New Wave Group AB (publ)

Welcome to this presentation of Q3 and the first nine months. It's nothing really that have happened on the map so to say. The only thing you can say is that or repeat is that we have started to invest in the team where in the in the US and we built slowly up the stock during a small build up in Q3 but mainly Q4, Q1 and Q2 next year. And we've been quite active among clients in the US and we think it's quite a big opportunity. It's at least what Europe has been and Europe so far has been very successful on the Timware. So we have quite big hope there, but it of course will take some time. in the different segments uh it has really not happened anything special for us uh you can say it's uh has been a very tough market i come back to that i think it's the first time ever actually when when corporates and gifts and home furnishing are down at the same time uh during the financial crash for example it was extremely tough on the corporate uh but on the other side we had a very strong for example for retail market for sports for example Now, if we take corporate, we measure it, so it can be maybe a little bit wrong, but when we measure the corporate market among our clients, not what we sell, what the clients actually sell to the end users, it's down between 7% and 9% in Q3. If we look at sports and leisure as official figures, and if you take Sweden as example there, it was minus 1.5 in Q3. And that doesn't sound so much, but then we should remember that it's down 11 quarters in a row. And On gifts and home furnishing, the index for Q3 was down 9%. And that was 9% up on 1% last year. So it has been a very, very tough quarter and more tough than I expected, actually, if you look at the general market. And then still, I'm a little bit disappointed because in some of the countries, we grow too slow. In the big ones, with big market shares, it's very, very tough to perform uh so much better than the market we do it better than the market and i think if you look at the market share i think is the strongest quarter we've done in a long time uh because every mortgage market in this three segments or let's say it's seven percent down six six seven down and we are at least two percent up if you look at local currencies uh but still i i think that in in some countries we are uh we we should be able to do it better Corporate. Yeah, I jumped those because it's actually no news. Crop shoes, we can talk a little bit about. We continue to grow. It's still that we missed distribution. We hope now to get into some of the bigger Swedish chains next year. And the shoes and tests and everything has fantastic results. And Andrea, We have the possibility so far where we are selling, we are selling very good. So for example, if you go into Löplabbet and talk with them, it's really increasing. At the same time, you can say that we are not really there yet. So if we have like Löplabbet that are a specialist that have more stuff in the shop, we are selling very good, which I can explain. But we're still not strong enough on shoes. So if you put just a big shelf in a big sports shop, with hookah, Nike, Croft, very few go in picking Croft. So we still have a long way to go there, but it's in the right direction. And we had fantastic reactions. Now we released the most technical show we ever have done. It was released a week ago in New York, where we had a pop-up store on Broadway. And it was, of course, a lot of happenings around the New York Marathon. And we were very, very happy how that shoe was received and the reactions on it. Nothing new there. That's not so much to say. One thing you can say there, and that is that it's actually a very good beer, non-alcoholic. I must say it's, okay, I'm a part of it, but it's the absolutely best non-alcoholic beer I ever have tried. But it's a very small business. I think it comes for less less than 001% of our sales. So the quarter net sales, local currencies up 2%. And again, I want to repeat that in one way, I think it's the best quarter in a very long time, according to how the market was. But I'm still not the guy or we are still not the guys that are very happy for 2%. And you can say that I would expect a little bit more, not only 10%, but I think we should have been able to make maybe 4, 5% plus, even in this climate. So it's mixed feelings in one perspective. I'm not happy. And in one perspective, if I look at and compare it with the market, I think we've done it good anyhow. Operating result a bit down compared with previous year. And the operating margin a bit down. I still think compared with the market and the economy we have around the world, it's still very, very good figures. I get the question all the time about our target for operating margin. But if we can do 13.6% in a quarter when it's an extremely tough market, 20% long term don't scare me at all. And we even have some companies doing above 20 also under these circumstances. And one thing that of course takes down the operating margin is still the acquisition we made in the UK that starts improving, but from very low levels. If we look at the sales in total and including currency, it was down 1%. And we will see what's happened now with the dollar, especially when the election is done there. Promo sales decreased 1%, retail increased 1%. Here is not so much to say. You can say that one thing that I'm not happy at all about is the result on gifts, home and furnishing. On the other side, you can say we were down 1% and the market was down 9%. So even there, we gain a lot of market shares. The different markets, US is much more positive than the other countries. And you can see there it's really Sweden where we have the biggest decrease. If you look at Southern Europe, it's more, I would say, timing effects. We will not continue to be down 6% there. So it's Sweden that are tougher. Central Europe still up. And then you can say in the US, it's more the existing business that are growing. It's not the new investments on Teamway yet. I mean, we have still almost no stock there and we can't deliver. We have just started it. So it's done by mainly Katrin Backen and Click as brands, I would say. Other countries, it's always ups and down. I think you that follows know that it's mainly the trading company that's over there and Canada. But what is down is mainly the trading business. Gross margin, I'm extremely happy with. 0.2% higher than last year when actually most companies going down in gross margins due to price decreases and so on. So if we also there include the BTC or the UK business that are much lower in the group, I think it's a record high gross margin. And of course, one way could have been to give a bigger discounts and so on and increase the sales more. But I think it's right that we would focus more than keep the margins up than on maximum the sales in a top market. External cost a bit up. There's also currency affecting it down. So the cost increase in local currencies are higher. I don't know if you have the figure loss, but No, we don't. But I think we have the costs under good control and we continue to invest in marketing and sales, even if it's a bit tougher. And I think it's now when it's a bit tougher, we also can gain market shares and we will fulfill the planned investments in marketing and sales. And there you don't see so much, for example, on personal. I think we are five more employees than last year. same quarter but you have a change there so we get more and more efficient on warehousing, administration and so on and get more and more people out on the field working on the sales. But there I think you all know that when you employ a new salesman it takes at least a year before they contribute with the positive results. Then they of course start selling a little bit but you should build a relation with the clients and you should come into it. So in the end, 13.6% in operating profit for the quarter. I don't know if you want to comment anything, Lars, about this EF-August 16 impact.

