ITAB Shop Concept AB (publ)

Okay, thanks. Hello everybody. It's Andreas Elgård speaking. We are very happy to have you listening in on our report for the first quarter of 2024. And those of you that follow us, you know that we like to go through a little bit about who we are and we do this as kind of educational for those that are new. So for those who already know us, you will recognize most of our slides that comes now in the beginning. And I will go through that rather fast so we can focus on talking about the Q1 results. And like I will lead the presentation when we come to that part. So the agenda in brief is that I will just do a brief introduction to who we are. how the changing consumer behavior is making retail have to change and transform, what our strategic response to that is, how far we've come in our strategic execution, and also where the growth lies and what the opportunity is. And then we'll come into the Q1 report before we take questions and answers. So, just at a glance in 2023, we have a turnover that is just above 6 billion Swedish. We have an operating margin in 2023 of 7%, which is just in line with our financial targets. We are approximately 2,500 employees. If we count in our temps, we are a little bit more, but we use that as leverage up and down. uh we have a mix of own produced products that we sell and and also sourced products and of course we don't just sell products we also sell services and we like to package it every everything up into solutions that that meet the needs of our customers and our customers they are organized in in the segments that we report are the following so it's the the biggest one is the grocery it's do-it-yourself home improvements followed by fashion and then we have other customer groups that is basically all parts of retail, where maybe a shout out can be to the pharmacies, health and beauty, consumer electronics, and also more and more food on the go where we are making a significant business. So just to put some numbers on that in 23, so you can see that the grocery segment is more than half of our turnover. And then it starts to become quite evenly distributed. And we don't report the size of the segments beneath fashion. Maybe that's something for the future, but right now we stick to the way that we have been communicating historically about our segments. And we like to say that we are what we create together with our customers. So depending on the need the customer have, depending on the sector they're in, the strategic dilemma or opportunity that they might have, our effort looks very different than the outcome and the result of our work together looks very different. And it can be everything from a car retailer to a consumer fashion brand to pharmacies where the need for trust and confidence is very different depending on what the situation is and what the consumer is looking for. Retail as you know is truly going through transformation and it has been it has for a number of years when and I will come into that a little bit during this sector here or section but first I want us to just take a minute to look back and reflect a little bit where we're coming from so this is a new slide that not everybody has seen before so it's kind of taking a 10-year view on where we're coming from. And of course, we had a tremendous growth through acquisitions in our history. We had good margins, but those were also the days when the market was very predictable. Most retailers had large expansion plans and large portions of our industry and also ITAB was focused on capitalizing on those expansion plans. Things was predictable. It was quite easy to plan and to move forward and you could kind of estimate how the future would look like. The margins that we had back then are a little bit difficult maybe to understand because they were really infused by very, very high margins that we had in our lighting segment in terms of products. That was at that time was very profitable. What has happened since then is that we have moved away from halogenic lighting solutions into LED. LED is much more efficient. It's much easier to produce. So even producers like us with key competences have been faced with a lot of competition. So lighting is very easy to source today and that has really put the pressure on the margins and changed the whole industry for retail lighting and lighting in general. But the market changed where retailers went away from large expansion programs into more trying to figure out how to please the changing consumer needs that really put a strain on our whole industry and also on ITAB. And for a number of years, ITAB were struggling to keep up margins, even though turnover was stable, margins were dropping and combined with high debt, that was a situation that was not good for the company. We started to restructure ITAB towards the very end of 2019. And we launched in February of 2020, our new strategy, the one-atom strategy that I will come into a little bit later, but it really aims at modernizing ITAB, both in how we go to the markets, but also how we function as an organization. And you can see that despite the tricky years that followed after COVID, that was really tough for retail um everything with supply chain disruptions inflation russia's invasion of ukraine all these things that kind of have made the the world around us more unstable we've managed to gradually increase our results and that has also continued now despite the high interests and the economic downturn that we see across europe And you can also see rolling 12. We have put in our Q1 results, but we'll come back to that a little bit later. So what is really driving our industry is the changing expectations that consumers have and consumers expectations are not set by maybe your normal competitor. If you're a retailer, they're set by TikTok, different types of social media, different types of new ways to interact with brands that is more personalized, more unique, more