Embellence Group AB (publ)

Thank you. Welcome, everyone, to the Q1 2024 report of Ambulance Group. My name is Olle Svensk, and together with me today is Karin Lede, CFO of the group. So essentially, Q1 highlight is that we had a very strong start of the year. Our net sales amounted to 240 million, which is a growth of 8.5% versus previous year. it's actually our strongest quarter ever and especially us is the driver behind this edita amounted to 33.6 million which is 24 percent more than last year and this is also our strongest quarter ever reported edita margin reached 15.7 percent and it was leveraged in the business and economies of scale and also with a good product mix All this while we continue to invest in product development and not the least in marketing and sales efforts in the quarter. Operating cash flow reached 14.4 million, which is much better than last year and mainly driven by an improved operating result. And I really want to share some highlights from the quarter, and it's been a very exciting start of the year with strong sales and marketing focus. As I mentioned, the Q1 this year was our strongest quarter ever, and we grew 8.5%. But first quarter is also an important fair period in this industry, in the interior decoration industry. Among many fairs, we have Maison Objet in Paris, Dekhoff in Paris, and Ambiente in Frankfurt. And at these fairs, our brands launched several new collections like Colin Sands' selection of hummingbirds, which is a celebration to one of Colin Sands' really design icons. At Wall & Deco, Laurence Decodura at Maison Objet in Paris, which is actually the world's first fossil-free vinyl wallpaper. And Papelina presented the elements collection with updated colors on some of the bestsellers. And of course, I also want to share some pictures of the high activity level we have with our brands during the quarter. So, Maison Nobier Wall & Deco used to showcase the 2024 indoor wallpaper collection, as you can see on the picture here. And more importantly, we launched Decodura, which, as we say, is a new paradigm in wallpaper. It has all the characteristics kept like on the previous material, but we have like the same fire rating, the durability, but it also boasts a reduction of carbon footprint with 50%. So it's really a perfect solution for hospitality where sustainability matters. Colin Sun launched the selection of hummingbirds at DECOF in Paris. It's actually a design that originates from 1780s, and it's a collection with both textile and wallpaper. But we also delivered a number of our own initiatives to continue to build our brand portfolio and to drive sales growth. Among many initiatives, we had the first Jubilee Place Day Salon held at Colin Sun's flagship gallery in London, where design talks with industry leaders in interior decoration. In Stockholm, Colin Sun hosted an event to celebrate almost 150 years of its craftsmanship, all the way from hand-blocked printing to hand-painted designs. And for our largest brand, Borosta Peter, it has been, and it is a very successful launch of Orangerie, a botanical, beautiful collection with several contemporary wallpaper designs. And last but not least, I really have to mention that again, we've won several projects in hospitality in the US, in Germany, in Italy, but also in Algeria and Morocco. And here are a few pictures that I really want to share with you. The first salon Col & Son had here during the quarter, and it's the first one of several. And you know, the ambition is to showcase that Col & Son is the center of gravity when it comes to luxury interior decoration. There was a lively panel discussion with leaders in the design world, discussing space in interior design. And it all happened in our Kohl's flagship gallery in London, in Chelsea, London. In Stockholm, we had the celebration of almost 150 years of Kohl & Son craftsmanship. And as you can see, also well attended event. It was held at Hotel at Hem in Stockholm. And for Borås Tapete, here is a picture of Orangeri Collection and more importantly this Citrus Garden design. And I'm personally not surprised if this is a future design icon, as it has been really well received everywhere, I would say, but not the least internationally, especially in the US. And Wall & Deco won several projects during the quarter, and this is one that has been installed in Germany, where we actually were able to both win, produce, and it got installed during the quarter. So also a very important growth channel for us is the hospitality and project business. But now, Karin, now over to you to tell everyone a little bit about our financial performance.

