Embellence Group AB (publ)

Welcome to the Imbalance Group Q4 2025 report presentation. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key.

The group and together with me today is Karin Lidén, who is the CFO. Today we will start to look at the business and what we achieved in the fourth quarter of the year. We will then look at the full year performance and how we're doing on our strategic focus areas. And since we are a group with strong iconic brands in the interior decoration industry, we will also look at some of our recent product launches. But first, let's dig into the business and our Q4 numbers. Q4 was a stable quarter where we delivered currency-adjusted organic sales growth of 1%. As we also highlighted in our last quarterly call, we continue to face currency headwinds mainly from the US dollar and the Great British Pound that negatively impacted our top line by 4%. All in all, delivering net sales of 195 million Swedish krona, which is down 3% versus past year. Worth noticing is the comparison number from past year where Artscape had an extraordinary one-time effect where they grew 51%, so the comparison numbers are heavily impacted by this activity. The numbers are also, of course, impacted by the FX rates, which Karin will shed some more light on later on in the presentation. In the quarter, our gross margin improved to 61.8%, up 1.1 percentage points versus past year, and it's sixth consecutive quarter above 60%. This was driven by positive channel and product mix, which means that we sold more from profitable channels, such as the D2C channel, and we've also actively worked with launching products that are more premium and higher priced. So all in all, stable margins above 60, which we can expect going forward as well. Our EBITDA decreased by 2 million in the quarter to 26 million Swedish krona, which mainly was driven by the negative FX rates. In the quarter, we continued our progress on our focus areas that are both important and necessary for us to reach our long-term targets. And these focus areas are the DTC channel, international sales, and the hospitality channel. Within these focus areas, we have initiated a limited number of targeted strategic initiatives that have affected EBITDA margins slightly. From a strategic perspective, these investments are necessary and can be grouped into three main areas. Firstly, it's linked to organization, where we have made a few selected recruitments at both group and brand level. Historically, the organization has lacked certain capabilities that are critical to executing our strategy. These recruitments are therefore aimed at strengthening the organization and better aligning our capabilities with our strategic objectives. Secondly, through systems and platforms. So to support our future growth, it's essential that we have the right foundational systems in place. We have therefore decided to implement new platforms to support our DTC growth. Three platforms have already been rolled out with the start of Papelina and Artscape during the summer and with Coal and Sun rolled out at the end of Q4. And we will follow this up with Boa Stapeto in the first half of 2026. The third area is our go-to-market models, where we have in selected geography updated our go-to-market models. In some key markets, we have changed our agent and distributor setups to better reflect the local market needs and improve commercial effectiveness, which is an initiative that will continue for some of our brands. All in all, these three initiatives, as well as the negative effects, have affected our EBITDA margin by minus 0.7 percentage points to 13.2%. During the quarter, we have improved our net results. We have improved our cash flow and we do have a strong financial position with a net depth in relation to EBITDA with 0.5 times, which is improved versus past year, leading to the board proposing a dividend of one and a half Swedish crowns per share, which is up from 1.25 Swedish crowns past year. And it's just 51% of our net income, just slightly higher than our communicated targets of 30 to 50% in relation to our net income. If we then move on to look at the sales highlights in the quarter, it was a mixed quarter where some of our brands delivered good results and where we have challenges specifically with Coal & Sun and Wall & Echo. So let's start to shed some light on the Coal and Sun business, where we deliver negative sales growth of 16%, where roughly half is driven by currencies. We are, of course, not satisfied with the commercial development of the brand, and we expect a lot more from the brand long term. The brand will now move into its next phase with more focus on DTC, international expansion and sales within the hospitality channel. And we have for this recruited a new managing director, Jelena Ford, to lead this iconic brand going forward. Jelena comes with strong track record from both brand building and commercialization, and she will start in May. The recruitment of a new MD is the first wave of actions, and we are, of course, not waiting for Jelena to join to take additional actions. So we have launched several commercial initiatives which will affect the business short term, but in the long term, it will deliver both increased sales and gross margins. These are the right decisions for the brand, and we will continue this work in the near future to be able to turn around the business and deliver on our long term growth strategy with new management in place. Wall and Echo is also facing challenges with negative FX rates, but we also see that the Italian home market in retail is not performing and neither is the German market. We are making progress in the hospitality channel, but we cannot offset the negative sales growth coming from the retail market in Italy and Germany. We are working on several initiatives to strengthen the business and in Germany we have chosen to change agents during the year and we have strengthened