New Wave Group AB (publ)

Okay, let's start. Welcome to the presentation of Q4 and 2024. It has been a quite tough year, I must say, with a very tough market. I saw, for example, that the index of sport in Sweden was down in Q4 again, and it's for 12 quarter in a row. And that's actually never happened on the 27 years in public, or 26, or whatever it is. So I'm surprised because the economy don't take off at all. The only place we can see geographically are stronger is the US and partly Canada. Canada can also, depending on that, Still have quite more market shares, but I would say that Sweden is probably the most depressed country as we see it in Europe, followed by Germany. We maybe see also small positive or get small positive signs in the UK. I will not go through this. Nothing new has happened, and I will talk more about new establishment later on. uh the only thing i can comment here because i guess uh it's a lot of people that wonder what's happened with the duties and with trump and all these things and you can say i can't i can't say that we foresee those things uh but we did know that it it will be unstable uh so i'm very happy we opened up the sourcing office in alexandria in egypt so we are well prepared now there and alexandria is also handling the north of Africa which means that we can switch production quite quick so I'm not so scared of that of course it can be that we have containers on the way home and if they put in a duty from day one or next week while we have goods on the sea we can have a hit but For the longer term, I'm not worried at all about those things. We are very used to handle it, I must say, because all this time we're running away. It has been quota-free, it has been Swedish quotas, or... uk quotas and the eu quotas and the duties ups and down depending on how they classify the countries and so on and we are so well spread out today so within half a year or something we can switch to any country And I hope you don't put high tutors on all countries. But if you do even that, you can say that doesn't change anything either, because then it's equal for all suppliers. And that will mean that the consumer will pay to them.

Yeah, nothing new here. And not here yet.

Here is one very important part. We will go. much more heavily into canada and also increase what you can say organic in one way establishment so harvest printer the second biggest brands we have on corporate or promo wear will establish a stock as soon as possible in montreal where we already have a company but we don't have harvest printer there and it will be active from q4 in best case in q1 worst case and that's depending on the lead times it's as usual that we we can't sell things we don't have on the corporate side then the second launch in canada is uh uh pro job that we establish uh also a warehouse and uh or we have the warehouse we established the stock and the sales team and so on in toronto uh and that's probably it's a little bit longer lead time on the work rather than the promo wear so that's probably q1 26. We will go in in full with craft team. We're in Canada and we own stocks. Today we sell a little in Canada from the US stocks. But first of all, we see big opportunities in Canada. And second of all, we need a local stock there. You can say some of the competitors, for example, on corporate or promo in Canada have up to three distribution centers. So to run Canada from the US is not possible. But we have very, very positive reactions in Canada, recording the teamwork, as well as we have in the US. So I hope it will start showing in the figures from second half of this year in the US already. And we have already signed quite many clubs. We also are looking to, and will, but I can't say which quarter, set up another distribution center for Qlik. That company developed very, very well, but we have still a lousy service in the southern U.S. So most probably it will be in Texas. It's not decided yet, but we're looking for facilities and so on.

It's still like this that it's happened most things.

Otherwise on the craft side and the launch in the U.S. is actually the interest is over my expectations. uh it's very very few clients that are not really interested in in distributing sales growth so so i'm very happy for that it's also a market that are worth much more than in europe it's most of it is organized sites in private clubs and schools and for example a soccer player in in u.s or more or less forced to buy we can have other negative comments about that in one way, but they are more or less forced to buy all equipment and they are worth roughly double in buying per individual than a Swedish normal football club for example. So it's a huge market. Otherwise, everything is going more or less as planned on the team where we still continue to invest in a team where we really grow. The last national team was the Swedish table tennis team that we signed yesterday, a six-year agreement with. And that also I'm very happy for because table tennis is now growing very quick in Sweden, for example, and there, of course, thanks to Olympic Games.

So they will play and compete in Crofts for the coming six years.

And there you have the table tennis guys. And you can also see it, for example, now on that the interest has increased a lot because more or less every club have a queue for young people that want to come in and play. All clubs in Stockholm, as I know, Engby, Spårvägen, Hammarby, they have all lot of young people in the queue that want to train and that's of course a really big pity in one way that that it's not space for everybody and you can also notice it for example on television where i think it's the first time since valdner that that actually svt was sending the last one was singapore smash i think if i remember correctly so i'm very happy for that agreement Yeah, not so much to say. Yeah, gifts and home furnishing, it's nothing new. We are still fighting. It's the toughest area for us. And I was not, of course, happy with last year. And here we have the same problem, you can say, as we have on the sports side. It's decreasing sales among all the clients.

