ITAB Shop Concept AB (publ)

welcome to etab shop concept q3 report 2025 presentation during the questions and answers session participants are able to ask questions by dialing pound key 5 on their telephone keypad now i will hand the conference over to ceo andreas elgard and cfo andreas helmerson please go ahead

Thank you very much. So hello, everybody, and thank you for tuning in and listening to our interim report for the third quarter this year. So I would like to start with just highlighting that I am super proud and happy to be sitting next to Andreas Helmersson, who is now our permanent CFO. We sent this out to the market as info recently. So I just want to say congratulations and we're in safe hands here. I also want to say a big thanks to Laika that now stepped back as CFO and to take care of herself. And when she comes back, she will be a great asset for ITAB moving forward again. So let's jump into the report and as always, I will focus a little bit on general ITAB information and then Andreas will go through the numbers. I will hit some numbers as well, but that's how we usually do it. So just for those, if there are any newcomers to this, this is ITAB Group at a glance. All the numbers are pro forma for 2024. Important to know. So we have 24 production facilities spread over 17 countries from Asia to over Europe. all the way to South America and with activity, I would say, in all continents. Of course, Europe is our main market. We're quite Europe-centric, but we really have a wide footprint. We have 40 plus countries that we operate in. We are approximately 5,400 people. And together, we managed to have a turnover, our revenue above 13 billion Swedish. So that's a little bit. And of course, we help retailers to realize their consumer experience that they want to have, be it inspirational, convenient, efficient. And we do that with our solutions for the different retail sectors that we're in. So it is, of course, a lot of interiors, building physical stores, and then we add value added to that through retail technology, retail lighting, and also services and solutions that we package As I mentioned, we are really focused on Europe and we are by far the largest company in Europe and we are a leader in Europe. And we have this global reach with activity across the world when needed. We follow our customers. The grocery sector is the biggest sector for us, followed by do-it-yourself home improvements. And then comes fashion, apparel and then other. Maybe moving into next year, it will be time for us to report this slightly different because we see some movements here in our sectors and there's quite a lot in other that may be qualified to be highlighted a little bit clearer for the future. We work with the most leading retail chains in the world, not all of them, but a big chunk of the leading retail chains across the world. Just some highlights on the third quarter there from my side before I hand over to Andreas Helmersson. So we have a really strong profit development in this third quarter and we are working, focusing on delivering the synergies and we have some, we already have some synergies in the bank. Of course, we'll see the full effect more clearly during next year and into 2027. towards the end of 2027, we will have the full P&L effect of the 30 million euros of synergies that we promised our investors when we acquired HNY. um so in the third quarter we have a turnover of approximately 3.3 billion swedish um with the sales growth if we adjust for for currency the vast majority of our sales is of course in euro and so we have it's important for us to follow the the currency we have as a as as mentioned a very strong result this uh this quarter with 260 million Swedish in adjusted EBIT and that's a growth of 13%. When you do such a big deal as we are busy with HMY, when you acquire somebody the same size as yourself, it's very, very important to focus on people. So we have a very people-focused approach to the integration. We are also very focused on our customers. So to make sure that we deliver value quickly and we protect business continuity so we don't get, I would say, too introvert working on integration and forgetting about the market. So those are two of our really... really important priorities but also then that's no excuse to not deliver on on our promises for the future and we have a very clear plan for the future with these synergies and how we should release them and we can I think we said this in the last quarter and I want to repeat that we see clearly bottom up that the synergies are definitely there and we will be able to deliver them. Purchasing will be absolutely able to do and also on I would say efficiency and commercial upside. So by that I hand over to Andreas.