individual, using much more data. And of course, for traditional brick and mortar retailers, this is difficult because it means that others know more about their customers, so they have to change and they are doing that. So they're investing in online, they're investing in omnichannel, they're trying to stay relevant. They're also, some of them, they stopped investing in their stores and saw that they started to lose even more. So they're also then, I would say, repurposing, refurbishing, updating their stores. And sometimes you talk about that retails are struggling and there are fewer new store openings, but that's just in the lens of looking at how things were before. Retail right now is a very, very dynamic landscape where there's a lot of change going on and there's a lot of investments going into retail, but it's not the same type of investment as it used to be. And that means for us that we need to transform. We need to become more agile. We need to be faster. We need to be more efficient. And we also need to be more relevant. So we need to be even closer to our customers and develop the things that they need because the retailers are truly in a cost versus experience dilemma where they need to invest in all parts of their business. And at the same time, they cannot expect the same long payback as they were used to. So they really need to make sure that each investment they do also deliver operational efficiency and lower their cost base. And this leads us into our strategy. We like to kind of condense it into that retail has to rethink. So we say rethink retail and do that together. Together for us means together with our customers, but it also means together with our suppliers and partners. And our ambition is to become the leading solution provider. And we have a strategy for that. I will not go through the seven strategic priorities, but I will go into kind of explaining what the essence of the strategy is. It really is to position ITAB better when it comes to growth, so we can grow both organically and we can grow through acquisitions. And our ambition is to be a solution provider. That means that we don't always have the product that the customers may be asking for, but we need to understand their true dilemma and together develop the solution that fixes their problem. And I will come into how we deliver value and how we do that in the next few slides. But that's kind of the aim for our strategy. We do that through our products and services. We do that with our know-how, of course, and we're taking a different way and a different path to the market in doing so. But also it means that we need to build an ITAB that is much more fit for purpose. So establish common ways of working, modern updated tools and information internally. And for those of you who don't know us historically, Since we consist of so many acquired companies, we had very many different cultures, very many different internal ways of working and support systems. And we are changing that gradually towards becoming much more efficient and transparent internally and updated. And our ambition as solution provider is really to strengthen our position and develop our relationship so it becomes more sticky and that it adds more value to the customer. and not through our products and services, but through our know-how, our insight, and our ability to be creative and help retailers to succeed. So that means that we need to develop our relationships towards a much more strategic partnership, and we really need to be able to leverage our know-how that we have from across Europe, sometimes also out in the world around us, and bring those experiences faster to the retailers because They might feel that they are alone or unique with their dilemma, but many others are in the same situation or they have been in the same situation or about to come into that situation. And we can help them with our experience that we have from other clients and make sure that we do it in a way that each brand is comfortable with. And we do this by focusing on not what we have in our portfolio of products and services, but really focusing on how can we deliver value. So we have developed a value proposition since a couple of years back that we are working on. And that means that we need to deliver the desired consumer brand experience. Each brand has their own values, their own ambitions that they want to communicate through the consumer experience. And the built environment in stores is still the most powerful way of building a brand experience. So that needs to be delivered. And that's very different from retailer to retailer. Ideally, the solution should lead to increased sales and higher conversion. If they do that, it's perfect. If they also then improve the efficiency and the service level to customers, then it's even better. And can it also then reduce the operational cost of running that store or running that chain or running that warehouse? Then it becomes truly valuable for the retailer. And we believe strongly that if it's valuable to the retailer, it will be valuable to us as well. And we will create that sticker relationship. So that's kind of our strategy in a nutshell. And to make it a little bit, I'm not sure if I make it concrete, but that's an ambition with a slide. It's real that today, We support retailers in stores or across their chains with the lighting solutions, interiors, retail technology. And in the future, we're going to continue to do that, but we will add more services. We will add more connected products that can leverage our, I would say our solutions, but also be agnostic and leverage other supplier solutions. So the retailer can get an overview on their total set of assets that are connected in the store and that can leverage data from own sources or other sources and that can also deliver data that makes the retailer take better decisions. Because the retailers are truly trapped in a dilemma where it's no