ITAB Shop Concept AB (publ)

Thank you very much and welcome everybody to this call. We have the Q4 result and the year end report to go through with you and also to give you a little bit update on the acquisition that we have just finalized one week ago. So let me begin. I will start as usual to do just a short introduction if we have any newcomers to to the call. So to talk a little bit about who we are and what we do and what we've been up to the last couple of years before we hand over to Ulrika to go through the numbers. And also I will do a wrap up towards the end before we open for a Q&A session. so here we have updated this slide with 2024 numbers please note that these are the adjusted numbers and let me just highlight from the very beginning what the adjustments are because they are not really anything strange or i would say debatable it is mainly adjustments for the large transaction that we finalized so it's all the transactional costs and DD costs and so on that occurs. And it's important to remember the size of the acquisition. So that's the main part of the adjustments. And the other part is sale of a company in China with a factory and that's a strategic decision. So it's truly non-recurring costs. So by that said, in 2024, we grew our sales. We are now at just above six and a half billion Swedish. And we are with an operating profit of around just north of 500 million and with an operating margin of seven point seven percent. That is in line with our financial targets of having an operating margin of our business cycle of seven to nine percent. So we are really proud over the improvement and development during the year. And we'll get back into the figures and what they where they come from later on. But I just want to highlight that ITAB today, excluding HNY, of course, because that's not part of these figures, we have a number of production facilities across mainly Europe, but also in Argentina and in China. We have operations in 23 countries, but of course we sell to many more countries and we are approximately 2,500 people. Our main customer groups are grocery, do-it-yourself, fashion, and then all other aspects of retail, I would say. And sometimes we also go into the hospitality sector. We offer a number of solutions and these are typically different types of services and then complemented with products for interiors, different types of technologies like checkout, smart gates, products to guide the customer, queuing systems and so on, different digital solutions and of course lighting. So with that then we help retailers to achieve their targets and build a physical environment in their stores. So this is just it at a glance. And we usually talk about that we are one of the leaders in Europe, but we have a global reach. So we follow our customers around the world and we have some quite known and large brands. That's mainly what we work with, the large retail chains. Grocery being more than 50% of our turnover with home improvement due to self following quite far behind. So you can see the rest of the retail sectors are then more evenly distributed. Fashion coming in just below home improvement. And then the other segment is 22% of our turnover. And maybe a shout out there to pharmacists, consumer electronics, service stations are important in that segment. But basically all aspects of retail is included in that category. And we usually say that we are what we create together with our customers. So depending on the type of relationship we have, depending on the strategic dilemma or challenge or opportunity that the customer have, and depending then on how much they engage with us, our impact can be very transactional where we just supply products to very fundamental and strategic where we develop concepts and solutions and innovation together and then implement that together with the retailer. And on these pictures, you can just see some of the different examples, everything from car dealerships to pharmacies to do-it-yourself stores and, of course, cafes and grocery. So not only retail are transforming, but also ITAB are transforming. And I will come into that in a short while. But let's begin with retail. And I think all of you know that because we are all consumers. We all know how we have changed our behavior. And we know that there are generations that are coming up behind us that have even more demands on how to be met as a consumer and what to expect from different brands. So there is a clear movement and this movement is not something that has happened and now we have a new landscape. This is a constant ongoing, very, very rapidly changing retail landscape. where consumer expectations are constantly evolving. So it's all about frictionless experiences, having the most convenient shopping experience possible. And of course these expectations comes from online where you're being more guided and then you bring that to physical retail. And also it's about the inspiration that you, when you want to learn something or when you want to invest your time, then you truly want to be inspired and you want to get more, more value for your time, so to say. And this impacts retailers. So the retailers, they need to invest in areas that they didn't use to usually invest. It could be new channels, could be new formats, could be adding things to their to their retailing mix. And while they are doing this, of course, they need help, help to develop it, help to know what will work and also help to test it and then help to deliver and scale up once they have decided. And that's basically what what we in our industry do and what we at ITAB do. So we have changed the last couple of years to become much more consumer and retail change focused and improving our, I would say, speed and agility and our service level to be more relevant and also to change how we develop our offer. So we develop that much more together with the retailers. Because the retailers, they truly have a cost versus experience dilemma where they need to invest and their costs are going up. And that is tricky. So each time they do something, it is very, very important that they get a good return on capital. That leads me into how we are positioned ourselves and how we talk about our role in helping retailers to improve their business. We talk about that we help them to rethink retail because that's basically what it's all about. We like to focus on creating value-based outcome. when we do something that it's really the retailer's KPIs that need to improve. And we focus, of course, on the consumer brand experience. We focus on and that's where you build the inspiring environments and you communicate the brand values. It's also when you create a more convenient experience through technology, but also through layouts and so on. But that's not enough. You also need to deliver solutions that drive increased sales and conversion. Otherwise, it's very hard to get the payback on the investment. And that used to be enough, but it no longer is. Now you also need to then improve the efficiency. for the retailer and for the consumer and also the service level. And by doing these three things, you really get a strong case. And if you, on top of that, also then can help to reduce the operational costs for the retailer, then you help them with their top line, you help them with their margin, and you help them to take out costs. And that's really what it's all about. So this is how we try to build our offer and present our offer. And each brand, each retailer have a different dilemma or different challenge that they want to solve. But of course, when you zoom out, many of the challenges are shared. And that's where we really have an opportunity to help them with our wide market coverage and our leadership. And this is a picture that may be not so easy to understand without my voiceover, so I will try to be pedagogic. If you look on the left side today, how we influence the consumer journey and the retail operations, we mainly do through our solutions of creating great lighting experiences that drive conversion and emphasizes the products that the retailer want to push. We build environments that are inspiring and efficient. And of course, we