Thank you Andreas, thank you for the welcoming and good morning to everyone. To give a representative view of the development of the group, we have mainly focused on the performer development in this presentation. In the interim report published online, you will of course find all the details, including reported figures with HNY consolidated from 1st of February. Zooming out on our historical performance, you can clearly see the significant impact of a recent acquisition of HNY, now reaching 13.5 billion in sales and rolling 12-month growth of 2%, including negative currency effects. In Q3, currency adjusted growth is up 4%, showing a stable development. And in Q3, as Andrea said, EBIT adjusted for non-recurring costs, but also the amortization of acquisition-related intangible assets amounted to 260 million Swedish, and that amounts to 7.9% margin, which is up 13% versus last year before. Zooming in on the financial highlights for Q3, we can see that although net sales is down 2%, in fact, up 4% if excluding the currency, Adjusted EBIT is up by 13%. Q3 has been impacted positively by rollouts of technological solutions about price and cost control, which has really been a focus, prioritization of profitability before sales growth, and turnaround activities in France and Turkey, as well as early synergy effects from bringing the two organizations together, including fixed costs, but also from consolidating our spend. Focus onwards is to execute on the synergies as Andrea spoke about and majority of those synergy realisation is expected to happen in 26 and 27. As well as improving our cost efficiency even further and continue to grow our profitability in key markets such as France. If we look at our net sales by customer group, we can see that our largest sector grocery is stable, and we see strong growth in home improvement, especially in the quarter, 43% up, and that is especially driven by key clients and long-going relationships that we have in Southern Europe. Fashion had a strong Q3, but it's still behind very strong comparable figures of last year. And similar to the other segment, which is also a bit down, these are two segments where we in last year, 24, had exclusivity on a few larger international rollouts due to design and development work that we have won. And the largest sectors in other, which Andreas referred to as well, can be good to mention is currently pharma and beauty, leisure and sports, and also consumer electronics. In Q3, our net sales for Northern Europe has declined with 16%. And we have seen this also in Q2, and it's especially driven by grocery sector in Denmark and Finland. And these are markets where we had large rollouts during last year with some of our key clients. But it's also a reflection of the customers are delaying some projects and being somewhat hesitant to committing to plants. Q3 has been strongest in Central Europe and especially rest of the world driven by performance in Asia, Australia and also US, especially with our technological solutions. Our operating cash flow for Q3 is minus nine million Swedish. And rolling 12 at 287 million Swedish, which is not pro forma, is impacted negatively in the quarter by network and capital development, and especially by accounts receivables. Accounts receivables are impacted by a normal seasonality, which we normally see in Q3, but also by extraordinary strong sales in the vacation period, July in the Northern Europe and August in Southern Europe, leading to pre-production in order to handle these high volumes. We have also accepted projects with high profitability on behalf or expense of longer cash conversion. We currently don't see any overdue increasing with any significance and the normal seasonal pattern of networking capital speaks towards a stronger inflow in the next quarter. And similarly to last quarter, we'd like to remind you zooming out a bit from the Q3 result and returning to what has previously been said and communicated about our plans with the merger of HNY. During 23, legacy ETH had EBIT margin of 7%, and legacy HNY around 5%, leading to a combined margin of 6%. And this is very similar to where we are today, rolling 12 pre-synergies. And although we had a good start in our new group on realizing these synergies that we have communicated, the majority of these are expected to be realized in 26 and 27. There is a strong strategic rationale for this acquisition, as well as it being financially attractive. And with the synergies identified at 30 million euros, increasing our net income with 90%, with only a 16% share dilution, all other equal, this indicates a significant earnings per share growth. And with that, I hand over to Andreas Helgård again.

