ITAB Group AB (publ)

Good morning. My name is Bjorn Borgman. I'm the CEO of ITAB and I'm here today with our CFO Andreas Helmersson. I will cover highlights initially. Andreas will cover the ground of this presentation and then I will try to wrap this up in the end with our priorities going forward. This is my third or my second quarterly report. So maybe the training wheels are starting to come off today. will judge this afterwards. Stepping into this, highlights for Q3. Good quarter, positive sales and adjusted earnings performance. From my perspective, there are two ways to look at this quarter for ITAB. We can look at it either as the best quarter since bringing ITAB and HNY together. All-time high sales, all-time high adjusted profit for the quarter. EBITDA level of 7.8%, EBIT of 7.3% which is well within our financial target range between 7 and 9. So really happy with that. On the other hand, comparing this to Q3 last year, it's slightly better. Q3 for us is a seasonally strong quarter. So the quarter from a sales perspective up 2% currency adjusted and on the profit side plus 3%. So slightly better than a really strong versus a really strong quarter last year. And I think regardless how we look at this, this is a step in the right direction for ITA. If we try to step into what is the difference between reported and adjusted profit in the quarter, there is a very sizable adjustment which we communicated in September. This relates to the discontinuation of our ERP implementation. We've taken a one-off in the quarter of 220 million. It will be close to a quarter of a billion in total when we wrap this up. Why did we do this? Our ERP project for ITAB was started more than three years ago. The objective at the time was to get one ERP across the ITAB Group. This was good objective and right objective when we started this. But after the acquisition of HNY, the journey to one ERP became much longer and much more costly for the new Group to complete. HNY has a well working ERP with lots of integrated business logic. Changing this is to be compared to an open heart surgery. This is something you would like to avoid. So moving to a new ERP for only half of the business defies the original objective with the project. Based on this across the group we've done a thorough evaluation and are convinced that we can reach the original objective of bringing the group together with a combination of master data integration and common group applications all with the help of AI that was not available three years ago and I think Our conclusion is that we will be able to do this in a faster and likely also a more cost efficient way. So we are quite happy that we managed to do this. It's a big decision to make and it was a big one off in the quarter, but we are confident that this is the right way forward. Moving on in the quarter. Probably on the less strong areas, cash flow. Our view is that this looks worse than it is. Cash flow follows a seasonal pattern. It's driven by the strong Q3 we have. And it's a back heavy quarter with a lot of sales in the back end of Q3 due to vacations. And this is what is the key driver of the cash flow within the quarter. Other highlights. Synergy realization continues to be on track. Really happy with how this progresses. We see this in the underlying profitability in the business. We believe we passed the midway in terms of synergies to be finalized in the end of 2027. Highlights in the quarter. We continue to pick up cross-selling orders. This will probably impact us early in 2027, but the order intake here when it comes to retail tech and lighting in the H&Y business has been really strong. So happy with that. And the new progression we see is on supply chain where we are now seeing synergies from footprint consolidation in both UK and Turkey underway. So really happy that we start to Drive Synergies also on the supply chain side. On that I leave for Andreas to take us through the more financial details of the quarter.