supply them with technology. So all transactions happen in a smooth way and that the customers are guided in a safe way and also efficient way throughout the store. So that's what we're doing today. And that influences, of course, the consumer experience, but it also influences the operations of the store and the operation of a whole fleet of stores. And we're going to continue to influence that also in the future. But we need new tools and tricks in our bag. And we believe that there will be a much bigger need for services. And it will also be much more... needed that we are able to use data created by the brands and by the brand themselves, either through other channels or open source of data, and that we also can help the retailers to get more data out of the stores and to consolidate this and drive that. So data and services will be additional venues that we add to the retailers for them to help to drive there. their efficiency and their service to the customers going forward as well. For a number of years, I would say since 2020, we launched our one ITAB strategy that really focused on two things. One was, of course, to transform ITAB, I would say internally to drive our efficiency and maybe do the things that we have not done before. So that's all about consolidation and getting the power of the whole group to meet the customers. And also we transformed how we go to market. So like I talked about just before, being much more solution oriented and outcome based in our sales and that has helped us to improve. both the re-engineered cost structure and how we go to market and how we drive and change what we offer and what we sell and what we succeed in selling that has really helped us to develop. So these seven priorities is what we've been working on. And on the next slide, I will... just go through because here I kind of put them into a different format. So really, the strategy was all about first stabilizing our performance because at the beginning of our strategy execution, we were in a financially not so strong state. So we had to do cost and capital restructuring. That was really, really important. And we did that. So it was all about simplifying the company. Then we started in parallel to invest. Of course, during the COVID years, it was hard to invest and it was important to keep control over your cash. But we have started to invest in how we go to market, how we drive our competence. We've implemented different digital systems and we are right now in the process of soon starting the implementation of a new ERP for the whole group. So there are a lot of investments that we put into the company in parallel then to doing savings and restructuring. And all of this we didn't do just to do because it was fun. It was necessary. But the purpose all along was really to expand and to grow the company both organically and through acquisitions. And that leads me into the next slide because I put a big tick box on this expand phase now because that we certainly can do. I put a bit shaded tick box on the build and invest phase because there's still more things that we need to do there. But of course, the big tick box on Xpand comes from that, as we communicated last Friday, that now our intended acquisition of HNY have gone through and we are two leaders in our industry in Europe that are now combined into one group. And that really sets us apart by far compared to the competition. I just want to highlight that these figures here are 23 figures. So it's important to bear that in mind. And what we said at the time of the acquisition and what we have communicated at that time, we talked about how complementary HNY and ITAB are to each other, that where one group has its strengths, the other one is a little bit weak geographically and vice versa. So we really complement each other, especially in Europe, Middle East and South America. Together, we also can learn because HNY has some strengths that are unique, ITEM has some other strengths that are unique, and we can learn from that and offer the best of both to the market. We will get a significant increase of scale and that will help us to become more efficient. It will help us to drive synergies, both when it comes to taking costs out and improving our capital spend. But of course, then synergies in purchasing is a is quite a big upside. We also see clear commercial upside. And I just want to highlight on this picture that the figures that we presented then are still the figures that we're presenting now. But I just want to let you know that the full synergy effect we expect to be realized during 2027. So we need to do the work before we can get the synergies in our books. But we have clear plans and the work now starts. It started this week. to deliver that. So we will follow that through the coming years. And as you know now from today, ITAB in 24, we improved our growth and we improved our profitability. So we have moved in the right direction. And I can share that also HNY have done the same. They have grown and they have improved their profitability. But we will not present official HNY figures until we present a Q1 report where we then will include February and March into the new consolidated group. And just a few words on what we now have ahead of us, because it is important to remember that this is truly transformational. So not just for HNY and ITAB, it's transformational for our industry in Europe, because it is two of the absolutely largest players that now combine. And what is really, really important for us is that we now start the work. Up until Friday last week, Friday lunch, we were competitors. And after lunch, we were in the same family and best friends. And as you all know, business is all about people. And now we need to get to know each other. And I put up some of the things that we talk about internally, because I think they're important for you guys to know that Our first focus is to ensure continuity in our business. So keep focus on our customers, continue to serve them, take good care of them and continue to drive the business. Don't jeopardize anything on the market because we are busy integrating. That's also important, but it cannot be more important than taking care of business. So that's our first priority. And of course, right now, it's important that we now become friends and we we get to know each other of course we've done a very very thorough due diligence we know what we are we know how we complement each other we have a plan but now we get into the details we we lift the cover and look at everything uh in a in an official way and it can be shared internally so we can start to drive all the projects we need to do to truly become better together And then I think this is an important message that I've said when we announced our intentions. And this is what we talk about also internally. It's important that we start delivering on the synergies directly. That's not something we can wait with until 27. That is something that is going to start as soon as possible. And I think already the first couple of months we are going to start to deliver on the synergies. And I think it's very important to highlight that we see the synergies mainly coming from procurement and cross-selling. Those are clearly the two biggest areas. And then, of course, there will also be some efficiency when we combine our two groups. So to wrap up, ITAB and HNY truly better together. And I just want to make a shout out that, of course, this is a huge acquisition. There are risks connected to that, but the two companies are performing. The value that we add per share is quite significant, and I think that's important for all the shareholders to remember. And if somebody feels that it's a pity that we don't give dividends in the coming year, it is because we want to stay focused on the financial risks and make sure that we spend the money on reducing our debt and not on paying us dividends. And since we add so much value through HNY, we think that's a really, really good way to treat the coming year. So by that, I hand over to Ulrika to help us to go through the figures for the last quarter of 24. And before we do a wrap up and take questions.

