Fagerhult Group AB

today. With that, I hand over to you, Bodil. Please go ahead.

Thank you, Magnus, and welcome everyone to this Q4 2024 webcast. So during Q4, we continued with a very high focus on cost control and cost reduction, as we are still not satisfied with the operating result. The fourth quarter was not in line with ambitions and it's caused mainly by the slower market conditions. So in Q3, we reported on restructuring programs in three entities, and we are reinforcing cost control in the whole group to right-size the business to the current slower market conditions. We see these activities continuing through the first half year of 2025 and they will gradually benefit our results. We have decided to close the Dubai entity of the Fagerholt brand, which is part of the cost reduction in Fagerholt brand. And this will improve the operating margin in business area premium. I want to point out that this is not affecting any of the business area collection brands in the region, which are operating successfully. So as a group, we still have a strong presence in the Middle East region. On the positive side, Q4 showed a higher activity level than Q3 in both higher order intake and higher net sales. We continue to see big swings in order intake between months business areas and brands. And this is something we have seen since the middle of 2024. And our presence in many geographical markets and in many segments help us to spread the risk and increase stability over time. It has helped us in 2024 although we have not been able to balance the full impact of the lower construction market activity in new builds during the year. It is difficult to speak about a general pattern as we see big variances. As an example, in Q3, we reported lower activity in the UK after the UK election. And now I'm positive to say that we saw good demand in Q4, which is reflected in good order intake in the business area professional with 22% growth. On the other hand, the French public market was very difficult due to the lack of budget voted in the French parliament, which has then, of course, as you know, since happened. but that is partly reflected in order intake in business area collection. On the positive side, during 2024, we reached the best gross margin so far, which shows that our active price management in the inflationary period is paying off in a good way, and also that we're able to create customer value in a premium segment. A big contributor to the positive gross margin is the high tempo in product innovation, that is so important for us. Only in the quarter, we launched new product families in both Iguzini, DesignPlan and VEF. We also saw launches in the smart offering, for example, a new generation of products in Citigrinn, which is for all outdoor smart solution. Also, cash flow remains very strong. And we see a future is positive. So the board intends to propose a dividend of 1.40 Swedish crown per share, which is right at the top end of our dividend policy. So let's have a look at the numbers for the quarter. Order intake in Q4 was 2.008 billion Swedish crowns, which represent an organic decline of 6.2%. and net sales at 2.040 billion Swedish crowns, which showed an organic decline of 4.1%. At the EBIT level, we delivered 143 million Swedish crown with a 7% EBIT margin and EPS was 0.32 Swedish crowns per share. If we then look at 2024 in figures, and there the year-to-date order intake is at 8.14 billion Swedish crowns, which represents an organic decline of 3.4% compared to 2023. And net sales declined organically with 2.6% to 8.305 billion Swedish crowns compared to 2023. And operating profit before EICs was 741 million Swedish crowns compared to 901 million Swedish crowns in 2023. And this represents an operating margin of 8.9%. And EPS before EICs is 2.31 Swedish crowns per share. And as always, Michael will give you more information when we come to the financial section. But first, I will give you a better understanding of our business areas. And you know, I use this possibility in our quarterly reporting to give you a flavor of our strategic group focus areas. And today is no different. I often get asked questions about our four different business areas. to give a little bit more of flavor to it and understanding of our position in the market and why we stand out from the lighting providers. For 2025, I thought I'd give you an overview of one business area per quarter, and I will start with collections. I will also give you in short of our greenhouse gas emission numbers as we have updated our calculation model for these emissions, and that means restating our baseline as well as give you a snapshot how the numbers are developing in relation to our 2030 SPTI targets. But let's start with a focus on collection, and collection focuses on high-end lighting solutions for architectural applications worldwide. It comprises four brands, IGESINI, VF, Atelier Lyktan and LEDLINEA. It is the largest contributor to the group's revenue, accounting for approximately 45% of total revenues. And due to the size of the projects in this business area, its performance can vary highly between quarters. The collection brands work in a close symbiosis with international lighting designers and architects. And as a result, their lighting can today be seen at many of our most cultural and iconic recognized places around the world and are the only brands where we are active in the US and with a global footprint. And in the US, New York is actually the city in the world with the most lighting designers that do both specification for the North American markets and many projects worldwide. Therefore, a presence in New York is very important if you're a global brand. The collection brands engage in both outdoor and indoor high-end lighting solutions with a mix of 34% in outdoor and 66% in indoor. And all of the bands do outdoor and three of them do indoor. So let me give a brief overview of each brand and