Let's save.

And we also had some special incomes previous year that we don't have this year. Yeah, I think we have talked about most of the things here what we maybe should point out is again under gifts and home furnishing even if it's a small part of the business we actually in sweden have a increase in sales and that's compared with minus nine percent in the index i'm feel rather confident that we're doing the the right things there even if it's a bit tougher Yeah. Cash flow. July, September, nearly 200 million improvement from last year. And a little bit same thing as I said last year, I would have preferred a higher believe in the coming two quarters, a bigger stock and a less good cash flow. But anyhow, it's good to see quarter after quarter that we produce a good free cash flow and we're standing still or have small increases. Balance sheet, again, record high. I would maybe even there preferred a little bit lower. and that we've been able to do some of the acquisitions and so on. But an equity ratio on 60.7%, that's almost double our own goal before the financial cash flow was actually 40. And then we raised it to, was it 35? And now it's up on six over 60%. So we still have really a lot of room to make things, but we must find the right things. And I feel more and more questions about why do you don't acquire, why don't you buy back shares and so on. But if it's any time, we should have a strong balance sheet and be prepared to really do something. It's now. So we will continue to have that until we find the right thing to do. January, September, it's yeah it's very looking very much the same as the quarter sales flat or decreased one percent but one percent was currency so it's really exactly flat yeah And there you can see that on a corporate, we are minus three sports and less than still plus two. Very much thanks to Teamwear, I would say, on that segment and to the US market. And gifts and home furnishing flat in a market that decreased quite heavy. More or less the same picture here, Southern Europe. and Sweden is the most difficult ones and the US is up also on the nine months. Gross margin on nine months, a little bit lower, but I think still we hold it quite well. External costs then up. And again, it's personal cost increase. That's mainly inflation, but you also have, again, a swift from more salesmen and less administration warehousing. And you can say one salesman is more expensive than one warehouse worker as well. But it's also, of course, an effect of the inflation we have seen on salaries in many, many countries. And it comes down to operating profit on 11.9% or 800 million nearly. And you can say that we hopefully stand in for in our strongest quarter in Q4. Hopefully I say because I I think it might can help a little bit that they cut down the interest rate today in Sweden with 50 points, I think it was. And as you've seen before, Sweden has been the most difficult country for us. But I misjudged that before. I actually thought the market should become better already in the spring. And now I'm not so positive in the short term, so I hope I'm wrong again. And it will be positive. Yeah, not so much to comment here. Again, it's the part that are not inflation is related to sales and marketing activities, especially then in the US and Germany. I'm more happy in one way in the U.S. because there, as you see, we increase sales. I'm more disappointed. I think it's taking a little bit too long time in Germany. But it's very hard to say again, because if it takes six or 12 months before it's pay off, you never know. And I think it's at least it have to pass 12 to 18 months to evaluate the investments we have done, if they will give us the effect that we think or not. And cash flow so far this year 732 million which are also of course I'm quite happy with and we need strong cash flow now and we are standing more or less still to be able to do a high growth later on. Yeah, good cost control. I think this the extra money we spend, we know what we're spending. And that's on activities or investment that should pay off. Yeah. So it's not so much more to comment there. The future we continue to gain market shares. And of course, I think we hope it should be good, very good growth from the market turnaround. If we can continue to take market shares and have a positive market with plus a few percent instead of a big minus in general, it should pay off good. Very strong balance sheet and we continue to looking at acquisitions. That was mainly that, so I open up for questions if you have any. Yes.