Yes, thank you Andreas. Hello everybody. Looking at the full year of ITAB, our adjusted EBIT margin shows an increase to 7.7% and we saw increasing sales and underlying profitability improvements despite the challenging market and strong second half of last year in comparison. During the year, our historically good start in 24 were followed by a somewhat weaker second half of the year. We still experience a considerable interest in our loss prevention and self-service solutions, but the outcome is impacted by timing of delivery for individual projects and the facing of deliveries were different compared to 2023. For the full year, increased volumes and margins in total favor of product mix and higher capacity utilization in our production are main drivers for the development. Our operating cash flow is positive with a cash conversion of 88%, which is above our financial target of 80% over a business cycle. And our underlying financial position is strong. Net debt is impacted by the directed share issue in September related to the acquisition of HNY, but underlying debt continues to decrease. And we are now looking forward to 2025 with integration and working together with our new colleagues at HNY. Looking at our sales in the fourth quarter, we have a growth of 11% with several of ITAB solution areas and most geographic markets reported increased sales, mainly driven by grocery, do it yourself and also the fashion sector. So basically all our important sector showed significant growth in the fourth quarter. For the full year, growth was 7%. The grocery sector is the main driver, followed also there by fashion and do-it-yourself. Most geographic markets experience growth, but especially in Northern, Central and Eastern Europe. Our sales growth in self-service solution continues with increased sales of self-checkouts and also conventional checkouts. And we also see growth in our interior solutions, while we have experienced lower volumes in loss prevention projects second half of the year. As a result, the product mix did not have the same positive effect on the gross margin and earnings during the last two quarters. Onwards, we feel the market continues to be a bit cautious, but we are fully focused on continuing serving our customers and planning for the commercial synergies together with our new colleagues in HMY. Overall profitability for the full year 2024 we improved our profitability despite a challenging market and in comparison a strong finish of 2023. The underlying improvement is mainly driven by higher gross margin and sales growth for the full year, a favorable product mix and increased capacity utilization. And as I mentioned, our margins weakened somewhat during the second half of the year, driven by the lower share of loss prevention solutions impacting the product mix negatively compared to 2023. Apart from this impact driven by project-based deliveries, we generally see increased margins across both portfolio and market geographies combined with increased operational efficiency. In quarter four, our result was positively impacted by sales growth, while product mix and compared to last year had a negative impact. Our adjusted EBIT in the fourth quarter amounted to 106 million, corresponding to an EBIT margin of 6%. In the upcoming integration process, we will, together with our colleagues in HMY, continue to focus on operational efficiency and build an even stronger platform for the future. Cash flow from operating activities in the fourth quarter was $320. 20 a bit above 320 million and we have a positive cash flow every quarter in 2024 summarizing the full year to 624 million sec which is continuously strong and corresponding to a cash conversion of 88 percent Increased profit during the year and balancing inventory levels at a lower level than last year despite our sales increase contributes positively and indicates that our efforts to increase capital efficiency are materializing. By that I thank you and leave to Andreas to conclude on the main takeaways from 2024. Thank you.