some of their products. So we start with Atelier Lichten, which is actually the oldest brand in the group. They celebrated 90 years last year, founded in 1934 in Sweden. And Lichten was the first brand to be acquired by Fagerholt already in 1974. So they produces high quality luminaires for both outdoor and indoor use with a strong emphasis on timeless Nordic design. They're known for their ability to create bespoke luminaires for prestigious projects. They have an indoor department called The Studio doing this. And you can see many of the solutions around the Nordic countries as such as in street lightings in Kungsregalen and in Ridderholmen, which you can see in the picture. or office lightings for many of our Scandinavian headquarters. We can mention SEB, ION, or Bunyus, all equipped with Atelier Lufthansa lighting. And they have a more narrow geographic footprint than others, mainly active in the Nordics and the UK, with an ambition to expand into Europe. Then we have Iguzini, founded in 1959. Iguzini has grown into a world-renowned brand for architectural lighting applications with a very high level of product innovation. They possesses a strong competence in many areas and with a focal specialism of optics development. We mentioned one innovation this quarter, which is the so-called fill array, which is an invisible track light for spotlights. For the curious one, take a look at Igazini's Instagram and you will find some films about the new solutions. They focus on high-end architectural design lighting, primarily within hospitality, cultural, educational, and office segments. And their largest markets are Italy, their home market, US, and Germany. And you can find their lighting at well-known places such as King Cross Station in London, Lecce and Palma Cathedral in Italy, Doha Metro in Qatar, and Coppabogor Church on Iceland. And I think if you ask any lighting designer around the world, they will be familiar with Egocene. Then we have the youngest company in the group who were actually founded around led solution founded in 2006 in Germany is led linear and they offers highly innovative minimalistic miniaturized and customizable linear lighting solutions so they have since the beginning leveraged the latest led technology to provide versatile products for projects ranges from high-rise facade retail store so both indoor and outdoor and you can see on the picture here you see the puma flagship store in new york you have the louis vuitton mall of emirates or in sweden and platinum building complex in gothenburg and their largest markets are us germany and the uae And then we have the last company of the four, which is VEF, which was founded in 1950 in Germany. And VEF, as I said before, only does high-end outdoor lighting. And they are world-leading in lens technologies and optical systems and providing highly reliable luminaires mainly for urban landscapes, streets, and pathway. And for example, VF provides luminaires with marine grade to withstand the toughest weather conditions, such as harbors and areas close to the sea. And VF's largest markets are France, US, and Australia, and has a well-recognized name within the high-end performance outdoor segments. So you can see here you have an example of a bridge and they light up many famous bridges, city centres, monuments and airports around the world. An example are Sydney Harbour foreshort with Darling Harbour and the Rocks or the Familia Sagrada in Barcelona or London City Island. So to summarize, the collection business area is unique with their focus on high-end premium lighting for the design and architecturally heavy projects internationally. It makes them less price sensitive. And one of the main opportunities for the future within this field is to combine high-end luminaires with smart lighting to enhance lighting experiences and save additional energy. So that closes the part on the collection. And I will move in to give you a quick update, as I said, on our emissions calculations. As we have decided to change our calculation method since the baseline year, which for us is 2021. We are now reporting higher emissions for historical years, which comes from this change in calculation method we have implemented related to use phase emissions, so in scope three. We have previously used future projections of all electricity emissions factors over the lifetime of our luminaires, taking into consideration changes in the grid, for example. we use the emission factor instead for the year a luminaire is sold and for all electricity it will consume over its lifetime. So, for example, if you look at the example on the slide, we applied an emission factor of 196 for all luminos sold to the UK in 2021, instead of 77, which was equivalent to a projected 20 years average emission factor. This increases the emission scope, but use phase emissions, and we will apply the changes to all years. And this new approach aligns with the so-called environmental product declarations or well-known as EPDs and what's done in the interest industry and will not impact how we align with our SPTI targets. And if we just a snapshot on the numbers, what we see from 2021 and until 2024, we are progressing well with our emission reduction targets validated by science-based targets. And as you remember, we're aiming to reduce scope one and two emissions by 70% and scope three by 30% by 2030. And since 2021, we have reduced our total carbon footprint by 34%. So more than 90% of our emissions come from the use of our products. where we can influence emissions through energy efficiency and smart lighting. So right in the heart of what we're doing. And that is one of the reasons why smart lighting is such an important part of our strategic agenda. And then, of course, part of the decrease is also driven by decarbonisation of the electricity grids in different countries around the world. And with that, I will hand over to Michael for a deeper financial update.