So there we will have to fight.

The quarter, we increased 3% and in one way I don't think I should be CEO if I'm happy with 3%. On the other side to make 3% in this market I think is very very strong and we continue to take market share all the time. The PromoSight challenge up 5%, operating results 56 million less than last year, which I think is a very, very good result under those circumstances that we also continue to invest in the markets and especially Germany and the US that continue with the warehouses, optimizations and so on. So we don't slow down those investments. and operating margin 16.4 percent also i must say i'm not happy with but again under the circumstances sales we have discussed increase that's all said already operating segment You can say promo was done up that sports and leisure is up 6% is quite fantastic in the market that are down, down, down, down, down. So there I'm very happy. Gifts and home furnishing a little bit down. If you look at the areas, US 3% up, Sweden 6% down, and I think it's two reasons for Sweden. The one is, again, the market and the economy. The second reason is that we are much more difficult to grow or defend the sales in a country with so big market shares as we have here. It's actually much easier for us if you look in other countries where we have much smaller market shares. Central Europe, plus five. I'm very happy with that and also rest of the Nordic countries is plus eight which I think is a very strong number and that's especially Norway that have a very good growth finally you can say that investments that we did inside skiing in or where we took the biathlon team the cross-country team and all the combination finally pays off in sales it took a longer time than i thought but it's not the easiest project in the world on on skiing because you have so many norwegian brands in it now people start to think craft is norwegian and that's very good As I think Europe minus four and the finally other countries, which is Canada and trading plus 38. There I've said every report that the trading business is very up and down. It's a few big orders. Sometimes they come in one quarter, sometimes the next quarter. So. uh it looks very good but it's not as good as it look and another quarter when it's not good it can be better than it shows because we have it in order but not delivered and as we see then us is the biggest market for us today uh if you look at the gross margin 50 percent uh there i'm uh quite happy actually even if it's lower than last year i think it's very very very stable or to have 50 in in this market i think it's really good and i was a little bit afraid that it could have been lower because as as i said both i think in q1 q2 and q3 reports we have a price pressure down uh especially on the basics and basics is as you know a huge business for us with t-shirt polos sweatshirts and so on so they're not quite satisfied. Otherwise, external cost, I think it's under really good control, both the external and personal costs if we're look at what the inflation have been the last one two years I think it's good control I'm very happy for the warehouses we already have done with automatization and the warehouses that are in progress for that because that that's one way to to really increase efficiency and it comes down in a operating profit then on 462 and the significant lower financial costs 27.6 against 38.1 so it's down if i count quick nearly around 25 percent and the profit per share then on 2.6 Here I think I have already mentioned most things, but you can say that Q4 was actually a bit stronger compared with the quarters before. So, for example, again, I'm very, very happy with the sports leisure and those figures. And it also shows that I think craft is also in the long term in a very good way. Cash flow, 413. No, sorry. 545 million, which is also, I think, good. And if we look at the cash flow for the year, we will do later. The balance sheet, again, extremely strong. We had a goal to have an equity ratio on 30% before the financial crash. And after our experience there, we raised it up to 40. And today we are, I think, on 63.7 or something. uh and 7.2 billion in own capital and this of course gave us the possibilities to continue to look after acquisitions and hopefully do some acquisitions I think I get questions about that every interview that why haven't anything happened and the answer is quite simple we haven't found any that we really think is attractive enough and we should absolutely not go around and buy companies just to show growth I mean why we do it uh and should live with it for for the long long long long term and we must also see the possibility to grow them both in sales and profit uh but i i don't know how many do you think we have looked at the last two years you know 100 200 100 so more than i can count we can at least and sooner or later i hope it comes up something and and it's good to have the financial muscles to do it and also of course now when we built up new stocks and new launches in US and Canada. We have a very, very safe financial situation and are able to do that. And there, of course, I can say already now that the cash flow will, of course, be affected in Q4 or Q1 negatively, and the stock will increase when we go in and do those things in Canada and US. So it's not a surprise for anybody. January-December more or less sales like with prior year and also in both channels. Here's not so much comment. Here is clearly the biggest market now with 2% growth and you can say Sweden, it's still a little bit better than it was in Q4. look at the year but otherwise it's very very similar and here you can see other countries comes down with minus one percent when it was 38 percent plus the q4 so it's very very much up and down in in this training business 49.4 percent in gross margin same common sense i am on the quarter i think it's good And an operating result on nearly 1.3 billion. Which feels quite good. I mean, if we have said four or five years ago that we should do 13.2% in a bad economy, no one had believed it. And now we're delivering that in bad times. So I'm quite positive to what we can do in a little bit better economy. Yeah, there is not so much to comment, actually. Cash flow on the year, nearly 1.3 billion, which means that we take out the whole profit, actually, as free cash flow from operating. Investing is mainly two things. It's automatization of warehouses that continue. I think next one to be operative is that Netherlands. That's our next one, yeah. And we go for it also in Germany and France more or less at the same time. And the other thing that start costing some money is that we change ERP system. So we have the cost to implement the new one, but it's still not in operation. So we have also cost for the old one.