Thank you Ulrika. So I will not go through these points in detail, but I just want to kind of ask you all to zoom out and look at what we have done the last couple of years and again in 24. We improve our earnings, we have growth, and we declared our intention to do this very transformative acquisition. And that is now concluded in the beginning here. But of course, all the work has been done during 23 and 24 in that process. It has really been an eventful 2024. I'm super proud over what the teams have achieved across ITAB. I repeat again what I said previously that this improvement that ITAB has also HNY have improved their 24 compared to their 23. We are looking forward to sharing much more details around that in the future. We're very busy now ourselves getting to know the colleagues and understand all the numbers. than setting plans for the future together. There's so much talent in both our groups, and we're really looking forward to putting all that talent to work and deliver increased value for our shareholders and all our employees and customers. So I just want to do that because I think Ulrika presented really, really well the movement of our figures. And just to mention maybe that because I've gotten some questions on the quarter that people feel worried that it's slowing down a bit. But I have to remind everybody that we are a project based business almost entirely. So every year we start from scratch almost, and we need to fill up by winning all the projects. And usually we follow a year cycle, but when it comes to the more technical and digitally advanced products, they have longer sales cycles. And when they come, they usually have quite rapid implementation. And we had this 25 million euro deal that we supposed to deliver over i would say the majority of 24 but but it actually happened at almost everything during the last two quarters of last year and that's why we have very high comparable figures so we feel really really confident we we are according to our plan that we presented to um all of you guys and to our banks when we stepped into the acquisition of HNY. So we're basically spot on that plan. And we're really looking forward to delivering more earnings per share to all our shareholders going forward. So by that, I think we open up for questions and answers.

If you wish 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 Erik Sandstedt from Kepler-Chevreau. Please go ahead.

Hi there. Erik Sandstedt here with Kepler. A few questions. the quarter to start off with and then a couple on H&Y. If you look at the sales growth, it's accelerating in the quarter up some 10% year-on-year versus Q3 of 4% year-on-year. So we still talk about a pretty tough market out there, but what's explaining the improved growth rate in Q4 versus Q3 year-on-year?

Now, Ahmed, you're right. I mean, we are maybe not completely consistent, but we have seen a good good delivery of mainly interior solutions and that's why when you I mean if you look at the growth it's great if you look at the profit it's not so great so there is a mixed shift between I would say interiors interior products lighting and retail technology that is that's behind the profit change then when it comes to um if we see the market picking up i think this has been in in the books for for a period that we have seen this growth coming on the interiors and it usually follows the year cycle um so um i would say that's that's our take we i mean we have good hopes that we will continue to have a positive development uh going forward but also recent developments this autumn is also putting some some question marks if the recovery in the market is coming or not. I think it was quite positive feelings on the market after summer, and then there's been some more hesitation coming in from November and onwards. And I think everybody understands the uncertainty in the macro climate with tariffs being discussed and the trade war is creating some uncertainty when it comes to pushing the button for some retailers. But usually the sales cycles are quite long. See it happening so fast.

Yeah, but is there any pricing in the numbers? Have you raised prices or is it largely a mix of tests with more interior solutions?

I would say it's the mix effect, I would say. Ulrika, would you like to add some nuance to that maybe?

No, I think after a tough year with inflation, of course, we have increased the focus on price increases and we make sure that we follow the cost developments and are very quick to adjust our prices if necessary.

but otherwise i agree with andreas it's mainly the mixed effect if we look at q4 and it's also important to remember that the majority of our sales is interiors so they have a much higher weight that is important to remember yeah

I'm still a little bit puzzled about the sales growth because it's pretty strong as I see it, up some 10% and much better than in Q3. But still, you say the market hasn't really moved. If anything, maybe become a little bit more uncertain in the latter part here. So you've had some pretty strong development in the interior solutions business then, basically.

But I think that when we express our view on the market, we say that it's cautious. And I think then, of course, that doesn't apply to all customers and all parts of the market. But those who are more, I would say, capital sensitive, they were a little bit optimistic in the beginning of the autumn and are a little bit more worried now because there is more uncertainty. There are quite many retail chains out there that have high debt, and they are more sensitive when the macro becomes a bit more uncertain. We clearly see that decision-making has changed. So it's not a uniform picture. It's quite a complex landscape that we're in, and we will try to become more clear in the coming reports in how we judge the market.

Fair enough. And then I'm a bit curious about the gross margin here as well, because you just mentioned it's a project type of business and interior solutions doing quite well as well, which I guess is a lower margin business in terms of gross margins. These are the retail tech and so forth. But could you say anything about the development on the gross margin in the year, or sorry, in the quarter, if you exclude this retail contract that you delivered in Australia in Q3 and Q4 last year. I'm just trying to get a feel for sort of the underlying gross margin development here in the quarter.

