ITAB Shop Concept AB (publ)

Hello, everybody. This is Andreas Elgård speaking. We're happy to be able to present our interim report for the second quarter of 2024. And with me today, I have Ulrika Bergmanskjöld, our CFO, that will support me in the presentation. And we also have Mats Karlqvist, who is responsible for our investor relations, that will support with the Q&A in the end. so just very briefly we will give as always a very short introduction to who we are if there are any new listeners on the call and it's always good with repetition we are going to talk a little bit about what's going on in retail why um why it triggers us to change and the whole industry to change in order to support retailers in a better way and and then we'll go into some facts and figures around the report before we sum up with some main takeaways and then followed by Q&A. I hope that will be good for everyone. So short introduction to ETAB group. So these are 2023 numbers. So at a glance, we are having 15 production facilities across 12 countries. We have operational companies in 23 countries, and we are a little bit above 2,500 employees. We mainly work with retail. Sometimes we do things that is maybe adjacent to retail. Our main customer groups are grocery. That's more than half of our turnover due to self-home improvement. It's the second largest sector. Fashion comes in at number three. But the group, other customer groups or that segment, that's quite big. And things like consumer electronics, pharmacists, cafes or food on the go, service stations is part of that group. And basically we work with all parts of retail with a clear focus on grocery. We do that by providing retail interiors, technology solutions, lighting solutions and services And these services go all the way from designing things together with our customers into taking care of the aftermarket. So all across that spectrum. We are today one of the three largest companies in Europe. So we are a leader in Europe and we have a global reach. So we follow our customers where they go. We have our own activity in China. We have in US and in South America. we follow the customers where they go. And of course we have some really strong brands that we are working with and we have been doing that for a very long time. And we continue to expand our business with existing customers and also with new customers. We like to say that we are what we create together with our customers. So depending on if it is a fashion brand that wants to refresh their meeting with a customer, or it is an electric car company that wants us to help them to build the showrooms where they sell cars in a new way, or if it's a grocery store that is looking to reduce the problems of loss or shrinkage or improve the inspiration across the fresh food department, our effort and the outcome of what we do looks very different. And really, it is a collaboration with our customers, and that's kind of the spirit of what we mean with when we say that we are what we create together with our customers retail is truly going through transformation and that's why it is really important to work together because consumers are more demanding than ever and with all rights they have more information at their hands They seek for more, I would say, that we take better care of their time. So time is well spent. Sometimes they want to invest their time and then it needs to be well invested because they might seek inspiration or new knowledge or they really want to engage with a brand or with an experience. And the dilemma often for retailers is that these expectations don't always come from traditional retail. They come from online experiences, from social media or from online e-shopping. In any case, it means that consumers, they change their expectations. Retailers have a busy time keeping up to meet these expectations. So they are investing just as much as ever before, but they spend their investments across multiple different priorities. And this creates a dilemma for many retailers where we as an industry then and ETH have we need to be able to support them to figure out how to deal with the challenges that retail has today and with the opportunities that it presents. So it means for us that we need to be much more agile, much more consumer-oriented and much more solution-oriented than what we were in the past when the market was predominantly characterized by large-scale rollout programs. Today, it's much more dynamic, much more project-based and Smaller work, but much, much more work. And really, our job is to help retailers with the dilemma that they have to balance the cost versus experience expectation that consumers have for greater experiences. And then that comes with a cost. And our job is to help retailers to do that and to get a good return on capital so their business cases are strong. We do that through something that we call our value proposition. And we say that it's outcome based. So we focus on the value that we create for our customers. And if we create clear value there, we know it will be good for us. It will help us and our suppliers and our partners to also thrive. And we focus on four things. If we can deliver the desired consumer brand experience, each brand wants to let their values and their their brand identity to materialize in front of the customer. And that is what is important to them. And if we do that in a good way, it delivers a lot of value for them. If we at the same time can help them to increase sale and conversion through smart