Yeah.

October-December, despite the market, we managed to increase a little bit. As I said, the day I'm happy for 3% growth, I shouldn't be here. But I'm still happy for it in one way, and that's according to the market.

Yeah, more or less. I think most have been said here.

And... About the future, I feel safer than ever. We have a very good organization. We have managed to keep up service and keep up the investment during those tougher markets, which is still a lot of opportunities, actually in all areas, excluding gifts and home furnishings that are more difficult than the others. It's possibilities also there, but it's not so many or so big that it can be on craft or on corporate. a strong balance sheet and we continue to look at acquisitions so that's basically that and you're welcome to ask questions thank you magnus roman kepler chevre

I have a few questions. We could start perhaps with what you write in the report here about the Teamware initiatives, the investments. You expect some revenue, you write, in the second half of 2025. Perhaps if you can help us just understand sort of the size of that. And then you write that we should have to wait a bit longer for a positive operating profit contribution. It's a bit longer. Would that be 26 or should we look into 27?

On the TeamWare side in the US it will definitely, they are there to promise profit 26. How much the sales effect is very, very difficult to say because it's still like this that we have quite or very low stocks in the US and we're building them up now. uh but the profit 26 on craft team were in us i promise and then the interest has been actually over our expectations there so uh germany is another story there i think we will have to wait a little bit more because it's so also so depressed in the economy there

That's very clear. Great. Maybe flipping to another promise that you provided you after acquiring Tenzon, you expected to reach 500 million revenue. I think, believe you just you said 25 first and then when we had the capital market state was pushed to 26. What's your projection now? What year do you think you would reach that target?

I think we still have a chance to do it 26. and and if we don't it I don't think it will be below 400 at least so so it's but it's also very it's more difficult to predict on the sports retail because one big chain can change the whole picture and and you never know what season you get them so for example if we get into sport Germany to sign off we can be over those 500 million if not we have a problem to reach it so so it's much more I have to say easier to predict the corporate side. We have nearly 50,000 resellers in Europe and most are small and you can see the trend all the time. And on the retail, it's totally opposite. It's a huge chain. I mean, if you look at the market here, it's XXL Inter Sport Stadium and a bit of SGN Group that are Team Sport yellow. That's, I would guess, 85% of the volume there.

Speaking of which, could you mention if you have made any gains or wins on that side, on the retail side, in terms of contracts for craft shoes?

I think the last one that will take it up now is XXL. But I don't remember which season. Is it for spring? Probably. It's probably for the spring. Or latest fall. I'm not 100% sure.

And how about internationally? Or do you see a path where you first gain traction in the Nordics and it's bound later internationally?

I pass that question to the next report, Magnus, because the in-selling for next season is right now. So we actually don't know.

Great. Okay. And then I will leave it to other questions as well. But just one more on the tariffs here. You mentioned opening up a procurement office in Alexandria. I presume that would procurement there have been cheaper? You would have done that already before. So could you help us understand what's the price difference? How much more expensive tariffs set aside, would procurement there be compared to China?

It's not so much more expensive in Europe because it's totally duty free to us. And in China, you had duties on even before Trump changing or tried to changing. So the buying prices is not affected so much. And then we also, I mean, we shouldn't forget Northern Africa, Bangladesh, China, Vietnam, India. I mean, we're sourcing so many countries. But the duty, I think the old duty on China from the beginning on textile was up to 26% in some materials at least. So, but it doesn't worry me at all. What can happen is that we have, as I said, a couple of containers or volume on the sea on the way home and he changed the rules from today until tomorrow. Then we can't do anything. I mean, then we have to pay the due to that or when it's arrived. But, yeah. No one knows, I think.