Yeah, I think if I do a kind of high level explanation and like you can add some flavors, but like I just mentioned that we see a margin improvement in the underlying business. So during this year we see that improvement. So in I would say also in solution areas outside retail tech, we see a margin improvement. And that has been good because then since the mix has changed, that has been necessary. So it's, that is the, I would say the picture, it is really the mix effect, but underlying business has improved the interior business. Like, would you like to add some more detail to that maybe, or?

Yeah, since the interior business is quite a big part of our business and also production. So of course, the increased production utilization also gave a positive contribution to gross margin when it comes to increasing that.

Yeah, okay. Thanks. Then just a few questions on the upcoming acquisition here. Firstly, did you say anything about the HNY performance now in recent times? Maybe I missed that, other than what you have already communicated. And will you not provide any performer data before Q1 at all?

No, we will not provide any performer data until Q1 because Q1 is just around the corner and we are now busy working on the numbers ourselves. And I think that's the appropriate time to do that. And what I did mention, it was not put in writing on any of the slides, but I mentioned it in my voiceover, is that We have improved our results as ITAB in 24 compared to 24. So we have growth and improved profitability. And also HMY has growth and improved profitability compared to 23. And what we communicated previously when we declared the internal acquisition that is now finalized since a week was their 23 numbers. So we've had a positive development on our side and also on the HNY side. And we are exactly where we plan to be right now, which feels really good.

Thanks. And then in terms of synergies, I guess it's early days here, but do you expect any synergies already now in 2025? I guess the material part will be a little bit later, but do you try to maybe split it out between the years, roughly?

Yeah, I will not give a forecast on that, but of course, we are starting immediately with the work. So we are planning to do... several procurement waves where we go through the most important categories and try to improve our conditions and what's important is also that those improvements end up on the bottom line so they don't disappear in in a move that the benefit moves to our customers. Of course, we want to offer also our customers improved that we become more attractive. But but it's important for us that savings end up on the bottom line as well. So we expect to see the effects of the synergy work already this year. There might be might be some sgna savings as well and we clearly see that there will be some commercial upside as well the commercial upside might take a little bit longer but we but we see a clear opportunity especially when it comes to our high margin products that even though the sales processes are long especially if you do talk about the big deals but there's there's quite a lot that you can do also when it comes to a little bit smaller deals and to act on opportunities and

already this week.

Excuse me, there's somebody not muted in the background.

Yeah, sorry.

Maybe, maybe I got confused. I hear somebody speaking in the background. So that's where the synergies will come from.

Thank you.

And then just one final question, if I may, in terms of the acquisition here. I mean, you've done a lot of acquisitions. iClub has done a lot of acquisitions over the past decade or so under different management. But just trying to get a feel for, you know, what have you learned during these acquisitions? What will you bring with you in terms of, you know, synergies, integration, cultures, and so forth? Just a bit curious to... know how you think about this going forward?

Yeah, I think that's a really good question. I mean, if we zoom out and look at ITAB, I mean, over the years, I would say, I mean, I've been now in the role for five and a half years and the management that was before me I mean, they were really very successful when it came to driving ITAP's growth through acquisitions. Maybe not so much through organic growth, but through acquisitions, they were really fantastic. So between 2008 and 2018, item tenfold in size, so from 600 Swedish million to six billion over that period. And there were many, many acquisitions that were made. What did not happen during those years was the integration work. It was basically the companies were not integrated. The only thing that was done was a financial consolidation because we list and report our figures. so what we have been working on the last couple of years since i came is really to i mean that's the background behind the one itab so the one there is really to to become one group with one set of learning one way of working one way of leading and one culture and one strategy so that's what we've been busy working on and during my period we have acquired uh hny becomes the third acquisition um the two first we had a clear idea a strategic idea why we wanted to do the acquisition we also had an idea on how to do the integration before and both those acquisitions of chefla retail solutions that is today immola retail solutions and check mark from finland we had a clear idea about how to integrate and get the synergies. And both of those have been, I would say, successes for us. And that's exactly how we've done now with HMY. acquisition. Of course, here we talk about a completely different scale. This is 10 times larger than Cefla when we acquired their retail solutions division. And we talk about a company that's just as big as ourselves and with as many coworkers. So the scale here is very different, but we've had the same approach that It's a strategic fit, we have made a plan, we have a clear idea on where the synergies lie and how to integrate the company. But of course, we need to stay humble and realize that we have still a lot to learn. And we have many many brains that needs to be connected and a lot of talent that needs to be connected. So we need to empower the organization to drive these synergies, but we feel very confident that we will be able to deliver this 30 million euro because we have potential that goes beyond, but this is the promise we have made and that's what we're going to deliver. But please also remember the work first needs to be done before the synergy will come. That is important to remember. Great. Thanks. Thank you very much.