Thank you Andreas. So just to round this off, I just want to remind everybody that we are of course working in the retail space and we build physical stores and it is really important to remind everybody about what is going on in retail. we are all consumers even if we sometimes forget that but we are all consumers and we all see in our own daily lives and when we look at our our parents and our children in how the shopping behavior and the shopping expectations and the importance of being guided and led and seen is influencing how we behave and this is of course a global trend and and this poses new questions and and sometimes opportunities and challenges for retailers that they have to change their In order to stay relevant, they have to invest in differently to what they did in the past. And the past was really dominated by rapid expansion, doing a lot of the same in a very predictable way for us as an industry. And since a couple of years back, and this is just continuing to accelerate, being agile, having short lead times, being able to react, being able to help and guide retail chains so they get the most, I would say, most attractive business cases delivered to their operations is what is key. And that is what we have improved the last couple of years. And that has been behind our success. our, I would say, improvement and profitability. So that is this is super important. And this is it's still ongoing. It's nothing nothing that is kind of settling. But what is very reassuring for those that invest in in us is that there is more work than ever. It's just that the nature of the work is changing all the time. So we need to stay agile and on our feet and then also reminding everybody that it is projects and programs and they they they don't always follow the way that we report our quarters. They come when they come and that's why sometimes a quarter can be very strong and sometimes a quarter can be a little bit less strong. And that's why it's important to look at us over time. Many retailers are really struggling with this cost versus experience dilemma, the need to stay relevant, the need to invest, and at the same time, the need to take out costs. When we help them doing that, then we have a really strong case. We call that our value proposition. We started focusing on this a couple of years ago. to really be outcome based. So not talk about benefits and features on products, but instead talk about what is the outcome that our solutions deliver in terms of the desire to consumer brand experience, the increased sale or conversion that a solution can help to drive, sharing best practice across industry, across sector. And if we do that and also improve then the efficiency and the service level, and at the same time can reduce the operational cost, we are a very, very attractive supplier. And we can see that that is how we have managed to improve the last couple of years. ITAB of today is really helping retailers with two things. One is, of course, the consumer journey and the experience that you have in a retail store. But we are also influencing retail operations. So the whole efficiency across the value chain. This is something we do already today with our solutions and our products within lighting, interiors and retail tech. And moving forward, and we are moving forward, we see that this will continue, but it will be more and more services and more and more about being able to leverage and deliver data and be able to act on insights from data that you get from across channels in order to help the retailer constantly be relevant in the consumer experience, but also to drive efficiency in the store and across the whole value chain. and to become more data driven. So we are moving forward on this clearly, and that is helping our profitability development. And this, I mean, I am about to, this is my last quarterly report for ITAB. I will, when I leave in January, beginning of January, it's after six and a half years, and I'm super proud over the teams across ITAB that First of all, how they embraced the need for change a couple of years ago and how we believed in the strategy that we made together and how we've been able to execute that. Almost everything in the strategy have been executed and delivered. So that is something that we're super proud over. But it also means that the work is not done. And even if we sometimes feel that we're great, we're simply not good enough. So a new direction going forward is required. And that direction is, of course, hinted in the acquisition of HNY that our idea of becoming even stronger, even more agile and to use scale of economy to deliver more value to our customers and our shareholders. That is, of course, crucial in the new direction we're setting right now going forward. And I'm also very happy to be able to hand over ITAB into the hands of Glauco Frascaroli as interim CEO during the period between January and May 1st, when Björn Borgman will join as the new president and CEO of ITAB Group. Björn has a super relevant experience and I think the perfect leadership for ITAB going forward. So with that I just want to say thank you for you that are listening to this presentation and also thank you for the reports the last couple of years. And I think by that we open up for questions and answers.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Carl Johan Bonnevir from DNB Carnegie. Please go ahead.

Yes. Good morning, Andreas and Andreas, and congratulations to a very solid Q3 report. Good to see you. I guess the comparisons in the first half of the year was a little strange against those performer numbers you have. So good to see you're firing on more cylinders. And on that note, Andreas, I heard your commentary on the underlying market and the variability and so on. But do I feel that you are slightly more positive on the underlying thing, but it's still more variations related on the customer level than... and maybe general market level now?

I mean, it's always tricky. As you know, you've been following us for some time now, but I mean, we still feel that this year is much harder to navigate than 2024. And so we're super proud to be able to deliver such a strong quarter as we do this time. As you all know, the windshield, if you make that comparison, is a bit... It's a bit tricky to look out the windshield. It's easier to look in the rear view mirror, but that doesn't help us when we're navigating forward. But it does help us to focus on the things that we can control. And I would say that the next two years, the agenda for ITAB is super duper clear, the internal agenda. And we know that the work we will do will add value to our customers and our shareholders. And then if we start to see a more stable macroeconomic where customers can start to plan with more confidence, that is just going to affect us positively. That is maybe my answer. So we don't really see a change in the macro or the underlying climate. It's still a tough environment.