Thank you. Magnus Roman Kepler, Chevroë. Maybe I can start asking about your outlook here. And you mentioned Sweden, where you, of course, are a big player and you suffer with the market. But if we look forward in Sweden, I mean, we have a situation now. We have the interest rate cuts and Riksbank also flagged for more to come. We have real wages growing. We have electricity prices down clearly, price at pump down clearly. We have the amortization required, relaxation coming. We have big tax cuts coming. So I'm just trying to understand why you now switch to viewing the outlook as poorer. Is it that you see the order intake for sports retail being very soft or is it something else that you see or is it just that you don't believe in a recovery?

A few things on what you mentioned was happening after I wrote this. For example, the interest cut was today and I wrote this last week. So that was highly expected, even highly expected. I was highly expected that it was in the spring. And it didn't come and you can say, I don't want to blame the market because again, we could have done it better. But the knowledge I have last week, I didn't see any short-term turnaround. But I hope that, again, that I was wrong once more, and we will see a quick recovery. But in that way, we can say that I still don't understand why they didn't cut down the interest rate earlier and more. Because for me, it was quite obvious. I mean, we are active in so many different business and we saw the same thing all over, which almost never have happened or never have happened. I don't know. Can you remember any time when index is down on corporate home furnishing and sports at the same time? And you're talking in sports, you're talking 11 quarter in a row with that sort of But hopefully I'm wrong and all these kind of things will help and especially the interest rate that they did. But that I didn't know.

No, but so the positive take from this is that you're back down a bit because you were negatively surprised by your own outlook, but it's not that you now see, for example, on the ordering table, other forward-looking factors that you have in your pocket that reasons to be more negative.

Absolutely not. I don't know exact figures, but the orders, pre-selling orders for Kraft and X-Ping is increasing or have increased already. We have a higher demand than before. But if that is due to that people believe in the market or if it's because we take again market shares. And that's also, I don't know. And that's also why I say I mixed feeling because being 2% up in a market that ordinary in every 7% down is maybe the strongest where it is one of the strongest quarter we have done in a long, long time. So I have no worries at all about ourselves, so to say. And then we talk all over Sweden and that's probably natural or founded here and public here and so on. But we also have, I mean, Sweden is raised down in less than 25% of the sales. So of course it's affecting also the other markets.

Great. Maybe also if you can... Give your view of the Trump win and possible new tariffs coming into play. How could that affect?

I'm very used to that in the last 25 years. So it's nothing I even think about because except the production in the US, I think it's... neutral between competitors I mean if they if they raise so to say the the duty for everybody it will not change much because the production in in us in our areas is very very small it's maybe it can be a bit tougher for us than than someone that have a lot of production in South America if he is more kind to south america when he is to bangladesh or egypt to china but it's uh i don't think it will have any big effect so it will be a tax on the consumer and consumer not on your margins uh yes all right um and then um

Just to understand, you say that competitors have been trying to maintain volume and using the price instruments. You report instead a stable gross margin, at least on a group level. What is your view here? How much have competitors invested? How much are their gross margins down? Do you have any examples?

It's very, very hard to say. I mean, we can only see that when we are losing orders because we are claimed to be too expensive, especially on basic items. So it's very hard to say. But on the basic, especially on promo wear and basic, we have seen and there we also have seen a deflation in prices, which we said already Q1. not in margin but in in prices which of course uh make it more difficult also to grow them when you take down prices so that can be positive if trump raise the duties with 20 then we will have easily more easy to grow in the u.s True.

All right. I just have one final on the IFRS 16 effect here. Was this increase sort of a one-off or was this an increased run rate now, the recalculation here?

yes the absolutely majority of that is a one-off um because we had new contracts and that was also both new contracts for the correction so to say from prior quarters so the run rate as such is only a change of one and a half million or so thanks yes

Hi, I'm Daniel, Danske Bank. Just a couple of questions from my side. I mean, given the market environment and you're continuing to invest on market activities such as sales and marketing, how long do you think that should prolong going forward?

I think it will continue, but it must soon result in a higher sale so it gets less effect on the result. But we have no plans to cut down even if the economy is changing. But I think also that the thing right now is that we take the costs without seeing it in increased sales. we probably can see it probably see it in that that we take market shares. But but it's still not given. So you can say the relation between sales and marketing investments and that should go down as soon as we start growing better.

And these investments are still mostly allocated to Germany and US or I should use it? Yes. they are. And just looking at sales, sales stuff, etc. How much do you think is needed in additional to invest in in Germany and US as well?

But we can at least have, if we're talking before we have the same penetration in Sweden, we would need at least 100 more salespeople in the US, and at least 25-30 more in Germany. So it's a long way to walk, but we can't do it at the same time, because then we will sit there with a operating margin on 2% of that. So we have to build step by step. But it's a, it's a marathon. Yeah.