And sorry if I lost my next question comes from Karl-Johan Bonnevier from D&B Markets. Please go ahead.

Yes, good morning, Andreas and Ulrika. A couple of follow on questions to all the good answers you've already given. If you're looking at the project that you have now going into 2025, and compare it to how it looked a year ago. I guess a year ago, you still had quite a good mix in that bag. Do you see that pay-to-fixing result in two-thirds of what

The connection was a little bit bad, but I understood your question as if I mean how we view going into 25 versus how we viewed going into 24. So going into 24 a year ago, then we had these large exceptional orders that we're still delivering on. So that's maybe one difference, but we expect to continue to be able to find similar types of deals, maybe not at the same scale, because that was maybe a one off, but to have more an even flow of these types of deals. So I would say that, of course, we are meeting an all time high Q1 last year with this large deal being one of the explanations behind. But we believe that we'll be able to continue to perform like we have done in recent time and then that the synergy work will add on to our profitability. And of course, then when we add on HNY figures to the mix. I mean, in Q1, we will have February and March from HNY that we'll see that that will impact our results. We are optimistic about, I mean, about the future. And we just want to remind everybody to remember that we are really a project based business and industry, and that it's sometimes difficult to look quarter to quarter. You should zoom out and take a perspective over the years and see how we improve. I would say turnover, profitability, cash management, capital, all of that good stuff. That's how I hope everybody takes the time when they look at us. Since it was a bit bad connection, I'm not sure if I answered your question, so please let me know if you expect something more from me.

Sorry, I was totally disconnected, so I just heard your end of the answer, basically. yeah okay so yeah you seem to have a bad connection so I hope I'm sorry about that but I'll go back and look at the log afterwards yeah if you look at the you alluded to that the details might have been slightly more cautious now of like looking at the place in order have you seen a big change in the rfp activity and the things they are looking for and the quote levels and all the kind of activities going into this year um do you hear better no i'm sorry i i couldn't barely hear the question no um

we it's a bad connection so i don't know if you can if you can try to move a little bit or and repeat the question because we we only got parts of it so and i don't want to maybe once again answer something that is maybe wrong no i'm so sorry i'm so sorry i'm not sure why this is but if you look at what what retailers are doing the kind of contact you have with them for the month you

alluded to a more cautious view at this stage that maybe that is still after the summer. Has that transpired in different kinds of things they're looking for or levels of quotes or how do you see it?

I mean, it's unique for each customer because they have their own kind of financial situation, their own performance, you could say. But if I zoom out a little bit, you can say that during 24, we have seen that the Nordic region have been quite strong for us. We have seen that the UK have been much more difficult. And there are also some I mean, for those who follow UK retail and especially the grocery side, you know that there's a lot of dynamic changes that have been going on and private equity uh, situations and so on where with high, high debt ratio on some of these. And so that means they, they are really, really careful with their investments and they, they mainly do the things that they are forced to do. So they're kind of in hibernation, some of them. Um, I would say that the start of the year was, um, in, in Southern Europe was a little bit more tough and, and then it was a good comeback towards, um, the end of the year. um if you look at discount retailers they are just pushing forward and we have several of those so they don't seem to mind the macroeconomic climate because they're they i mean nothing beats a good price so they continue to be attractive for the consumers and it's more those retailers that are maybe already a little bit challenged in their business model and in maybe their financing they they are the ones that are hesitant and so maybe that gives some more flavor on the market. But looking forward then, I do think that we are, in terms of business cycle, I think that we are not in the middle of a business cycle in terms of macroeconomics, we are certainly not on the top side. So we believe that we are on the bottom half of the business cycle when it comes to how attractive the market is. So we have high hopes that if we get more political stability, then we think that investments is going to become more steady, so there will be less variation between different sectors, and that will then affect us with more even and more predictable results.

Excellent, thank you for the extra cover there. And a couple of questions for me as well, on the whole ME as well. What kind of client feedback have you got? What customer feedback have you got on the proposed joining zone?

Yeah, I mean, this is important. I mean, going into this, of course, we're worried that some customers might react negatively, but the reception from customers have been overwhelmingly positive. There's been maybe a handful of customers that have expressed some, maybe not excitement, but more questions on what will happen and what about me and my contacts. what will happen to my prices and how are you going to deal with this but over but the large majority has been overwhelmingly positive and our biggest customer that we were a little bit afraid that they were going to be maybe a bit hesitant they have been one of the most positive that we have so we this has been brilliant for us we already we already know that there is so much learning for for both both HMY and ITAB and now when we're one group there will be a lot of opportunities for us and in the text of one of the slides in the deck today and I can just highlight that we will continue to operate as HMY in the markets where HMY is the strong brand and we'll continue to operate as ITAB in the markets where we are strong, but we will of course cross sell and use and leverage each other's experience and know-how as a group. So all that good work is now ahead of us. So to steal from one of my previous employers, we have a glorious future, but most things remain undone.

