a quarter with a high positive cash flow. If we look at the details, we see that cash flow from operating activities before change in working capital was 24 million SEK compared to last year's 164 million SEK. The difference is mainly linked to the lower operational result. Cash flow from change in net worth and capital was minus 379 million SEK compared to last year's minus 141. And again, mainly linked to the change in sales timing as previously described. Overall, the operating cash flow was 355 million SEK. Cash flow from investing activities was minus 51 million compared to minus 68 million last year. More on this in just a few seconds. And the cash flow from financing activities was 64 million SEK. compared to minus 61 million last year. If we move to capex, the total investment in the quarter was 84 million, of which 51 was affecting cash flow. The majority of the 51 was capex related to IT development, mainly then the new common IT platform, which is key for future operational efficiency. Investment in tangible assets was 19 million this year, of which only nine affected the cash flow. The non-cash items are mainly lease contracts and cars. And investments related to services was 23 million compared to 11 million last year, mainly attributed to the harmonization of data centers. None of this affecting cash flow. And with this, I hand back the word to Johan.

Thank you, Julia. And let's continue. Because since we announced the profit update a couple of weeks ago, we have done some a lot of activities inside Dustin. And one of them is the actual rollout of the new IT platform in the Benelux. And as you saw this morning, that has given us the opportunity to announce a new organization for strengthening of customer focus and increased efficiency. And by that, we are really prepared to take the next step in our organization development and efficiency work within the company. purpose of the changes are to better support the strategic direction around the offering that means that we sell more services as we've talked about before it's to increase the focus on our two sales channel that is online and relations sales and and by that creating growth and to increase the overall efficiency in the company the new structure is estimated to save in combination with efficiency gains from the IT platform, 150 to 200 million yearly, as from 2025-2026. The total cost of implementation is estimated around 70 to 100 million. The group management team will, after the change, be structured around the value chain with positions for offering, conversion, customer delivery, and customer support. Added to that will be two enabling departments, finance and people and communication. The team will continue to have seven members and Cecilia Ridahl will be a new member of the leadership team, taking the role as COO. As a result of the change, Rebecka Tallmark has decided to leave Dustin. And for the position of EVP relation, the search process has been initiated. Overall, The changes in organization and the new IT platform give us new possibilities to increase efficiency in Dustin. Moving to the next slide on take back. So our offering on circularity continues to develop well. Our take back centers in Sweden and Netherlands operate with better and better efficiency as the volumes are increasing. We see strong demand from customers and the offering give us advantages in public tenders. The high volumes have also resulted in better efficiency and by that, better and better margins for the offering. Next steps will be to sell refurbished products to our local customers in the Nordic and Benelux. Here we see most progress from the LCP customers and the intention is that the interest will spread also to the smaller customers in SMB. On a yearly basis, we are now taking back approximately 1.1 million units per year, an increase by almost 50% in a year. And by that, let's move to the summary on slide 11. In summary, Q4 was a challenging quarter where continuous weak demand and new contracts affected sales and profitability. In cautious markets, sales growth was flat organically, supported by new contracts in the LCP segment. Gross margin was down from 14.6 to 12.9, mainly due to a high share of new framework agreement and high share of LCP sales compared to SMB. EBITDA margin of 0.6 was down from last year's 2.6, mainly as a result of low gross margin and the weak sales development in SMB. The result was also affected by 34 million of costs specific to the support term. In regards to dividend, the board proposed that there will be no dividend paid for the financial year. Despite the tough market currently, we continue to believe that we will see improvements gradually coming during the next couple of quarters as a result of AI PCs, the move to Windows 11 and the replacement cycle of current PC fleets in the market. And increased action in the quarters to come was initially by the change in the organization as a result of the implementation of the new IT platform in the Benelux and the need to find more efficiency. I think this is the most important thing for the future. This will give us a result in the coming quarter as we implement the actions in the program. And as communicated before, we believe that the effect of that will be 150 to 200 million. That will be executed during the coming four quarters and we will see the full effect of that in Q1 2025-2026. And with that we conclude the formal presentation of the results and we move to Q&A.

If you wish to ask a question please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial £6 on your telephone keypad. The next question comes from Thomas Nilsen from Nordia. Please go ahead.

