Embellence Group AB (publ)

you very much and welcome everybody to ambulance q1 report my name is juan onion and i recently started as the ceo for the group and together with me today is the group cfo calling lydian so let's look then at what we achieved with the business during the first quarter of the year it was an overall good quarter despite the fact that we had a negative sales growth of six percent driven by the artscape business, which we knew would decline in Q1, and which we also flagged for in the last quarterly report. In fact, the artscape business declined 21 million Swedish krona versus last year, and I will shed some light on two extraordinary one-time effects later on as well. On the other hand, our two largest wallpaper brands, Borås Tapeto and Kolen Sun, both grew for the first time in some time. where the new collections were well received by the market. What also grew and have done so over the past two years was the manufacturing business, which is still having momentum with 39% increase versus a year ago. We are seeing other players decrease in the segment, such as the list of Sanderson Group in the UK. So it's of course good to see that our business keeps delivering. All in all, these efforts have helped deliver the overall sales for the group at 202 million Swedish krona, down 12 million Swedish krona versus a year ago. What is also good to see is that we continued our journey on improving our gross margin to 62%, up 3.7 percentage points versus a year ago. This was driven both by mix effects between brands, by product mix, and by manufacturing efficiencies. We are continuing to make progress towards our long-term EBITDA target of 15%. And in the quarter, the total group's EBITDA margin landed at 16%, up 0.3 percentage points versus a year ago, delivering an EBITDA of 32 million Swedish krona, down 2 million Swedish krona versus a year ago. In the quarter, we continue to invest in design and marketing and sales activities, and we will continue to do this also going forward, specifically in Q2, which is a quarter with many activities and fairs such as Salone del Mobile. Now, moving on to our segment, starting off with the brand segment. Overall, the brand segment was down 9%, mainly impacted by two extraordinary factors at Artscape. For those of you following Mbalance Group and the Artscape business closely, you remember that we already last year in Q1 2024 talked about the fact that we had a record quarter driven by one of the larger retailers in North America following a launch of a new range. This has made the comparison quarter from last year extraordinary high. In parallel, we mentioned during the last quarterly call that there was another one of these larger do-it-yourself retailers in North America. who placed an order for Q1 already in Q4 last year, affecting the overall Q1 numbers negative. So if we look at these two quarters in isolation, the business grew 57% in Q1 2024 and 51% in Q4 2024 versus past years. And now the business in Q1 2025 declined 46%. So you can clearly see that it's a facing effect. So these two extraordinary factors, which we knew would happen, is driving the negative sales numbers for Artscape, affecting the overall group numbers. The Q1 numbers for Artscape is not to be seen as a new trend. We rather believe that the Artscape business will return to growth in Q2 when looking at the factors that we are in control of. With that said, one thing that we do not control is the tariff situation, which of course is affecting many businesses and also ours, of course. For us, this will rather be more on an overall consumer purchase power level and on hesitation from the retailer segment in stocking inventory than from actual tariff percentages impacting the P&L directly. As mentioned briefly, our two largest wallpaper brands, Borås Tapeto and Colon Sun, both grew for the first time in some time. We are happy with this development, although some of this was driven by a phasing effect of Eastern, which will impact the Q2 numbers negative. There was a positive product mix effect, which improved our gross margin, which I mentioned before. It grew 3.7 percentage points for the total group. And what is important to understand here is that when the ArtScape's portion of the business declines, as it did in the quarter, the overall margin will increase and vice versa. Now, moving over to the manufacturing segment. The strong growth continues and the business has grown for the last two years with new sales increase coming from both existing and new customers in both digital and traditional printing. Lotta and her team continues to gain economies of scale with larger volumes and is winning market share in a challenging European wallpaper manufacturing market. We have invested in both more capacity within the factory, as well as with new efficiency improvement projects, both linked to waste reduction and better color techniques. This will strengthen the overall quality of our work, which in return will attract more customers and more sales. Worth also mentioning is that we last year in Q2 onboarded a few new customers, which means that as of next quarter, we will start to hit comparison numbers that are more in line with current numbers. So we should not expect the same growth levels for Borås Tapetfabrik in the coming quarters. Looking back at Q2 last year, we sold for 24 million Swedish krona, which at the time was up 110% versus a year ago. And these absolute numbers of 24 million Swedish krona are in line with the Q1 numbers just reported of 24 million. So periods ahead will be more normal levels. The manufacturing unit's main objective is of course to serve our own brands and then also serve external brands with the help of that, we will gain economies of scales. But a portion of external manufacturing is just about 10% of our total business, so yet very small. And now going forward, we will start to see more stable numbers and not the increases we have seen for the past 12 months. If we then go into sales by