Thank you, Ulle. Looking at the financial, as Ulle said, we're proud to report 214 million in sales and almost 34 million in EBITDA. The sales growth of 8.5% was primarily organic. It's 7.8% organic growth and 0.7% currency impact. The gross margin 58.3% was stable compared to 2023 full year, but a step up compared to the same quarter one year ago. The EBITDA margin of 15.7% is a sign of the economy of scale potential when sales grows. Operating cash flow was 14.4 million, which is a clear improvement compared to prior year when it was 2.2 million. The improvement in cash flow from operations is the main reason. The operating capital increased since accounts receivable grew in the quarter. If you look at the trends, Rolling 12 net sales increased from 740 million to almost 760 million for the last rolling 12 period. The EBITDA margin increased to 15.7%. And finally, from finance, we look at the sales development by region. We saw a continuous cautious demand in the Nordic region and we had a decline of 5.5% or a sales of 78 million. The market is still cautious and we had a slow start of the year but also an effect of the early Easter in the Nordic region. Europe was more stable year on year with 65 million of sales We see especially good sales in the hospitality segment and also some positive signs in Italy and UK. The demand in Germany and France was a bit weaker. And as Olle already mentioned, we had a record in the rest of the world reporting a sales of almost 72 million, a growth of 41%. The sales in U.S. was particularly good. Brostapeter, Volandecco and Artscape all contributed. But of course, the launch of the new assortment in Artscape contributed well. And back to Olle again, looking a bit ahead.

Thank you, Karin. So as I hope really comes across, we have a positive vibe and momentum across all our brands in the company. Yes, there are still some markets that are a little bit uncertain, but we will continue to drive strong product launches at key events as we did in the first quarter, but this is also happening here in the second quarter. Contained input costs and really good work at Borås Tapetafabrik when it comes to production efficiency helped the performance there as well. There are some There is still an uncertain consumer market, especially in the UK and Sweden, but we have many initiatives underway to perform better than the overall market. And I'm really excited to share with you our updated strategy at the upcoming Capital Markets Day on May 21st in Stockholm. To sum all this up then, so again, strongest quarter ever and with the US as the best performing market. net sales amounted to 240 million which is up 8.5 percent and this is the third consecutive quarter with strong organic growth the beta margin reached 15.7 percent the economies of scale and improved product mix helped that and we continued in the quarter to focus on product development and marketing efforts to drive sales strong operating cash flow improvement compared to last year and exactly what we said also when we had this course last year. And the focus ahead then. We are prioritizing organic growth. We are prioritizing an improved cash flow and good profitability. And we have a laser focus on executing successfully key product launches ahead. So I invite you all to register for the Capital Markets Day on May 21st in Stockholm, where we will share more of our updated strategies. Thank you. Now over to see if there are any questions.

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 pound key 5. 6 on your telephone keypad. The next question comes from Felicity Janek from ABG Sundal Collier. Please go ahead.

Yes, hello. So this is Felicity at ABG Sundal Collier covering for Benjamin Wahlstedt today. So congratulations on a strong result and I have a few questions here. So the first relates to the very strong rest of the world development. Part of this strong performance is attributed to Artscape's launch of a new range, and part is attributed to strong momentum for other portfolio brands. Could you share anything around the contribution from each part?

No, not in detail more than that. Yes, in the rest of the world, it is US that is the majority of the growth, even though it's not all. And from a brand point of view, a large portion comes from Artscape. But Wallen Dekko and Borås Tapeter also performs really, really well in the quarter.

Okay, thank you. Understood. And so my next question is in Q1, you have been around to several trade fairs. And this might be kind of a tricky question to answer, but could you share any indication on how your designs have been received?

I mean, the short answer is really well received designs, both the Coal and Sun launch that took place in Dekhoff with the celebration of hummingbird, but also Wallen Dekhoff some designs really as far as our our customers are concerned has the potential also to be you know kind of iconic designs and signature designs for the brand but more importantly for wall and deco is the decodora launch with a new material that reduces carbon footprint with a 50 and that has been really really well received across the markets i would say thank you

And so also previously you have shared some data points on your e-commerce expansion. Could you maybe talk a little bit more about the launch in Germany and Austria?

Yeah, previously this is for Borås Tapete. Until now we have only had Borås Tapete in the Nordic countries, but now we launched it in Germany. in Switzerland, I think actually in Belgium and France as well here in April and that will continue.

Okay, and could you share any data points around your statement that the market trend is moving in the right direction?

I would say there was a cautious optimism across the fairs that we've been to Both in January and February, but also here in April, we participated in Paris in Milano and Las Vegas as well. And there is some kind of upbeat feeling. And also, you know, with all the comments and reception that we get from what we are launching, We are humble, but we are cautiously optimistic because we have really interesting things going on in the company.