longer enough to take out cost in a store or across a chain. They have to be able to take better decisions across their whole value chain, which means that they need to use data in order to do that and also enable their suppliers to become more efficient. So far in our strategy execution, I would say that we have a tick mark on the stabilized phase. The stabilized phase was all about doing the homework, making sure that we were financially sound and profitable. Because remember, we came from a high debt, low profitability situation and also a bit unclear what our role was. That we have done in a really good way. We have simplified ourselves. We have also started to work on how to become stronger on our customer. And that's really the next phase, the build and invest. Most of these tasks that we have here on build and invest, we have done. We have developed our value proposition a couple of years ago. We have started to roll out the new go-to-market model. We are adding new services, new technologies. We are driving excellence in operations, but we feel that we're not really there yet, that we are ready. And one big part of that is We are investing in a new IT landscape. It will take us at least three years before we're ready with that, before we can say that that part is ticked. But we're not doing this sequential. We're doing this in parallel. So we are also then looking into the next phase that is all about growth. How can we grow organically? How can we continue to be the consolidator of our very fragmented industry and lead through acquisitions? So that's just short about our strategy execution. And all of this aims towards us becoming the leading solution provider within our industry. And there is plenty of growth. There is a clear opportunity for us. First of all, the market that we are addressing is really massive. And if we just go down to, if you see the three green boxes to the right of the map of the world, the one in the bottom, that's how we assess the addressable market. And so it's a, It's a hundred plus billion market where we are just scratching the surface. And we believe that there's plenty of opportunity for us to grow in Europe. That is our core. And then of course, we're taking the opportunity to also grow outside Europe when the opportunity is right. And we have these kind of three main chapters that we're working with. One is to penetrate the core market. where we're already existing, where we are strong, where we have our teams and our assets. Let's make sure that we sell more of what we're doing already in other parts of the group. So we increase our conversion or cross selling and that we can gain new customers in segments that we are already strong in and where we have a really relevant offer. And then on that core, expand with new offerings that add further value to the core and where we already have a relationship. And that could be to to connect our retail tech solutions to make sure that they can deliver data and become more efficient and reduce costs for our customers, or add services that help our retailers to maybe reduce downtime in stores or improve their efficiency. And then, of course, we want to expand to new markets and new segments. And we see that there's huge opportunity for us in Southwest Europe where we are not so strong and we could clearly become stronger. And also, I would say in Southeast Europe, where we are also not so strong. So that's kind of more traditional type of opportunities that we want to explore. And then we want to explore also more technology companies and service companies when we look into the future and where we'll find our growth. And the trends in the market right now, even though the economy around us is a bit unclear, The offering that we have is truly adding a lot of value. We can also see that we are being listened to. Our new go-to-market model, focusing on driving value for the retailer, it is relevant and it's really helping us. We have the solutions to help them reduce their costs, to help them to reduce their usage of energy, but also to help them to increase and stand out with their brands, because that's what it's all about. It's about being relevant for the consumer And at the same time, do that in a better way than what the retailers used to do. So sorry for my speed talking, but we like to do this and for you to get kind of an understanding of where we're coming from, because it is important to understand our story, what we're doing and what our aim is. And by that, we come into the Q1 report. And I will just start a little bit on the first slide and then hand over to Laika. So I just want to highlight that what lies behind our result in Q1 is really, we have communicated through press releases a couple of things that we have gained new deals, sometimes with customers that have not bought these things before. And some of the things we have communicated are with customers that are already buying, but have decided to increase their purchasing with us. One press release that we went out with in the beginning of the year was about a large global retailer that buys more self-checkouts from us. We already have orders that is way beyond the 7,200 that we communicated. So it has been really good for us. But also interiors have been part of what we are seeing as growing again after having a difficult year in 23. It is really growing again and delivering profits that is sustainable. And then, of course, our maybe shining star for the moment is entrance and exit gates that are not just gates, but they're also smart. They're connected and they help the retailers to reduce shrinkage and increase safety and also provide a non-intrusive shopping experience. So there's maybe a snippet of what lies behind the sales in Q1. And I would say that most parts of ITAB are contributing in Q1. So all product segments, most of our units out in the ITAB world, and we're really proud of the results. And by that, I hand over to Ulrika.