Yes, hello. Can you talk a bit about what level of interest you're seeing for AI-enabled PCs and what kind of price point these units are coming in relative to previous products? And also what you see in terms of the replacement cycle we're hoping for driven by Windows 11 and replacement of equipment purchased during the pandemic. Thank you.

Yeah, let's start with the AI PC, where I think the market has developed in the recent three months. So what we see there is new PCs being launched. You could say phase one of AI PC. Price point is about 10% higher than previous versions. And the usage are, I would say, to specific roles in the company. So there are a few customers that would buy the high spec PC to all their employees, but rather to certain personas in a company that would need the higher performance of a PC to use the AI capabilities. And that's where we can see demand. That is still on a pretty low level if you look at the total market, but we can see signs happening there. And the other one was the agent of the fleet, was it?

Yes, the Windows 11 replacement and replacement equipment purchase pandemic, yeah.

I think on that demand for, let's say, coming from the Windows 11 change, we start to see some activities in the larger corporates and some of the public institutions. And this is expected, I would say, because they would be the ones starting because they have a better planning process and they look further ahead, let's say. What we're trying to do together with Microsoft and the hardware vendors is to inform the smaller companies about the fact that they have to change. Otherwise, they have a security issue basically a year from now. And the risk is that if you change too late, there will be a shortage of PCs as you come closer to October, November next year. We are running, basically starting to initiate information and campaigns on that subject as we speak.

Okay, thank you.

Thank you.

The next question comes from Daniel Thorsen from ABG Sundal Collier. Please go ahead.

Yes, good morning. I have a question on the 34 million SEC negative specific item effect here in the quarter. Why have you not adjusted for that one in adjusted EBITDA? Is it because you expect to see similar effects in the coming quarters? Or could we think that the underlying adjusted EBITDA is rather 62 million than 28?

Hi, it's Julia. No, we do not expect them to come back in the coming quarters. It's more of an adjustment compared to previous periods, and that's why it's not put as an adjusted point in this quarter specifically. We do not expect to see them in the future.

Okay, so if we think of a beta base here in Q4 going into the next quarters, it's better to think of 62 million than 28, for example.

Yes, I would say so.

Okay, and then regarding the new organization, Is the timing of this change, has it anything to do with the tough market, the weak momentum recently, or was this already planned earlier? And also the relation to the financial targets. Is this something that you already foresee a year ago to reach the margin targets a few years out? Or is this something we should see as an upside to your financial targets two, three years out?

A really good question. I think it's a combination of that because We have, of course, worked with the IT platform for the Benelux and the coming ones for the Nordics for a couple of years. So we knew that that was coming and we know that we need to adjust in order to get the efficiency gains from that investment. That's clear. What I think put pressure on the activity right now is, of course, the weak market. So we need to combine these two to create action short term to win success long term. And that I would say that has helped us to keep really focused on delivering on that now in the coming quarters.

Okay, so this was something that you thought already one and a half year ago that you needed to do at some point in time and the weak market now was the trigger for it.

Yeah, you could say the IT platform was in the thinking of how we develop future but we have kind of taken it forward a little bit or taken it More action now rather than in the future.

I see. And then a follow-up on that one. How have you calculated the cost for these changes, the 70 to 100 million? Is it layoffs? Other costs? For me, it looks quite costly to do a reorganization.

Well, I would say it's two things. It's either... And you can say both of them have to do with breaking contracts. So you either... Reduce your office fleet and other fixed assets that you have that we don't need anymore, or you lay off people. And both of these, you will have to pay some sort of a penalty when you break the contracts. And a part of it is for sure people, so lay off of people. And others will be, again, closing offices when we are fewer people.

Okay, I see. Okay, but you have not specified that, because here you just say that reorganization will cost around 70 to 100 million, but you don't say that you target less employees one year out or anything like that. But that is what we will see, I guess.

It's what we will see. We will be less people in dust in a year from now, for sure. We are doing that detailing work now, given the fact that we need to announce it and then start working on it. And the hard part of this is always to estimate how many will be natural levers and how much is layoffs. So that's what we're trying to figure out now in the next couple of weeks.

Yeah, I see. And then my final question on the annual savings there on 150 to 200 million, is that only related to lower OPEC? Or is it related to be, because you're talking about being more efficient here to the customers. So has this something to do with increasing sales, reducing COGS or OPEX? Or how should we think about that?

Its majority would be OPEX. Part could be reduction, let's say, in less complexity in COGS or the relationship on COGS. So there's a better margin, you could say. But the majority would be OPEX.