When I listen to you, how you describe the integration process, it sounds like, as you alluded to, you are very complimentary. But for me, it sounds like, even if it's a big process, it sounds easier if you put it like that. Might be the wrong word for it, but it's not the most complicated kind of integration process that you're now starting.

I mean, I would say that, I mean, we need to respect this because it's people, it's emotions, and the scale is big. So complexity is big. But in terms of, since we are so complementary in terms of where we're strong, I don't think that it will be a big distraction, so to say, for customers or for coworkers in the majority of our markets. And then maybe in parts of Central Europe or maybe in UK, where it's not so clear who is the dominant part in some markets in Central Europe. There, of course, there might be some more motions and some more change management, and we need to allow for more time so people truly can feel comfortable to give their best to the integration work. But the overarching feeling we have right now, especially after the first week of doing a bit of a road tour and meeting people, is overwhelmingly positive. But there's a lot of hard work that we have ahead of us. And I just want to remind everybody that synergies comes after the work, not before. So we need to do the job. And those that follow us the last couple of years, you know that we have been consistent when we make promises, then that is our focus. And then we have consistently delivered on our promises. And my intention is to continue to do that. that will lead to quite a very good growth in earning per share for all our shareholders. And I think that's what everybody should be hanging in there and be long-term. I mean, that's up to every shareholder, but I do think that this is not a quick fix. This is a several year project that we have ahead of us. But also remember that our industry is fragmented. Even with this combination, there is plenty of room for the new group to grow in Europe and also to have appetite maybe to do things outside Europe, maybe North America and so on. But first we need to eat up what we have put on our plate before we put more on that plate.

excellent and on the same topic looking at the 30 million euro in synergy potential for me procurement and cross-selling doesn't imply that it will take maybe a lot of investments in non-recurring items and similar kind of things to realize that but it's more of a grinding out process that it might be say until that's reported 2027 before you have the full potential coming out

Yeah, I would say that, I mean, I would agree with you that there's not, if you just look at procurement and you look at maybe cross-selling, then the costs of realizing those images is not so big. But if we see that we need to do, I mean, structural changes in the group, then of course that is usually connected to quite large costs. When we've done our plan, we have also included those aspects into our plan and into our financing and the agreements that we have. But we do believe that the vast majority of the cost savings will come from procurement. We more than double our procurement volume. Um, and, um, uh, we just need a couple of percentage saving on that volume to reach our targets. So, um, we are busy, uh, our procurement teams have started the work, so they're busy and we will, we will go through all our categories and deepen our relationship with our suppliers and, and offer opportunities for our suppliers to be part of this journey. And, but, but in exchange, of course, we need to have better conditions, um, and better payment terms.

so on that note if you come up with a structural improvement potential i guess the new scale that you have in the combined volumes and everything should produce also structural opportunities would that come as an extra on top of the current energies that you have highlighted if you go down that route i mean i mean it's too early to say but but we don't have a large structural changes in our

plan, so that can be good for the shareholders to know. But that might change when we get wiser from exploring the company together. And depending on how the macro climate and the industry develops, we think that we mainly have opportunity for the current footprint that we have. But as always, we need to optimize. That's clear. But if there are changes that affects people and so on, then of course, that also comes with costs. So that's how we are planning. But the focus we have is mainly on procurement, commercial upside, and then of course, there will be some SG&A connected to efficiencies that we find. So that's how our plan looks like. And we don't intend to spend more costs than absolutely necessary on realizing these synergies.

Sounds promising. When you look at the business mix of HMI, do you feel that they have the same kind of project-based business as you have? Or do they have another type of element as well with system sales or maybe more recurring revenue than you have?

No, I would say that probably ITAB has slightly more recurring revenue and more since we have more retail tech. So in all other aspects, HNY and ITAB are really similar where they have a stronger track record last couple of years driving organic growth and working with, I would say, large brands, very famous brands. that they are strong in developing and delivering to. And we will be able to come back and tell more about that in the future when we do our reports.

Excellent. And just one question also. You started your own ERP project upgrade last year or maybe two years ago now. How is that going to go ahead in these kind of new circumstances when HMI comes into the equation as well?

I mean, that doesn't change because on the ITAB side we have 40 different versions of ERP and we need to consolidate and drive efficiency. So that ambition remains. During this year, we are going to see the first implementation of our new ERP. The good thing is on the HMY side, they are much better consolidated digitally. So we don't double the burden of the change there. On the contrary, there's a lot of learning and they have come further than what we have done. So there's a lot of the positive sides that we aim for. We have seen proof within HMY, so that is really reassuring. But as everybody knows, it's a lot of work and we've been working for a long time preparing and we still have some more work to do before the rollout starts. But that's something that we're really focused on. I think we have reached 11.30 now. Sorry, I interrupted. Matt, do we have any more?