our sales teams with focus on international sales and hospitality to further build on the positive momentum from the hospitality channel. Borås Tapeter continued to deliver growth for the fourth consecutive quarter and grew with 9% in Q4. For the brand, we have improved the DTC offering with more print-on-demand products, as well as launched a few new collections and designs, which I will share some examples of in just a few minutes. Looking at Ortscape, we delivered minus 25% in the quarter, but the brand did have a good underlying double-digit growth in the quarter, if we exclude the one-time effects from past year, as well as the big effect from the currencies as previously shared. Papalena delivered another quarter with slight sales growth, and we do see a stabilization of the sales after the week start of the year. Before the summer, we moved the office from Falun to Borås. During the summer, we launched a new DTC platform. And after the summer, we got the new MD and leadership team in place. All in all, we are starting to see that things are going in the right direction, specifically linked to the DTC, where the brand jointly with Artscapes are performing above 40% growth rate versus past year in Q4, a development that we see will continue in the next near quarters. Borås Tapetfabrik continued its positive trend and made progress in the quarter. Our ongoing commitment to product innovation and quality development has yielded positive results with 29 million SEK, a growth of 19% compared to past year. We continue to take market share in a tough market and more collections and designs are placed with us, which is a testament to the high quality work that we are delivering. We are committed to deliver high quality products and high service levels to both internal and external customers. And to become more effective, we have during the year invested in a new and effective color kitchen, which has helped deliver efficiencies. If we turn and look at the annual numbers, we do see that Borås Tapetor are growing with 5% and has grown in all quarters during 2025. We see growth in basically all markets and with the strongest development of the brand outside of Nordic, building on our strategic choices. This is a development that we expect to continue to see during 2026. Colin Sun's 25 numbers are mainly impacted by FX rates in the weak UK market. As mentioned before, we're not satisfied with the commercial decisions the brand has taken, and we have launched several commercial initiatives that will help turn around the brand and start a new growth journey, which Jelena will lead as of May, and which I will manage in the interim period. In the table, you can also see Artscape's number from 24, which were heavily affected by the one-time effects and the tough US dollar. During the year, we have had good progress and intensified our work on the three selected focus areas, which will help us drive growth going forward. It's the DTC channel, it's winning with our brands internationally and increase our presence in the hospitality channel. While we are still in the early stages of building our DTC channel, we expect this channel to contribute more than half our total growth over the next three years. DTC is strategically important for us as it delivers higher margins, it acts as a growth accelerator for us, and it enables us to have a closer and more direct relationship with our consumers. During 2025, DTC sales grew by 18% currency adjusted, and it now represents 8% of brand sales versus 7% prior year. Our current focus is on establishing the core fundamentals. We implemented a new online sales platform from Papilena and Artscape during the summer. These were the first brands to go live on a new platform and have shown very strong early performance with growth of more than 40% in Q4 following the implementation. Levels that we expect to see going forward as well. We continue the rollout with Colossan ending Q4 and Borås Tapeto is scheduled to launch in the first half of 2026. In parallel, we are expanding the portfolio with more DTC focused products with additional launches planned in the 2026, which also will help drive sales in the channel. To support the development, we have also strengthened the organization and continue to invest in digital infrastructure, content and talent. And together, these actions are laying the foundations for DTC growth that is scalable and increasingly material to the group over time. International sales is another area of great importance for us, and we have delivered growth in all of our biggest exporting markets, including the important market in the United States, which is a sign of strength for us, and it perfectly fits with our strategy. We are strengthening the international sales teams and gaining stronger control, and we're working actively on refining our go-to-market models in selected regions. And in some areas, this involves direct engagement with key accounts and deploying dedicated sales representatives, while in others, we are evaluating and restructuring distributor-agent relationships to enhance market success. The third area is to increase our presence in the hospitality channel. It's a strategically important channel for us, both as a growth driver and as a way to strengthen brand visibility and long-term relationships with professional customers. Over time, this channel creates scale. It creates repeat business and strong references that also supports growth in other channels. During the year, we have increased our focus on the hospitality channel, and this enhanced focus is starting to pay off with small growth in the channel, although it takes a bit more time. To support this development, we have reinforced the organization with clear responsibilities and dedicated resources, ensuring that we can engage more proactively with architects, designers and project partners, which has improved both our speed and quality of our