There's more underlying patterns still, customer by customers, if you put it like that.

Yeah, absolutely. Customers with, I would say, a strained balance sheet, they are being very cautious with their investments. And then there's always customers in a very rock-solid financial position, and they are able to invest. But I would say the common denominator for all customers is that they're much more focused on positive outcomes and quick paybacks in the business cases. So that really goes across. And then, of course, those who are strong financially are maybe quicker to take decisions than those that have a strained balance sheet.

Makes full sense. And Andreas, I heard your commentary also on the working capital and being, say, a seasonal impact by build-up and so on. With the kind of prolonged cycle you see and maybe securing contracts with slightly longer payback patterns, should we expect a normal Q4 kind of release again or is that sliding now into maybe 2026 release?

No, I think we normally see a release of cash and an inflow of cash in the fourth quarter. And there's no signs that this should be different this year. So we expect a more normalized natural capital situation again in Q4.

Good to hear. Just a housekeeping question. Looking at the integration costs that you highlight at the time of the acquisition and the €21 million, how much of those has been insured by now?

The 21 million euros that has been communicated refers to integration costs, that is costs referring to our work with realizing the synergies. Then we have also had costs related to the acquisition, which is more legal costs and so to realize the acquisition. Those are almost done now. But with regards to the integration costs, we expect that to continue throughout 2026. And yeah, I think that the total amount.

And how much do you have a feeling for how much is still left? Because you have already done a fair bit of it or.

yeah a rough number i would say uh half of the non-recurring costs that we have communicated is the acquisition cost and half is the integration cost i think that's a rough test excellent thank you very much and uh andreas all the best out there and good luck with your new role at our year and i look forward to to follow you there as well so all the best thank you thank you

Okay, it doesn't seem like we have more questions over the telephone conference. We have a few questions in writing, starting with the first one. What lies behind the high tax cost and what can we expect regarding tax for Q4?

I can take that one. I think what we've seen in 2025 is that we have costs relating to the acquisition of HNY and some of these costs are non-deductible, which means that our tax efficiency is not as good as we would like to. We can also see that when we have losses in some markets, that also skews the tax efficiency to some extent. When you do an acquisition of this size and you increase debt in a way that we have done, obviously it's a journey to make sure that that debt is pushed down across the full group to make it tax deductible as well. So I think we're on a journey and we will see tax being more and more normalized, but it will take us a while to really optimize this product.

Okay, second question. Accumulated one-time costs amount to 116 million SEK. When can we expect these costs to evaporate, to disappear?

Yeah, no, I think I explained this recently as well, but I think you should be aware that the integration program will continue throughout 26 and into 27. And that we have taken around five to seven out of those 20 until now.

Yeah, maybe if I add some flavor to that. So, I mean, I think if I remember correctly, that when we communicated the deal, we said that we need around 21 million euro in restructuring costs. And I think that's a very, very strong business case to get 30 million euros in synergies at the cost, one time cost of 21 million euro, because these are then continuous synergies that we'll see moving forward. And of course, these were top down assessments and the synergies we can validate bottom up. And then when it comes to restructuring costs, I mean, they will be communicated as we take decisions because everybody will understand that restructuring cost of this nature is connected to and taking costs out and that sometimes comes at cost. So just so everybody is aware that there is a lot of work still ahead of us to to make sure that we have the most agile and efficient company we can.

OK, thank you. Then I have a question. Is it possible to quantify the respective impact of decisional conversion cycle projects, what was the main driver of accounts receivables?