lighting, good displays, inspirational environments, or convenience that helps the sales to grow, then that further adds to the outcome that is positive. And if we, on top of that, also can provide improved efficiency and improved service, then that provides additional value. And can we at the same time then reduce the cost to operate the store or a fleet of stores? then we bring a lot of value to the table. And this is kind of how ATAB is transforming from being a product supplier into being more of a solution provider and delivering on these outcomes for the customers. So it's an integral part of our strategy. And you could say that today we support retailers already in two ways. We, of course, influence the customer meeting. We influence the work environment for the store staff, but we also influence how it is to operate a store or a fleet of stores. We do that with our solutions. So that's kind of the left side of this slide, what we do today. We believe that we'll continue to do that also in the future. That's kind of the core of our know-how and where our retail experience sits. But we need to do that with an addition of even more service. even more data, even more insight, even more actions that comes from insights, a more connected consumer experience where you leverage data collected in store, data collected on other channels and provide more convenience or provide more personalized inspirational experiences. So that's what we believe about in the future. And that's also why we think that in the future, It is important to grow as an organization in order to be able to invest in data capabilities, in new technology, in connected products. It's also important to grow in order to be able to offer more services in a scalable way across the geographies where we are active. Our one ETAB strategy really focuses on transforming ETAB from traditional producing product-oriented company into a service provider, a technology provider that gives solutions that sometimes comes out of our factories and sometimes comes out of our partners' factories, all geared up to deliver the greatest possible outcome for our customers. And we do that, of course, through a number of different strategic priorities. I will not go through them today. We talk a lot about this if you go to itabgroup.com and you can listen to that. But if you boil down our strategy, I need to remind you that when we set this strategy, we were in a situation where we had a high debt, we had profitability that was going downwards year over year, and we were struggling to understand what was going on in the market. So we set out the strategy where we had to simplify our business, we had to take out some costs, we had to take out some capital in order to strengthen our balance sheet and strengthen our financial situation so we could invest into our own future. And that means investing both in our own capabilities, our own competence, our own teams, but also to invest in building the capabilities that we need for the future and also invest in maybe growing ITAB. So all of this is kind of geared up to the simplify and amplify part is geared up to creating an ITAB that can expand through acquisitions, but also through organic growth. And to do that in a scalable way, so the cost base doesn't grow as fast as the sales grows. That's the whole ambition behind the one-eighth of strategy. And I would say that we have come more than halfway in. Maybe we're two-thirds in. We have done a lot of the heavy lifting. We're changing how we go to market. We're changing our competence and in our leadership. And we have started to invest quite heavily into our own capabilities. We are going to continue to invest and we will see that we will see expansion happening. Already now, you can see it in our organic growth, but you will start to see it also when it comes to acquisitions in the future. And just to kind of wrap up this part a little bit, the trends that we have in the current market, because I want to remind everybody, it's still kind of recession light, we have not seen yet great improvements in the economy compared to where we came from last year. Now we see clear signs that inflation is under control in most major markets, but we're not seeing yet the clear signs from financial institutions that interest rates are going down. And this is critical because the will to invest needs, people needs to feel confident that we're going in the right direction. So when the will to invest increases, It will also help us. But already now in this in the current market situation, we are well positioned to help retailers through strong business cases to improve their business by taking costs out, by improving their energy usage or simply improving their consumer experience and at the same time save money doing that. So that's something that we are super eager to continue to talk to customers about and drive growth and profitability. So basically, our whole strategy is geared up to embrace the changes that is happening in the consumer landscape that forces retail to change. And that's really that you have to rethink how you do things, and you have to do that together, together with customers, together across ITAB, and then, of course, together with our suppliers and our ecosystem and partners. So that's kind of the essence of our strategy is to rethink retail and do that together. And by that, I hand over to Ulrika to start the presentation of our interim report for the second quarter. And then I will wrap up with some of the main takeaways.