execution. At the same time, we have strengthened our service offering with better project support, clearer specifications, and more professional approach throughout the customer journey. This makes it easier for hospitality customers to work with us and increase our competitiveness in larger and more complex projects. If we then move on and look at some of our products and brand highlights, starting off with Borås Tapeta, where we continue to strengthen our DTC business by expanding our range of digital print-on-demand products. Approximately 60 new articles were introduced between September and December by scaling selected signature patterns into larger, more expressive formats. In the quarter, we also launched a few co-op designs and on the picture in the top left corner, you can see the Alva Aalto 14-6 wallpaper, which was pre-launched in October. It's a timeless graphic pattern from the 1940s, which is a part of the Scandinavian designer collection launched now in February. We also launched a collaboration with a Swedish curtain atelier in November in connection with a press event in Stockholm. The sweet pea pattern that you can see in the bottom left is inspired by the English countryside, combining rural elegance with calm colors. And lastly, on the large picture, you can see the collaboration with Marie Mattsson, a nature photographer with focus on inspiration and deeper appreciation of nature. Marie Mattsson's most appreciated images are now available as photo wallpapers at Borås Tapeto. If we then look at the Papelina, we are broadening our assortment with reversible designs, which is a key design principle across most of the portfolio, which means that the rugs are offered in two color expressions and supports longer product life cycles. The products shown here are from the spring summer 2026 collection including Anja, Tom and Lea. The collection reflects a balance between traditional Swedish weaving and contemporary design expressions. All crafted in Dalarna in our weaving mill with certified materials developed for everyday use both indoors and outdoors. At the same time, we have iconic designs such as Vera, which we launched already in 2002, which continues to perform strongly, demonstrating long-term brand equity. Together, the balance between icons and new collections supports sustained relevance and growth over time. Recently, we have also increased our international presence through participation on more trade fairs, and we have visited Maison Objet in Paris, Ambiente in Frankfurt, and Shop Object in New York. All in all, to help strengthen the brand and reception has been good among visitors and business partners. Summarizing the year, it was a stable year where we grew organically by 1%. was affected by currencies with minus two percent we should note that also the 24 comparison periods was affected by two extraordinary effects from artscapes pipe fill orders making the comparison numbers very tough we increased our gross margin by 1.7 percentage points to 61.6 percent driven by product mix and channel mix and effects by efficiency improvements The EBITDA was mainly affected by the currency headwinds, and we did also invest in a few strategic initiatives in the second half of the year to be able to deliver on our long-term targets. All in all, delivering an EBITDA of 108 million Swedish crowns and a 14.1% EBITDA margin. Now, I'll hand over to Karin to shed some more light on the currency effects and on our cash flow situation.

Thank you, Johan. As Johan already mentioned, the currency impact has been significant during the year and increasingly so during the last three quarters of 2025. This picture explains our situation. And if we start at the bottom right, we look at the net sales by currency. Summarizing the net currency exposure of sales, we need to consider both transaction and translation effects. Transaction effects comes from exporting in foreign currency and translating when consolidating the group in Swedish kronors. As you can see in this picture, there are four currencies which are important to the group. Swedish krona represent around 40% of net sales exposure. Euro around 20%, pounds 21% of net sales and dollar around 17% of net sales. This means that the consolidated net sales number is impacted when CX strengthen, as we have seen it do over the past nine months. We are more impacted by a weak US dollar and a weak pound on a group P&L and a group profit level since we are net sellers in those currencies. We are also net sellers of Euro, but less so as the Borås Tapetfabrik purchase the majority of their raw materials in Euro. If you review the chart to the left, you see the development of these three important currencies during 2025 and the start of 2026. There is a significant negative development of all three, particularly US dollar minus 20% and pound around 10% lower than the start of the year. This resulted in a negative currency impact where translation effect alone was minus three to minus 4% during the last three quarters of 2025. the first quarter was actually positive compared to the comparison period one year ago. You can also see the continued development of these currency rates after year and we all see that they are significantly lower than the same period and the same quarter in 2025. Looking at the operating cash flow and net debt, we ended the year with a fourth quarter of operating cash flow of 42 million compared to 39 the year before. The leverage ended at 0.5 compared to 0.7 a year ago. The EBITDA level was almost at the same level, but the net debt has significantly decreased, ended at 68 million compared to 99 million a year ago. Both external bank loans and leasing has decreased as part of net debt. We see an improved net profit level, positive cash flow, and we have a low leverage. And this leads the board to suggest a dividend of 1.5 Swedish krona compared to 1.25 a year ago. And now I hand over to Johan to summarize.