Okay. Thank you very much. That was all my questions for now.

You're welcome. Thank you.

The next question comes from Kari Rinta from Handelsbanken. Please go ahead.

Thank you, Kari Handelsbanken. Surprisingly, I'm also interested in the rest of the world and the US. So, 21 million increase in sales compared to last year. So, it would be very helpful if you could split that between ArtScape and Brødstabautel and Wall and Deco. So, is the majority of that increase ArtScape or should we think about that?

A large portion is ArtScape, yes.

Okay. And then the ArtScape is a very US-based operation. So you have the manufacturing and you have most of your sales. But the Wall and Deco and Boros Tapeter, so those are manufactured in Europe and then they are exported to the US. So how exactly do you work there? Do you have some distributors that hold or how is your sort of channel strategy, distribution strategy in the US for the non-articulate business?

Exactly as you say, Volendeco is produced in Italy and Borosta Peter in Sweden. With Volendeco we have an agent structure and then with Borosta Peter we have a distributor that is kind of our prolonged arm in the market and covers entire country actually.

But is there any sort of change in terms of inventory management? So you record your sales when the distributor sells to retailers or when do you actually, when do you report your revenues?

We report the revenues of course depending on incoterms but we norm we have very little consignment stock so we normally report our revenue when we sell to the distributor when we ship the goods to the retailer or when we ship the goods to the end customer if it's an e-commerce transaction and when it comes to hospitality or project sales We record the revenue when it is shipped from our, because then we don't have any inventory at the distributors. We record the revenue when we ship to the project.

And I think if I can elaborate a little bit further there, I mean, for Vålendeckon Borås tapeter, normally they are typically they are very low inventory levels. And I mean, for Volant Deco, there's none. For Brostapeter, there might be a little bit, but we have a very short lead time on all our items.

Okay. So in our case, there might be some, since there is a new collection, there might be some pipeline filling the retailers, building some inventory, but in Brostapeter and Volant Deco, it's more good sales rather than someone building inventories.

I mean, with Artscape, it's important to remember what we said in Q4, that we saw they were taking down stock and reducing inventory levels in front of the launch that happened here in Q1. And exactly as you say, with Wolendekko and Bråskapeter, it's not the same thing, I would say.

Okay. All right. That's very helpful. And then one of your last comments, prioritizing organic growth. Does that have any implications on your... I mean, okay. Prioritizing organic growth means that you're prioritizing organic growth, but is it a clear stepping away from acquisitions or...

No, it's not a clear stepping away. I mean, what we are saying and what we have been able to deliver now for three quarters is strong organic growth. And we have a fantastic portfolio already today with strong brands that we see we can do more with. But you're invited, as you know, to come to our Capital Markets Day on May 21st and we can elaborate further on this.

I will see you there. Thank you very much.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more phone questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

And we have received a few written questions here in the chat function, and the first question is, or several questions are around the rest of world and the US development, so I will ask Olle about the Artscape launch in Europe. It should have been done now. Do you have any comments on that?

Yes, the launch has been done. And as I commented before, it goes much slower than we expected. The Artscape sales last year, and especially in this quarter, has been strong in North America, US, Canada, and also Mexico. But Europe is still very small numbers, I have to say. And then another question here regarding this is, can we expect this strong performance for Artscape also in the coming quarters? For how long time can we expect this product launch effect in Artscape? We have the delivery as we have anticipated during the first quarter, actually in February. The first... orders we received in April to replenish the inventory, which was also according to plan. But of course, this was the stock reduction that happened in Q4 and then a stock buildup in Q1. But replenishment is already happening since a month ago, a little bit more than a month ago.

And then finally, how much reduction in rest of world sales should we expect after Q1 boosted?

How much reduction in sales rest of world should we affect after?

And last year in, I mean, Q1 was, we don't give projections at all, but Q1 was a record quarter for us considering the Q4, Q1 effect. But as Olle said, replenishment is ongoing and demand is good for Artscape. No further questions so far. I hope everyone has gotten their questions answered. And I thank you so much for listening in. today. Any final words, Olle?

No, as Karin said, thank you so much for participating and looking forward to meet you soon again.