Okay, that's clear. Thank you very much.

The next question comes from Daniel Gerberg from Handelsbanken. Please go ahead.

Thank you operator and good morning. I will continue on that topic if you could give any more on the timing of the implementation, i.e. when we should expect this 70 to 100 million to be visible in the numbers, and also a little bit on if this will impact the services organization in terms of, and also then the top line, if we should expect that you will need to downsize the service organization when taking down the employees here, or reducing the number of employees, I should say.

Yeah, the saving will come from a combination of less complexity and more efficient organization and more automation through the ERP implementation. It's a combination of the three. The complexity reduction could affect sales to some extent. We don't believe that that is material to the total sales number. But it will have some small effects on sales by taking away some of the really complex stuff that we do that is not up to our standards when it comes to profitability.

Perfect and then a question on you mentioned that frame agreements comes with initially lower margins can you just help us to understand this initially is it due to cost for setting up stuff that goes away or is it more volume that supports the margin going forward or otherwise I guess frame agreements is quite sticky in

I agree. How the frame agreement works in IT is that you make a price for a certain product at the time of the starting of the frame agreement. And over time, the development of products is so rapid that quite soon after the initiation of a contract, you will change the product to something relaunched in the market, a new product. And at that time, you're able to change the price to some extent, which means you get better margin. The initial of the contract is that you have to sell the product that you actually offered in the frame agreement in the tender of the frame agreement, which means in these first deliveries, you have a relatively low margin. As development of the products continues throughout the period of the contract, you will be able to capture more and more margin from the new launch products. That's kind of how the contracts work. So that is the reason why margins are improving over time.

Okay, and looking at this specific coming down from 14.6 to 12.9, and this is partly from frame agreements, can you give any, you know, ballpark on how much we should expect later on improvement from this? Is it 100 basis point or any, you know, guess on, or guess, but yeah, ballpark guesstimate?

I would say that Q4 is a special quarter seasonality wise so with a high share of LCP and a high share of public so that affects the gross margin we don't see any reason over time that gross margins will weaken in the business we're doing so LCP will remain at the same gross margin as SMB if anything will improve that's what we're trying to achieve so I think that That's how we look at it going forward. We don't have any specific forecasts for certain quarters, but if you would take a stance on four quarters from now, I don't see, there is no reason to believe that margins are coming down, rather the opposite as we are adding services to the general offering. Perfect.

And may I ask you also? Sure. Hello, can you hear me? I think I lost connection for a while. I was thinking about cash flow and it was primarily soft on back of reduced accounts payables. And my question is, do you see this reason here? Do you see any change in payment terms, you know, on the back of selling more cloud online or, you know, with Microsoft or Dell, HP, Cisco, etc.? Or is it something else that we should know about when thinking about cash flow going forward?

We don't see any general trends in change in payment terms. Of course, we always work to get the best payment terms for us, but there's no general changes that we see now.

Also, the... SaaS delivery model, let's say, on Microsoft and things like that, they're too small to affect us in any significant way. For us, the distributors, the payment of the distributors are by far the most important thing. And there we don't see any structure change. If anything, slight improvements in the terms that we get from them.

Okay. Good and then finally a little bit on LCP software and services and also SMB and Benelux that was quite sharp. It both fell with 40% I think reported numbers. Is this only about you know headwind from volumes or is it also coming from market share losses or negative pricing?

I would say the standardized services are doing well. What is happening is that what we talked about before, we are moving away from complexity in terms of highly customized service offerings. And that does affect sales volume. It should not affect profit because we're getting rid of cost at the same time. But it does affect sales a little bit on a specific market for a specific number. But over time, it should have a significant effect on sales, let's say.

Thank you. And my final question would be on your high ambition within ESG and the CO2 emission. 25% reduction over the next three years per million SEC revenue and also 2030 goal of becoming fully climate neutral. So obviously in tougher times, it's often it's easy to forget a bit about this important goal. Thanks, but your view right now, can you still stay behind these quite aggressive targets?

There are really good signs in that work. First, the fact that we are doing the, let's say, circularity offerings are so successful. So we are taking back more and more of the products we sell. The other one is that the services are doing well, the standardized services are doing well, so that's a more efficient way of doing it. In parallel, we are working with the main hardware suppliers to get an efficient way of transforming information, CO2 information on all the products we sell, because that is in the end where we have to influence our customers to buy more CO2-friendly variants of the products. And that work continues and I think we are making good progress there together with the vendors because this is something that they have to give to us in order for us to give to and help the customers to choose the right products.