segment and brand, we see that Boa Stapeto returned to growth and both Sweden and several of the largest retail markets in Europe stabilized. Coal and Sun also delivered strong performance in the important UK home market and also internationally. Wall and Deco didn't manage to come up to last year sales driven primarily by the weaker home market in Italy. And looking at our rug company, Papelina delivered growth in the whole market of Sweden, but the brand did not grow internationally. With this, we're not satisfied with the development and we believe that there is more upside. And because of this, we have decided to implement management changes to drive our commercial efforts in the Papelina brand more successfully. since we are a product company it is always good to get a bit of look and feel of what we are actually doing starting off with colon sun 2025 is a very special year since we're doing this year is celebrating 150 year as a brand colon sun was founded 1875 during the victorian era and during a time when wallpaper became increasingly popular as a decorative element in middle and upper class homes The brand has since then become known for quality and style and are seen in various famous historical buildings, such as the Buckingham Palace and the House of Parliament. Throughout the year, we will celebrate the history of the brand with new collection drops, such as this new classic collections launched at the London Design Week in March. This jubilee collection is the first of two classic volumes comprising of designs that have lived in the archives since the brand was founded in 1875. The traditionally printed motifs are a triumph of British art and craftsmanship, providing a window into some of the most enduring and inspiring designs of the last three centuries. On the picture here, you see the bamboo forest, which is a testament to the popularity of the Orientalist style during the Victorian period. Moving on to Borås Tapeto. for Borås Tapeter 2025 is also a special year. Not as special as celebrating 150 years as Kål & Sand, but Borås Tapeter is celebrating 120 years as a brand. So we will tag along to the anniversary celebration also with this brand. The historic brand dates back to 1905 when Valdemar Andrén founded Borås Tapeter with his vision that All Swedes should be able to afford to create a more beautiful home with the aid of wallpaper. We are proud of the fact that for more than 100 years, we have been producing wallpapers that reflect contemporary taste, yet have long lasting value, both on the walls and in people's minds and hearts. During the year, we will have a number of activations such as this beautiful Valmo collection showed on the images where you see both several different colors as well as designs. The design was launched at the Jubilee Design in February, both as a traditional print and since we are seeing an increased trend with digital printing and made to measure products, we have also done an extra large version with digital print to serve a broader group of consumers. Yesterday, I had the pleasure of walking into the archives of Borås Tapeter with Sissa, who is the head of design for the brand. We looked at some of the 8000 designs that we have in the archives, and she explained to me that when they found the Valmo design, all the designers in the group were fully convinced that this was going to be the hero product for the 120 year celebration. The collection is created from an original design from the early 1900s, when Art Nouveau patterns were popular. At the time, there was a strong desire to move away from the dark, heavy patterns of the past and embrace something new. Art Nouveau was fresh, modern design, often inspired by nature. Valmo, which is a Swedish word for poppy, is a beautiful example of how a historical pattern can live on and how it connects us to people who lived more than a century ago. It was also interesting to see that it was not the first time when this was reprinted and used from the archive, but it was also used during the 70s, which also shows that a truly great pattern never goes out of style. It can continue to bring beauty and character to modern, sustainable homes for generations to come. Simply just iconic. 120 years of craftsmanship, creativity, passion and inspiration from this wonderful brand. And still today, our ambition as a group is to impact our surroundings through the power of design. Moving on to Wall & Deco, which I personally had the pleasure of getting a touch of at Salone del Mobile. I visited a fair in early April and met with the Managing Director Gianluca in order to get the first glance of the industry and of Wall & Deco. It was an overall good fair with many visitors and exhibitors and Wall & Deco had satisfying traffic in both the booth where visitors showed much interest in the different products and designs that the brand offered. During the fair, Wall & Deco showcased a number of different products and designs, and one of these was the DecoDura technology. This is an eco-conscious innovation replacing the vinyl with biovin, which achieves almost 50% lower carbon footprint compared to original wallpaper substrates, aligning with our commitment to a greener future. It's a significant shift towards sustainability without compromising on the look and feel. And what was also good to see was that depending on the requirement, it comes with different finishes. So you can get a texture and a smoother surface if you want that, depending on the needs. Another product innovation that Wall & Deco is very proud of and showcased is the AquaBalt, which is a waterproof wall covering dedicated to bathrooms, showers, kitchens, spas, any basically wet area. And I learned during the fair that we've sold over 24,000 shower installations in more than 80 countries across the globe. These two product innovations are examples for how product innovation in parallel with strong designs will make true impact on consumers. Now handing over to Karin for some more insights on the financials.

