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.