Thank you Bjorn. HMY is now fully annualized and we are now only using performer numbers when going back to Q125 or earlier in our historic comparisons. Zooming in on Q3, we see a sales growth of 3% and a sustained or slightly improved margin. Adjusted a bit in the quarter at 266 million SEK relative to 258 in Q3 last year. Despite strong comparables and in a market where we've seen cost inflation growing during the first half, we've managed to sustain margins due to synergy execution and a clear focus on profitability improvement. Net profit, as you said Bjorn, is negative in the quarter due to the decision to discontinue your ERP development program, impacting your ERBIT negatively with 222 million in the quarter. And this is treated as a non-recurring cost. Net debt has been lowered by almost 300 million since last year. This is a 10% decrease, but it's up since the end of Q2, driven primarily by higher sales impacting accounts receivables negatively. And Q3 is normally our working capital peak of the year. Q3 sales growth of 3% and 2%, if excluding currency impact, is pushing up the rolling 12 line after a slower start of the year. Gross margin has improved slightly on par with last year, but also EBITDA margin is up slightly despite the recent cost increases. Zooming out a bit, we can see that product mix is stable or slightly negative from a gross margin perspective, mainly because we had a very strong rollout in the UK for loss prevention projects during 2025. Net sales by customer group in Q3, also currency adjusted, shows a continued strength in our core segment grocery and home improvement, and we have seen this trend for a while. Grocery is normally more stable and holding up well, especially in times of market uncertainty. And the US-Iran conflict is still causing some uncertainty in the market, especially around our offices in the Middle East, impacting cost inflation more broadly than that, but also delaying some of our project commitments. At the same time this drives opportunities for offering especially in efficiency and loss prevention where we are strong. In other segments it's also worth to note a growth in sectors such as travel retail and automotive in the other columns here where customers are seeing the value that ETAB can bring from a complete offering and our global presence. We continue to see a mixed development in sales across our markets Northern Europe with especially Nordics sustains its strong performance from Q1. Southern Europe led by Spain continues to grow and Italy is now finally back to a more normal level after a slow start of the year. UK is a market where we're more exposed to project fluctuations and after a slow start of the year we are now catching up and outlook onwards looks more positive. Central and Eastern Europe on the other hand has strong comparables, but it also covers a few markets where development has been slower for us, especially in our key customers in markets such as Dutch, Benelux and Poland. Looking at our EBITDA bridge year to date versus last year, we see that sales volume is impacting a slightly negative. that procurement synergies are mitigating recent cost increases on freight, energy and powder costs and that SG&A synergies are pushing back labour inflation, an extra cost for euro shop and having a positive impact overall. Next wave of cost efficiencies is planned for execution later in the year. Looking at our EBITDA bridge quarter on quarter, we see a similar trend as year to date. but with a positive sales volume impact mitigated by an accounting adjustment from harmonizing our accounting policies across ETH and HNY during Q3 last year. This impact is not seen year to date. It's also worth noting that we have an impact from the heatwave in France during the quarter causing us to close production a few days as well as from continued material cost inflation expected to impact more categories than previously foreseen. This is a key focus for us to mitigate in the near term. Our operating cash flow for Q3 is negative at 168 million, but rolling 12 is positive at 755 million. The quarter is negatively impacted by especially working capital development and accounts receivable due to a seasonal build-up. Of course, quarterly sales were up around 100 million SEK and this goes directly to accounts receivables. This is the normal pattern in Q3, where our working capital normally peaks due to extraordinary sales, but also to deliver store experiences before Christmas to our customers. As a percentage of sales, we are improving slightly versus last year. We expect working capital to normalize in Q4. Net debt is now at almost 2 billion SEK, down 10% since last year. Q3 is up 353 million, mainly driven by the working capital we just talked about, but also from extraordinary tax payments and buyout of minority owners. Regarding synergies, we are now finally past the 50% line and the total synergy potential remains. We have communicated 30 million euros per year on an annualized basis with full effect end of 2027. And synergies, as we have communicated, comes 20 million from cost efficiencies and 10 million from cross-selling in the commercial synergies Bjorn previously talked about. In Q3, we are focused on execution of supply chain initiatives in UK and Turkey and we've also planned for the next wave of supply chain initiatives as well as for our cost efficiency program. At the same time, our cross-selling water stock and pipeline has continued to grow, which is a good sign that especially retail tech, but also lighting, is now gaining ground in legislation Y. And with that, I hand over to Bjorn Borgman for Björningen.

Thank you, Andreas. I'm going to try to wrap this up with our priorities going forward. But maybe before jumping into that, I would like to take some examples of project driving sales in the elusive segment of Adder, which Andreas was talking about. To the right here, you see travel retail. This is a project with Avolta. And as a new group, we've been really successful in servicing travel retail across the globe in a much better way than we did before. So this is a Volta project in Spain. We're looking to continue to do Volta projects in the Baltics in the end of the year. So really happy with this. Another outlier you see in the bottom right This is for UK Post Office where we've been automating the parcel drop process both with units for parcel drop but also for selling the equipment and accessories needed for parcels. A long-term project going through all the post offices in the UK over the coming two years. So that gives you an idea of what sits under other. We're probably not going to get back to other. We're going to have more grocery examples in the future. But for this quarter, this was good examples of what we do. Looking forward, priority remains profit ahead of growth. Not all quarters will benefit from the volumes we've had now in Q3. A few things we are working on. We have a revised planning approach for 2027, very focused on detailed action plans on cost and margin expansion across every business unit. So this is one of the slight changes we do as a business to really focus on driving profitability. Clouds, dark grey clouds on the sky. Clearly we see steel prices coming up end of this year, early next year. This is something we have to mitigate as a business. We've been quite good in mitigating cost increases in the past. I foresee that we're going to be quite good here again, but as always with cost increases, it comes with some delay in terms of implementation. Third one, more flexible cost structure. Clearly, as we spoke about before, this is a project-based business. To get utilization up in the production end of it, we need to manage this in a different way. We see consolidation of UK and Turkey today. We're going to conclude on that and we're going to look at other opportunities to further move this forward in the future. Clearly leverage the mix effect we have on our strong retail tech business. Continue to grow that ahead of the business and the associated services is key to get mix effect and drive profitability in the future. And lastly, to make sure that we conclude and deliver on the 30 million opportunities. These things together should make it possible for us to reach the targeted 7-9% EBIT margin as we have as financial targets. To conclude, not everything is about cost and profitability. We will during this period do balance the investment to further strengthen our leading position in retail tech. It's important that we continue to invest and grow in this business. And then in the mid to long term, our ambition is to come back to drive consolidation in this industry as the industry leader we are. But that is not a short term priority for the business. On that, I think we move to questions.