I agree and good luck. Thank you. Thank you.

The next question comes from Mikael Leysin from Carnegie Investment Bank. Please go ahead.

Thank you. A follow-up question here. First of all, can you explain more in detail the restructuring and the new organization in more detail? What do you specifically do? How much is impacting the LCP segment and the SMB segment, and how much is the central function that you are addressing here?

A little bit early to say the details there, Mikael. We are in the process of ironing out the details. There will be effects on relations sales both in SMB and LCP as we're putting the organizations together, reducing the manager layers, reducing the number of managers. It will also be effects from decomplexifying some of the part of the assortment where we don't believe we can long term become profitable and that will take away specialists in both LCP and SMB. More on the LCP side, I would guess. And it will also simplify the services structure, which I think will affect mainly SMB in terms of less cost. It's hard to define at the moment exactly what comes from where or to where, let's say, on the segments.

Okay. I was thinking about what you mentioned about the complexifying or where you have complexity. Can you talk to us about that? What is the complex part?

One clear example, I think, is that we have acquired a number of companies which some of them were producing a lot of services for their customers in a very customer-specific way. So the customer could almost choose exactly how they wanted to buy the service and what kind of components that service should include. A very manual way and very, I would say, old-fashioned way of delivering service primarily to small and medium-sized companies. Today, what you would do is that you standardize the service and then You would sell exactly that service to the customer very similar to a public cloud solution that you would buy a pre-packaged service And that's one of the complexities that we have another one would be that when we started with managed services There were many there wasn't too many suppliers that offered a service that was suited for small and medium-sized businesses So we started to produce some of the services ourselves now you can see more and more suppliers able to supply that service. And then us as a reseller, which we are in our heart, we can move to become resellers rather than producers of services because producer of service is not really, I think, our main focus. We do it when there is a lack of service to provide to our customers. But if there are services to be resold, we can do that.

Okay. What type of service could that be where you can go from producing to reselling?

That could be infrastructure services from data centers. We could run our own data center so we can buy the same service maybe from HP or someone else.

Is this primarily the Benelux region or is it across all countries? It's across all countries for sure. Okay all right moving on to the one of cost or 7200 million in cost to achieve this. I guess most of it or all of it is cash related right? Yes most of it for sure there might be a few right now but not significant. Will you take them the coming four quarters gradually? in the same amount every quarter or will it be more front-end loaded more now in Q1 Q2?

I think it will follow the changes in the implementation of changes in the organization which I believe will happen during Q2 and Q3 and that's I think that's where you will see the most effects. If it's the same number in Q2 and Q3, I don't think we are able to tell you that right now.

There will be some effects already in Q1 as well, I would say.

I'm also curious about the ERP system and the online platform where you are, that you can provide an update on those two.

Happy to. We have launched. the platform a couple of weeks ago. It works well, I would say. Of course, there are, as usual, a lot of issues changing ERP systems, but system works well. We're trying to get used to working in a new environment, working with new ways of working, and everything has changed. So that's a bit confusing to start with, but we're making good progress. We're delivering products. Demand is okay. Sales is okay. So it's like it works well. Customers are onboarding to the new e-commerce portals, the larger customers, and we're starting to make progress there. That's our ambition that in the next one or two quarters to move all customers to the new portals. And a new portal is basically a customer-specific website, you could say. So it's the larger corporates, they will have their own store, web store. And there we believe that that's one of the biggest benefits of the new IT platform is that we can sell to the larger customers in a more efficient way by using their customer specific portals. And that work is in progress.

Okay, and how long does it take to move over fully? So this is across all countries, all products, all customers?

We have started with Benelux and we will move it's like three steps we'll do Benelux now in the ERP side then we will do our two warehouses on new system support and then we will do the Nordics upgrade on ERP most likely a year from now approximately that's continuous work.

Will you also have the same amount of capex related to the platform and platform investment that you have had now for a couple of years?

What we have said before is that this year will be the same but after that we believe it will come down because then the main platforms of the two regions are changed.

Is this according to your original agenda and plan or is it six months or 12 months behind?