Thank you, Bodo, and good morning to each and every one of you from me. In terms of order intake and net sales, the fourth quarter was in line with expectations. Market conditions did remain volatile, as Bodo has already commented, with some external headwinds, and like many other businesses, we await the uplift from the returning markets. Some business areas and some brands continue to perform better than others, The enhanced cost focus I spoke of last quarter, including the restructuring in three entities, remains. But as Bodil already mentioned, we need to work harder at increased levels of cost reduction on a wider scale across the group. We are not pleased with the results. Some of the previously announced cost reduction programs have not yet materialized, and this, combined with the 21 million sec inventory write down in the quarter, explains the less than expectations on profitability. However, I remain confident that the previously announced cost reductions plus the newer, wider scale cost reductions will benefit the group's operating margin during 2025. Gross margins continue to improve and the quarter is in line with the full year, but for the above-mentioned inventory write-down. We do see further benefit here from improved portfolio and pricing management and material cost reductions. Operating cash flow is very significant, is very strong and a strong point for the group. It remains very healthy, but more of that a little bit later. Looking at the year-to-date position, net sales are organically 2.6% adverse to last year, with mixed performance across the various business areas. The slower to come through cost reductions will enhance profitability during 2025, and as mentioned already, the scale of the cost reduction focus will increase during the current half year. The earnings per share has reduced from last year and we are not at all pleased about that. We will seek to improve this during the current year. And as a sign of confidence in the actions and our well positioning in the market, the board will propose the maximum dividend to the annual general meeting in April. Operating cash flow for the year is at a second all time high at 964 million Swedish crowns and supports the dividend proposal. from a liquidity perspective. Due to the ongoing softer market conditions, the rolling 12 month net sales took a shallow dip in the period to 8.3. You can see it here on the chart on the right hand side. There are opportunities almost everywhere on the market and the mega trends do remain favorable. Decision making on projects, however, remains long with delays being often. When the new build market activity begins to return, we will see a further improved position in the rolling 12 months. With the exception of the supply chain crisis catch up in the year 2022 on the chart, the fourth quarter operator margin has seasonally been weaker, and we see this clearly in the chart. For the short term, our focus will be on driving the cost reduction programs to return to double digit levels and be in a healthy position for when the markets return. As mentioned, we expand and accelerate the cost reduction measures. Taking you through the separate business areas, Bodo's already described what, who, where and how our collection businesses work and focus, so I'll concentrate a little wider on the numbers. The year in collection resulted in net sales of 3.84 billion Swedish crowns net sales compared to 3.86 the previous year. So very, very close and an almost flat level of profitability at 363 million SEK compared to 368 million SEK the previous year. This is a robust and resilient performance given the challenging market conditions. Collection has maintained its operating margin, and this has been driven from gross profit margin development on the ever so slightly lower net sales. Looking to the current half year, we see an increased focus on cost reduction as the markets remain soft. Coming to premium, business area premium continues to deliver very solid levels of profitability, contributing more than half of the group's operating profit. The operating margin before IAC of 14.1% for the year compares to 15.8% for the prior year, with the reduction due to lower activity on the market. Full year order intake levels at minus 0.7% in premium are almost flat compared to 2023, and this is quite a good performance considering the 10 successive quarters of new build contractions. The Fargo brand continues to increase project success in two areas. One, promoting organic response smart lighting technology on the market, as well as delivering project luminaire solutions made from alternative materials. During the quarter, as Bodal has mentioned, as part of its cost reduction focus, Fargo HULP announced the closure of its UAE-based operation in Dubai, and this will be executed by the end of the half year. The restructuring programme at LTS is taking longer to execute, and so the savings here have not yet materialised from this programme. Coming to professional, business area professional closed out the year with a very strong order intake of plus 22% in the final quarter. So strong, in fact, that it resulted in the business area delivering full year organic order intake growth of plus 1.1%. The three-year trend and operating margin continues to be on a positive trend one, with improving performances in Eagle lighting and Wycroft lighting, but with a continuing difficult situation in Turkey, where the restructuring takes time to come through. When the Turkey restructuring has been completed, there should be an enhanced new level operating margin. So this is the focus, of course, in business area professional. Lastly, coming to infrastructure, high volatility exists in all markets. Bodle has already stated that quite clearly. And this is seen very clearly in BA infrastructure, where during Q2 and Q3, there was a positive order intake growth. But in the final quarter, the reduction was almost minus 26%. Despite the challenges this year in infrastructure, the operating margin at 9.3% is ahead of the group's average And following the closeout to the VACO restructuring and the degree of consistent sales growth, the return to double-digit operating margins should be in the foreseeable future. The business area has a 13% improved order backlog at the start of the year. I said I'd come back to cash flow on one of the early slides and on the cash flow side, we do continue in a very positive way now with 11 quarters of generating a positive cash flow from the group operations. The 964 million is the second best on record for 2024. We carry a lower net debt into 2025, have a stronger balance sheet as a result and look forward to making good use of the cash reserves. As you can see, the net debt reduced in the quarter as the operating cash flow at 356 million in the quarter once again was healthy. We report a net debt of 2.261 billion adjusted to 1.51 billion for IFRS 16 effects and the net debt EBITDA ratio remains at two. Net debt is the lowest the group has carried for at least six to seven years. Earnings per share, we repeat the message about not being pleased with the earnings per share level at 2.31, and we'll focus significantly to develop this during 2025. The accelerated and wider cost savings, including the restructuring programmes, combined with the lower interest expenses, will improve EPS going forward. Before handing back to Bodil for closing and Q&A, just a very short summary from myself. The softer market conditions continue to affect the activity level in the industry and on the Fargo Group. During the fourth quarter, we were not happy regarding the cost situation and we'll focus more on this during Q1 and Q2. Cash flow and balance sheet strength remain very strong and strategically the group is well positioned for when the markets return. Thank you and I hand back to Boda.