I think the main driver is really the ones that we've said in the report, but also here in the presentation that they're all contributing. We've taken some decisions. which we normally see. And then comparing to last year, we didn't have as strong July is obviously in Northern Europe and August in Southern Europe. So we really had to plan around that in order for people to still have vacation and to be able to handle these large rollouts for some of our key clients. So it's something that happens in this industry because that really prolongs the cycle. We need to order material previously or earlier than we normally do. And then it stays in inventory and as work in progress a bit longer than it does, and now it ends up at accounts receivables. So, I mean, zooming in on accounts payables and inventory, they are at zero, net zero from a cash flow perspective this month. Everything is driven by count receivable, and there's no signs of overuse or so. So we feel confident in that this will be more normalized in Q4, unless we have really strong rollouts approaching for Q1, which can disturb the picture, but we never know.

Okay, thank you. HMY sales growth significantly higher in Q1 versus Q2 and Q3. What was the main, what was the reason in it? In terms of the answer, what problems do we face in Q4?

I would say the first part of that question referred to a strong growth in Q1, right? And I think it's fair to say that legacy HMY had a strong Q3 and Q4 last year, and that spilled over into Q1 as well, especially January. So they had exclusivity on some major international rollouts, which comes and goes. It's really what we're after, working closer to our clients, trying to be a solution provider, trying to lead with creativity and design. And that's what they have done and won some really large exclusivity rights for international rollouts. And margins are normally higher when you have that. And we saw that spilling in into Q1. So high comps from a legacy HNY perspective and I would say from legacy perspective, it's quite stable. So I would say Q4 is a bit higher comps than what we expect normally in Q4.

Maybe if I just, I mean, from my point of view, from the CEO share, the simplification is that during 24, ITAB had really strong first half year and weaker second half year. And then HNY had the opposite. They had a weak first half in 24 and stronger second half. And then we all know, those of you that have been following us for some time, you know that you cannot always find the truth in the comparisons. There's so much going on in this industry, but that's maybe a good reminder for people when they compare.

Okay, do you plan to report realized synergies going forward?

Yes, it's something definitely we'd like to do, but we are currently setting up the process for that and investigating exactly how it would and could look like. To some extent, it's always difficult to exactly point to what is the synergy and what is business as usual. We'll come back to this topic starting in Q4 or Q1.

Okay, thank you. Please remind us of the problems in France. What issues are you seeing and what are the measures that you have taken?

Yeah, so in the Q2 report, we kind of put the finger on France. So I apologize to maybe potentially some of our coworkers for that. But there was a number of decisions that HMY made before the completion of the deal that they made during the autumn about some new customer acquisitions and some that drove quite a lot of complexity. And in the second quarter, I would say many of these deliveries started and they didn't go really well. And what we have been up to and the team in France, because it's not me and Andreas doing this, it's really the team out there working and performing. But they have corrected some of the mistakes and the bad assumptions and worked with the customers to make sure that we avoided some of the quality problems that was in place and also some of the bad cost calculations and so on. So some short term actions were taken immediately when we saw where this was going. So those actions were taken already during Q2. And then we have started to see the effect in Q3, but we expect more from France going forward. HNY is the leading brand in France, and we expect as a leading brand that you should be a leader also when it comes to profitability and stability. So we have an ambitious plan for France going forward to invest in competence, invest in capability, and make sure that we are super agile. also in France. And that's not a surprise because we knew that when we stepped into this deal, what we didn't know was maybe some of the short term problems that was caused, but the majority of those we have fixed. But of course, the long term will require some costs to be taken in order to get the effects that we want.

Okay, that was the last question I have from the audience. So I'll hand over to you, Andreas, for some final remarks.

So as I said before, I just want to say thank you to you guys that have been listening. And also if there are some ITAB employees tuning in, sometimes we also have a lot of shareholders internally. But big thanks to everybody across ITAB for the third quarter. And let's keep up the passion to integrate and keep focus on our customers, but also deliver on the synergies. That's what you can expect from us. I also then want to say thank you to you guys that have been following us in the finance market. And this is my, I think, 25th report and my last report that I deliver for ITAB. So it's always special. The first one and the last one is always a bit special. So big thanks for these years, guys. Thank you. Thank you.