We are still in our original agenda but the launches between the regions are tighter together than we had from the start so we are a bit later on this launch in the Benelux but we are remaining with the launch of the Nordics in the same because we can use more of the benefits from the Benelux in the Nordic region because we have coordinated the projects.

Alright, thanks for that clarity. Moving on to a couple of minor things maybe. The change of internal calculation related to the service offering, what is that about?

Hi, that is an adjustment for how we do what we call the standard cost calculations for services. But it's mainly also, like I said before, a bit of a correction compared to previous quarters where we had underestimated a bit the costs.

Okay, so are the costs moved or is it added new costs?

No, it's more a catch-up effect, you could say, compared to previous quarters. But going forward, we would expect to have the same level as we had in the previous, a little bit lower than we had in this quarter, so to speak.

So this is sort of an ongoing added cost?

No, it's an accounting effect, you could say, of the fact that when you work with standard costs, you do an estimate of what you expect the services to cost, and the underlying costs are a little bit higher. You go back all the previous quarters in this fiscal year, and then you get sort of a roundup effect at the end. We don't expect it with this.

Okay.

the effect becomes quite big in this quarter, you will not see the same effect in the coming quarters.

It's basically from a factory accountant perspective, it's under absorption of fixed costs in the system created by lower volumes.

Okay, I see. And my final question is, if I may, on the product mix, and if you can explain and maybe repeat how you can control the product mix in your SMB and LCB segments, if that is possible for you, or if this is just, I mean, driven, of course, by the customer demand.

Yeah. I think you have product mix in two dimensions. You have the product mix between, let's say, infrastructure and workplace, which is one mix. There we can influence the mix by adding specialists, I would say, in our own organization and focus our competence for certain infrastructure technologies to certain brands or certain technologies as said because there it's a lot about supporting customers so if we can support customers we can drive sales if we can't and it's much harder to drive sales in infrastructure products because you need more competence to sell that if you take more between the brands and the within certain product categories like PCs, for example. There, of course, in SMB, we influenced assortment to largely by campaigns or by availability. Because we know that if we have products on stock, that will sell better because the delivery time is shorter and the delivery accuracy is higher. So that drives sales by putting them in our warehouses. And of course, activation by campaigns are extremely important, primarily to the smaller customers. So there are different ways of influencing, depending on how the customer look and what they are affected by.

Okay. I was thinking about the product mix of framework agreements also. And if you can talk to us about that. Yeah.

The framework agreements are, of course, it's up to us to decide where we believe we can win and therefore invest in giving in tenders and try to win them. We know that we are quite cost-efficient when it comes to the logistics side and delivery of standard hardware, so that's where we have a great advantage to many of our competitors. What has come lately is that we are evaluating not only on the initial delivery of a framework, but also on what kind of added services can we then deliver on that framework agreement later on. So what kind of services do the customer require in the coming years? That has had a bigger effect now on the choice of framework agreement that it had a couple of years ago. For example, take-back is an important part of a framework agreement nowadays. It could be quite a high proportion of total profit that comes from take-back. That was not the case a couple of years ago, of course, when take-back was not really existing.

Okay. Can you say something about and quantify maybe the proportion of sales coming from new agreements right now?

Well, you can say that on average, the contract is four years. So on average 25% of sales should come from new contracts and this year that share is slightly higher. And then what happened between the quarter is that if you have larger let's say rollouts particularly in education that affects the Q4 much more than the other quarters in our case so that then you will have a higher effect on that. as on a yearly basis it's about four years contract meaning 25% new and this year 12 months rolling the renewal of contracts is slightly higher than the 25%.

Okay so can you maybe help us to understand this more to be very specific and clear how we should think about the mixed effects from frame agreements in the next couple of quarters I mean this is maybe mathematics and maybe it's possible for you to give us some help.

I think you should look at it that it will put some pressure on on LCP margins but not to the extent of Q4 but new contracts will have that effect for I would say mainly one or two quarters but obviously This is kind of you layer in new contracts all the time. This is not like, say, one time a year when all the new contracts arrive. So it will be new contracts every quarter. It's more depending on the quarter and depending on the customer rollouts for that quarter, it will have slightly different impacts on the number. It's quite hard actually to predict for us because our visibility is quite low in our case.

All right. That's helpful. Thanks. Thank you.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Well, no more questions. Thank you very much for listening in, and I wish you all a really good day. Thank you.