Okay, thank you, Johan. A bit more look at the numbers. Summarizing the quarter, despite negative sales growth, we delivered a strong gross profit of 62%. The margin, as you once said, was high thanks to brand mix where ArtScape had a lower share of sales. However, apart from that, we can see that the same underlying positive factors that we have reported on during the last few quarters remain. We have a positive product and channel mix and increased manufacturing efficiencies also this quarter. The EBITDA margin of 16% is high following the high gross profit. We continue to invest in product development and sales and marketing activities to fuel growth. The net profit of the period was 24 million kronor compared to 16 last year. Sorry. The finance net was positive 1 million and that's the main reason for the improvement in the net profit. And it's both the lower level of debt And with that follows low level of interest, as well as the positive revaluation of financial items in foreign currency that contributed to that improvement. The operating cash flow was 5 million kronor compared to 14 last year. And if you read the cash flow statement carefully, you will see that the other items in the cash flow were negative. and that is mainly due to revaluation of balance sheet items. And to continue, I am very content that we, during April, managed to conclude a new finance agreement with the leading Nordic bank. I have been wanting to refinance for some time now. The former agreement was not good. It's a few years old and not competitive, in terms and conditions were not up to date. The new agreement will give us both better terms and better flexibility. And this will, of course, lead to lower costs over time. But I don't expect to see this currently in the next few quarters as we have a very low leverage at the moment. So if we go back to the numbers shown in the graph, we have a stable operating cash flow above 100 million kronor on a rolling 12 basis and our leverage is 0.7 times EBITDA. Looking at the long term net sales and EBITDA development. We see that rolling 12 sales is 766 million kronor. And despite the somewhat lower level of sales in the quarter, EBITDA reached 32 million and the margin 16%. And that's the highest we've reported during the last two years. And sorry for my voice. I hand back to Johan for a conclusion and summary.

Thank you, Koen. So in summary, In the quarter, we grew with our two largest wallpaper brands, Borås Tapeto and Colon Sun, whom both are celebrating anniversary years with 120 years for Borås Tapeto and 150 years for Colon Sun. Both brands launched new collections with a classic collection at Colon Sun and the Valmo collection at Borås Tapeto. The artscape business declined during the quarter, driven by two extraordinary one-time effects, which impacted the overall sales for the group. The manufacturing segment continues to deliver strong sales, although we will not see the same growth numbers as of next quarter, because we will meet harder comparison numbers since we onboarded a few larger players in Q2 of 2024. We grew our gross margin in the quarter by 3.7 percentage points, driven by brand and product mix and by manufacturing efficiencies. And we continued making progress on the journey towards our long-term EBITDA targets and grew the EBITDA margin to 16% in the quarter, up 0.3 percentage points versus a year ago. we have secured a new bank agreement with more flexibility and better terms and although we will not see the effects of this in the near future we have secured a much stronger agreement with more flexibility than the one we had before now also looking ahead a bit first and foremost i am very glad to be on board the business and eager to get started and continue the journey of ambulance group I think it's a good opportunity for me to join with a clear and overall good strategy in place, which was communicated on the capital markets day last year. And with sound finances, which provides good ground for further development of the brands and for the total group. I will come in with a lot of energy and with a growth focused mindset, not only on the DTC business and the hospitality, which are two focus areas and where there is plenty of room to grow, but on all aspects of the business. We will continue to focus on building the five brands in the portfolio with both strong product innovations and pipelines, as well as continuing to be very focused on the design and unique identity of every brand in the group. And this is not just about a logo or a name, but this is about true branding. It's about the emotions people associate with us. It's the feelings they get when they walk into a room that we have transformed. Our brands will tell stories, they will build trust, and they will let clients know that we don't just sell wallpapers, window films, or rugs. We actually help people shape the spaces they live and work in. When our brands are clear, consistent, and memorable, they will set us apart in a crowded market and consumers in return will grant us with their loyalty. This we will continue to focus on in order to achieve profitable organic growth. Our brands can and will definitely become bigger. And what I've learned over the years is how a strong company could be when focusing on the right areas with the right people. It is natural that a smaller brands don't have all the expertise needed in all areas of the business. And in order to help with this, I will make sure that we centralize certain activities to free up time for the brands to focus on what they are truly good at, which is working with brand building the designs and the go to market strategy in the local markets. And with that, we will go over to Q&A.

To ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Alice Beer from ABG Sundahl Collier. Please go ahead.