Perfect that's clear and lastly here just curious about the development on Tencent I mean a lot of the marketing activities is allocated to Tencent and the rebranding what have you seen so far?

Very positive reactions but again also there we don't see that it really pay off in sales in the figures we have presented it's a very small part but the reaction among clients and consumers are very, very positive. So I think the brand is still strong, but we need to really have it into real sales as well. And there we missed a bit, in my opinion.

So I assume the operating margin there is negative.

For sure. Yeah. I don't know. That's such a small part, so we can't say. But what do we have in negative results so far in terms of this year? Last year, we had a positive effect. That's when we make the acquisition, if I remember correctly. About 20 million. I think nobody that is always like that. I mean, if we don't, it's very hard to make investment in the in the brand that pay off the first quarter or even the first year. I mean, look at Croft that are fantastic today. The big advice to us 97 to 2002, first five years more public was to get rid of it and sell it because it will never run money. So I mean, intensive will be the same kind of process of scrotums.

Maybe final then on just relating to Tencent and maybe acquisitions. Have you seen any different market activities within the M&A agenda and the inflow from potential objects to acquire?

The only difference we can see, correct me if you think I'm wrong, but the only difference is that we see much more companies that are in panic. So it's very short sales processes. And we have actually said no to, what can it be, two, three, four? that we maybe would have liked to require. But if you get two weeks in time and do a full, take the decision and make a full due diligence in a US company, turn around to a billion, we can't do it because the risk is too high. So it's more and more companies that are actually panicking. And in one way, it's good because it gives more opportunities. But I mean, I think we still can be fast. I mean, we can do it on two months, maybe two to three months, if it's a big acquisition. But it's not serious, I think to go in and buy something for a billion, and you should do the full analyze in two weeks. And some have also been in chapter 11. Already before and already when we get the chance to look at them. Absolutely. Yes, absolutely. I love it. But again, you need some time. uh at least if it's big amounts i mean we have all the time to look at the possibilities compared with the risk and and if the risk is too high and we're not sure then then we should not do it so otherwise i i love that i can even go up from one sec to one dollar if it's all right but it has been i mean in the case we said no to it was we should but then at least a couple of hundred million dollars and do that like that, it's too high risk.

Great, thank you.

That was all of me.

Hi, Oscar, private investor. I'm curious about the sports and leisure segment. How do you view the sales split between promo and retail going forward? Do you expect any of these to grow faster than the other?

Yeah, I think sports will grow faster because both the main volume for teamwear and for shoes coming into that segment. But it's very hard to divide sometimes what is great because if you have a corporate client selling teamwear to a club, then it's suddenly corporate. And if it's intersport or stadium or something that do the sales to the same club, it's sports so so it's uh i think the important thing is that we're growing both thanks then we go ahead with some questions from that has been sent in to us what is the reasons for the reduction in all the first cost of buddha are you making any other changes to strengthen the business there reduction of stuff you mean or what kind of reduction question have not specified in that area then i guess it's uh the reduction of stuff uh but it's it's simply to make it more profitable or less loss making right now but to improve the result and therefore we have cut down a bit and we'd be preferred to do that again before instead of try to keeping the the demand up and and go down on gross module

You mentioned the interest of M&A. What are you looking for geographically or product-wise? What is the dream deal?

Both. If you start geographically, the dream deal is to come in to either a new market or a market where we have small market shares and a selling company or the company we require. have a big client base that we can introduce our brands to. And if it's a US company, it will be an extra bonus if they were big in the US, but not in Europe. So to say, and we'll add this version, if you look on product categories, uh we have still a lot of products that we do not represent in in in sports for example there you have outdoor could be strengthened more we have tents on there now that we slowly built on on on mainly clothing we're only clothing today you have several more segments there workwear shoes could be something where we're looking for for but something that are in the group today one way or another but small that we need to strengthen product wise it could also be for example we have today I think is it nearly 1500 clubs in Sweden and we are selling to a lot of football clubs for example but we are not selling anything else on the globe There we've already talked before that we should be able in future to develop football shoes. That I see more as a development than an acquisition, but you have balls, you have all kinds of other things around.

Thank you. Is there a need for structural changes within gift and home division given the red figures?

No, I wouldn't say so. I think what we are doing right now will give a good effect. And then we should remember that that that has really been the tough market. As I said in the index in Sweden, for example, was down 9% in Q3 and we were nearly flat. So I think we're standing quite strong there anyhow, even if I wish and we should deliver much better.

Thank you. That was all the questions we had sent in to us. Any further questions here? I think that's it then. Thank you very much. Thanks.