Just one time for me, then it's possible. So, just to give me a view here on, obviously, coming back with integrated numbers and this kind of thing from HMY and so on. When I look at the numbers you have given us for the 2023 Is that accounting standard the same as you use, so to say? So that would be a good proxy for me trying to do some sort of early integration of HMI numbers until you give us the full catalog of numbers.

Yeah, HMY, of course, is accounting or in French GAP. What we have tried to do in the DD is to make a high level adjustment based on their numbers, but it's not 100% translated to our way of reporting, I would say. That is something we still need to do reporting for Q1 here.

when you look at it coming out in your cat in your your kind of setup of accounting rules it's still an operation that at this stage would generate about five percent margins yes yes i would say that it's it's comparable uh high level it's comparable

But let us come back to that because those figures are 23. So let's not spend too much time on that now. So in Q1, I mean, that is soon, not too far away. We are going to come back and have much more figures on this. So you have to have some patience until then. Sorry for that. But I don't know if you have any more questions.

Good luck with it.

Thank you.

Yeah, thanks, thanks. It's a lot of work. Mats, I don't know if you have any more questions.

Thank you for that, Koyi. We have a few questions just quickly from the webcast as well in writing. The first one, will you change your EBIT target for 2025?

Please say it once.

Will you change your EBIT target for 2025?

No, no, no, we will not change. And I was confused. I mean, so the financial targets will not change. We have a financial, I mean, if we do change our financial targets, then that will be communicated. I mean, in a combined way. So, I mean, our seven to nine percent, I think, over a business cycle, I think is a very relevant target. And we now we landed last year on seven we we landed or 23 on several on 7.7 so and and of course now we we bring in hmy we know the starting point is uh slightly behind us in 23 let's see what it is in 24. um of course we know some things that we that first needs to be validated before we can share it but we're looking forward to sharing that with you guys so we will not change our financial targets as of as of now there might be a good reason to do that in the future but for now our our targets are really well suited okay the next question will you publish q1 in sec or euros and i think the answer there is we will publish it in sec

we won't change the currency. I think that's correct, Ulrika.

Yes, no, we will not change for now. And that's something we need to evaluate going forward if that is something we want to explore. But for 2025, it will still be in SEC.

But it's a relevant question because we are so dominant in euro and so we are evaluating that but that takes time because it has a lot of consequences if we change the reporting currency but I understand the question.

Yeah. The another question, Morgan, the margin expansion has been driven by gross margin. Why has there not been any scalability on selling an administrative expensive? And could we expect it to come on onwards?

I mean, the effects from bringing the two companies together, that first needs to be worked through and executed.

It's not, I interpret it, it's concerning ETAB in 2024. So it's not connected to the acquisition.

Yeah, okay. So I think that we have continued to improve. But of course, we are also struggling with inflation. And especially on people, the inflation has been quite tough. And other things that affect SG&A, it has been quite tough. Yeah. But we are super focused on driving efficiency.

Yeah. How should you think about the goodwill amortization from the acquisitions? We don't amortize on goodwill, so I'm a bit uncertain on the question. So maybe we could get back to that.

Yeah, because that will be something that we look into when we do the purchase price allocation. So I think we don't... We haven't done that job to the full extent yet. And as you say, Mats, it's correct. We don't amortize on goodwill.

But maybe the person that wrote this question can clarify exactly what they mean. And we will answer that in writing and share with everyone.

That's a good idea. Yes. Can you talk about your balance sheet and impact of the HMI acquisition? Is it all in 2024?

No, it's not in 2024 because the acquisition was made last Friday, so the last day of January. So our new balance sheet will be communicated with the Q1. But we can say as much that nothing has changed when it comes to the purchase price. All conditions have been met. And so we have paid what we said we were going to pay. And of course, you can see that ITAP's financial position was improved due to the strong cash flow and capital efficiency.

Okay, thank you.

Yeah.

Could you give in a color on HMI's gross margin, same, higher, lower than ETOBs?

I think I gave color before when I, we cannot give figures at this point. We have given 23 figures and we will come back with the figures later. But we said that margin and growth have improved and then we'll come back to what that means.

And I think that goes for the last question as well. Can you remind us what the new group looks like in 2025 in terms of sales, EBIT, net profit and net debt at the end of 2025?

No, we cannot do that because I don't have a crystal ball, but we know which plans we have, but we don't give forecasts in that way.

That concludes the questions we've received in writing.

Very good. Big thank you to everyone.

Thank you.

Bye-bye.