Good morning and welcome you onto Ambulance Group I'm covering for Benjamin today. We asked the previous CEO, Ole Svensk, about the DTC share on numerous occasions. It must have been in the last appearance in this forum that he said he would not comment, but let the next CEO decide whether to communicate this figure.

so question is what is your stance and what is the d2c share for say buros thank you very much for for the welcome and for the question the size of the d2c business is not something that we are sharing at the moment but i what i believe that maybe you guys are looking for is if it's room for the d2c business to grow And on that question, I can answer that the business is small yet growing, but we still have lots of room to continue to grow. And this, of course, is also part of the long-term strategy for the group as shared on the Capital Markets Day. And I believe that is a good strategy and something that we will focus on going forward.

All right. Thank you for that. And another question for you, Johan. As the new CEO, what are the items on top of your to-do list coming in?

Well, first and foremost, I think it's very important to get to know the business, get to know the organization. And then as of then starting off with the strategy, which is good. So focusing on organic growth will be the number one focus for me going forward.

All right, thank you. And then on the gross margins, they were higher than ever before. Could you give us a bit more flavor on why and whether you expect this level to remain throughout the year?

yes i think on the gross margin it was a strong quarter and i think it's important to understand a bit of the brand effect that they said the brand mix effect that this has so when artscape's business is declining as it did in the quarter the overall margin will increase and vice versa so Going forward, if we see that the artscape business will continue to grow, which we believe it will come back to growth in Q2, we will see the margin go the other way.

All right. Great. Thank you for that. And last question. You write about signs of stabilization in the markets. Could you be more specific as to what you're referring to here?

I think in the Q1, we've seen a bit of stabilization linked to the retail market. So both Borås Tapeto and Colon Sun went back to growth, which is good. At the same time, there is still a lot of uncertainty in the market. We also saw some numbers on the consumer confidence index, which has been lower. So it's very uncertain times ahead, although Q1 was was the quarter where the two larger wallpaper brands went back to growth.

All right. Well, thank you. That was all for me.

The next question comes from Marcella Klang from Handelsbanken. Please go ahead.

Good morning and congratulations on the solid first quarter in the year. Great, Johan, that you are on board. A couple of questions. First impressions after the first couple of weeks. In your opinion, what are the main areas of potential in ambulance and the main challenges that you have been able to see so far? Thank you.

Thank you very much. It's actually not a couple of weeks. It's actually only two days. So I started last Friday. So of course, we limited amount of time. I've seen so far, I think the what's important to understand is that the business is solid. So we have solid finances, which is good. There is a very good strategy in place. So I think it's a very good opportunity for me to join. I think the strategy is good. It's clear and obvious where we need to focus and where we should focus. And in those areas, there is also plenty of room to grow. Yesterday, I was down in the archive. So I think it's also very good to see that You know, Borås Tapeton, Kål & Sand, two very historic and iconic brands with lots of heritage and many years as brands. There's so much good potential within these two brands. So it's, of course, a lot easier to build and grow these brands when there is a good foundation in place, which these brands have. So lots of room to grow.

Thank you. Another question regarding the external manufacturing. I am under the impression that this area, growth in this area is positive for group margins. Why not push more growth in external manufacturing? Is it a question of capacity utilization in your factory or can you give us more thoughts on this area?

No, of course, we would like to grow as much as we can on this part of the business. And we have invested in additional capacity also on other techniques, such as the color technique. We have done investments in waste reductions, et cetera. So for us, it's not about hindering the growth. It's more about attracting the growth. So the wallpaper manufacturing market is very crowded. There's a lot of competition. we are seeing that the growth numbers that we've seen last year. So in Q2 last year, we onboarded a few of these new players. And since then, the business grew very heavily. So Q2 last year grew 110% versus a year ago, Q3 95% versus a year ago, and Q4 63% versus a year ago. So the growth numbers are are very high. So now we're meeting those numbers. We expect the business to grow slightly, but not at the same levels that we've seen before.

That is clear. And there is still free capacity in your factory if you were to find more players interested in your manufacturing.

Absolutely. There is plenty of room to grow on capacity.

Thank you.

That's all for me.

Karin here again. We have received one question and that is also regarding the gross margin and it's from Adam. Could you please help us to flesh out the gross margin and what to expect going forward? What is due to product mix and lower sales of ArtScape, etc.? ?

So when it comes to when it comes to the gross margin, there are basically three factors affecting it. One is the brand mix where the art state business is affecting. The other one is product mix within the brands. And the third one is on manufacturing efficiencies. all these factors are affecting the gross margin. So we should not expect to be on the levels that we are now, but we should see the stable growth levels that we've had during the last couple of quarters, slightly above 60.

Okay. I think that was the last question. Thank you so much for listening in and