Hello, everybody. Happy to present some more details around our Q1 results. And looking at the full year development for the last 12 months, our EBIT margin increases to 8.4% after the latest quarter. And this is despite the unchanged economic climate. However, the stabilization in demand we noted during the autumn has continued in most of our solution areas and geographic markets. Our strong first quarter improves EBIT over the last 12 months significantly compared to full year 2023, where continued strong profitability, higher capacity utilization in our production and cost saving actions implemented during 2023 are main drivers. Operating cash flow continues to be strong as well as our financial position. Net debt is still very low, however, with a slight increase since year end related to increased capital needs due to sales growth during the beginning of 2024. In the first quarter, we see a growth of 5% where several of ETAB solution areas and most geographic markets reported increased sales. And as I mentioned, we haven't seen major changes from the economic climate during the start of 2024. However, we see signs of increased willingness to invest by our customers with continued focus on loss prevention and store efficiency, but also in more bespoke interior. Increased share of our technical solutions, including smart gates, continue to make a positive contribution both to our sales and margins. We note an increased sales of self-checkouts and other self-service solutions, as well as a recovering demand for customized shop fittings. And we have a more balanced product mix in the first quarter of 2024. where our growth segment had a growth of 10 percent compared to the first quarter last year. Gross margins continue to be very strong, driven by continuously increased share of technical solutions, but also generally increased margins across both portfolio and market geographies. Although we continue to be successful in loss prevention, we can also see margin impact from growth in self-service solutions, as well as higher demands of interior solutions, especially within the grocery segment. Balance in product mix combined with increased sales across portfolio and geography, higher capacity utilization in our largest factories, and also impact from cost reductions we implemented during 2023 is the foundation of our performance improvements during the start of 2024. EBIT of 161 million in the first quarter is more than 90 million higher than last year and corresponding to an EBIT margin of 10.2%, which is historically ETAB's strongest Q1 result ever. Looking at our cash flow from operating activities we had a cash flow of 64 million in the first quarter and last 12 months cash flow continues to improve to 882 million SEK due to underlying higher profitability and improved cash flow capital efficiency. During the first quarter, the improvement compared to last year was driven by stronger profitability, but at the same time, our sales growth impacted negatively, mainly with higher account receivables. We can see that our inventories continue to be more on a normalized level, and this is still one focus area for further improvements across the organization. And by that, I lead to you, Andreas, to conclude and talk about the main takeaways from our Q1. Thank you.

Thanks, Ulrik. I mean, we're super proud of Q1. We are happy that it's not a single part or a single segment. It's really all parts of ITAB that is a hard effort behind this result, which is good. So we're standing firmly on both feet, I would say. um and and we and i like to stress this that this is despite the the tough economic climates because the it is still difficult to get investments from retailers because they are their the capital costs have increased in ways for them that is tricky especially in grocery segment that is most important for us so given those circumstances we're extra proud over being able to communicate such a strong first quarter um We can see that there is a continued interest in some of our technology solutions, but we also see that more and more interest in discussing more holistic solutions going forward. And we believe that that is part of the things we need to develop even more and to become stronger in services there as well. Somebody asked me in the board the other day, so you always talk about the product mix and the customer mix, and I asked when you're going to stop doing that, and it was a bit of a joke, because it is a good topic to talk about. We have a good product mix and a good customer mix in the quarter, and that is important. And it doesn't mean that we have good customers and bad customers. It's just that the mix is balanced, and it helps us to deliver a good result. yeah so i i think that um i think this is uh maybe i should stop there and then just remind everybody that we are maybe we're more than halfway through our transformation but there's still more efficiency to take out the vitab and what we have most appetite for is of course to to to grow again we have growth in this quarter which is great organically and we want to continue to grow organically but we also want to grow through um acquisitions and use our strong financial position to to get back to be to being the consolidator of our industry so by that we say thank you and we open the floor for q a if you wish to ask a question please dial pound key 5 on your telephone keypad to enter the queue