Yes, good day, everybody. I will go a little bit more into the financials of Q2 and year to date. And looking at zooming out and looking a little bit at the rolling 12 months, our EBIT margin increases to 9.1%. After the latest quarter with continued strong profitability and the sales growth of 12%. After historically very strong first quarter followed by a good second quarter, the EBIT margin year to date 24 of 9.5% is our highest margin for the first half of any year so far. Increased volumes and margins, favorable product mix and higher capacity utilization in our production are main drivers. Our operating cash flow is positive. We have a cash conversion rolling 12 months of 91% and our financial position is still strong. Net debt is still on a very low level, however, with a slight increase since year end related to increased capital need due to sales growth in 24 and also dividend payment in the second quarter. In the second quarter, we have a growth, sales growth of 12% with several of ETA solution areas and most geographic markets reported increased sales. mainly in the quarter driven by grocery that increased 13% and do-it-yourself sector increasing by 28%. Customers have continued focus on loss prevention and smart gates. And in the second quarter, we see also growth in all retail tech areas, mainly in self-service solutions, but also an increased interest in conventional checkouts. The agreement we announced in the first quarter for 7,200 self-checkout has been increased by 25%, which strengthens our market position. Sales growth is also driven by higher demand of shop fitting solutions and we maintain our positive margin trend. Increased share of our technical solutions continues to make a positive contribution to sales and margins. And also higher demand in shopfitting solution had a positive effect mainly in the second quarter. We experienced that the uncertainty in the market trends have somewhat decreased during the year, even though the surrounding macroeconomic effects not yet are significantly improved. However, we see that customer spend is still not normalized and the political landscape in Europe brings some uncertainty. But our gross margin continues to be very strong, driven by a high share of technical solutions, but also generally increased margins across both portfolio and market geographies, combined with a higher production utilization. Although we continue to be successful in loss prevention, we can see margin impact from growth in self-service solutions as well as demands of interior solutions and conventional checkouts. The balance in product mix combined with the increased volumes and sales and improved margins across portfolio and geography and the capacity utilization in our larger factories And also together with the impact we see from the cost reduction we did in 23 is the foundation of our performance improvement during the start of 2024. EBIT of 150 million in the second quarter is 59 million higher than last year and corresponding to an EBIT margin of 8.9% in the quarter compared to 6% last year. And as I mentioned, following the historical strong first quarter, we now year to date have an EBIT margin of 9.5% compared to 5.3% during the first six months last year. And this is our highest reported result for the first half of any year so far. Cash flow from operating activities in the second quarter was 77 million and last 12 months cash flow of 746 million is still strong. However, we have been impacted by increased working capital during the first six months in 24, mainly driven by sales growth and account receivables, where we during the same period last year experienced declining sales. Strong profitability and balancing inventory at the lower level actually than June last year, despite the sales increase, contributes positively. And that indicates also that our efforts to increase capital efficiency are materializing. And by that, I hand over back to you, Andreas, to make a few comments regarding the main takeaways of 24.

Great stuff. Thank you very much, Laika. So just to wrap up this part, I mean, we are proud over the second quarter. We are proud over the way that we have started this year. So that's kind of the overarching main takeaway. And then, of course, we see now that we have increased sales across most of our, I would say, geographies and solution and product areas. Loss prevention is still in high demand. And of course, this is cyclical, so it goes a bit up and down, but we think this trend will sustain for some more time. It's also very interesting to see that we've seen a growth in conventional checkouts because overarching that trend is going down, which is natural with the technology development that is going and also the growth of self-service solutions. But we see this still as a positive development for us because it is in areas where we are really market leader. Our gross margin has continued, and I think it's also a combination of the general sentiment on the market that it's important to protect the margins when sales outlook is sometimes a bit uncertain. We are under heavy competition in our market, so we are proud that we managed to defend our margins. And it's not happening because we have the highest prices out always to our customers. It's really because we are driving efficiency continuously, which is something that we will have to continue to do, I would say, forever. But we have some clear priorities that we're working on that we have communicated before. We have a number of new customer agreements signed, and so we're really positive about the future, and we have a favorable and maybe a little bit more balanced mix, both on product side and customer side, that is contributing to our profitability in a good way. So, and I mentioned that we continue to focus on becoming more efficient on the cost side, and this also... is valid on the capital side. So we are really proud of how we continue to have the right focus here. We think that there's still more to be done in order to further improve us going forward. Yeah, all of this is kind of all good, but it really, I want to remind everybody that we are still working on improving ITAB and modernizing ITAB further. We are investing in modern IT tools. We are investing in common ways of working. All of this is helping us to become even more efficient, but also then able to scale up and to consolidate the market, both organically and through acquisitions. So these are the main takeaways from ITAB's Q2 report in 2024. And by that, I hand over to Mads Kalkqvist.