But I guess it's true that you've been saying before that in America they don't have much of local sort of, what you call a textile industry, right? But I guess that competitors have different sourcing footprints, where some competitors already source from other locations than China. So there should be a major sort of difference shake-up in price competitive power if such a tariff... You can say that it depends on what product you're talking about because it's totally different in different product groups.

If you take cotton products, they produce a lot of cotton in the US and most of them send it to Mexico. or Bolivia or Southern America and then back again and then it has been duty-free all the time when it's made of American cotton. If you look at jacket polyester and functional garment like like craft it's hard enough production in South America it's very very much the basic cotton

I think it's the best answer I can give you.

But again, it's nothing that worries me. It can be, again, that it hits one month or two months or so on. But that's it. And then we have to live with that. And then, of course, also we have the possibility on duties that comes into most of the suppliers to raise the prices as well.

Thank you.

No problem. Regarding the warehouses you mentioned, you're supposed to open in Netherlands, France and Germany. How do you take care of your lessons learned from Canada?

First of all, we are not opening new warehouses there. It's old warehouses that get automized.

Okay, so you develop them.

So it's not a new construction, so to say. Okay. I'm sorry, France is, yes.

France is a new solution. We'll have the same solution then in Canada.

We have two systems now.

Yeah, we are working with two solutions. Outdoor Store is one and High Robotics is the other one.

And Netherlands is the first time we really go sharp with High Robotics and test that. Otherwise we have Outdoor Store and all existing.

Okay. Good. And the next question is the ERP system you mentioned.

That I posed to the guy behind you.

i'm a little bit curious about that because erp can be huge or it can be smooth

um the implementation of the new rp it proceeds as planned the first implementation will be now in may in the netherlands but we have put quite much resources and in order to be as safe as possible in the transition so no worries today at least thank you

thank you andreas slumber scb uh what kind of working capitals slash inventory do you need for coming years now when pushing more into the us and canada

U.S. and Canada, I would estimate that we need to build up when everything is there. We have a team where on both sides and so on, half a billion roughly. But of course, that also depends on the sales. So you can say that the stocks were built up from day one, it will be Approximately 400 million. And then, of course, if the sales are not coming, we are not reordering as fast as we do, if not. So something around there. And if it goes like I hope, I hope we need much more than that within two years. given the setup now with more automation and so forth what kind of inventory levels or inventory ratios do you foresee let's see two three years out so that that will not change uh because of that what what really changes that we will be even better on service and and supply our clients and it will go faster and we we will deduct the personal costs so so it's not less capital tied up

And on the fixed capital side, what do you foresee for the coming two years? What is it we increase there?

Sorry, yes, we have planned now for two additional stores in next year, so that is approximately here are some 60 million. And then, of course, it depends on how much you we are going to aggregate from that or take on new new countries, but I would say that we can say that we are on the line that we have this year approximately or little little bit less than this year in total total investment.

It depends also a little bit if we find. We're also looking into Eastern Europe, where we are very, very small. And they're also looking to establish the corporate business that can maybe be added on both on stock value and investment plan.

Thank you, Magnus. Just a few follow-ups here. Firstly, on the questions about the inventory position, you mentioned here 300 million just to start. 300-400. 300-400 just to start, if I took you right, and then climbing up to half a billion or north. Hopefully more. Yeah, exactly. So how much is visible now in the inventory position as of end of Q4?

We don't know that because we are just placing the order and we don't know the lead times. So hopefully... If I could wish something, it should all be in place in Q4, but that will not happen because the lead times are too long.

But what you're saying is that in the inventory position, as of end of Q4, it's not much of value.

Again, Magnus, I can't answer because it depends on what lead times we get on building up a pro-job craft team. corporate in Canada. My hope is that it's in place in Q4, because that means that we really can start selling in Q4. But as the lead times are right now, I would say that the main part of it will be Q1. But we try everything we can to get it faster. So as the biggest stock we have in Q4, as more positive you can be about the year after.

Right, right. Then on the profitability, you mentioned here for this full year an achievement to reach 13.2% EBIT margin, considering the weak market conditions. And then in the CEO letter, you've been mentioning possible weakness in the market for the coming one or two quarters, i.e. H1 this year, but expect then a demand recovery in H2. If we would assume that there would be no demand recovery in H2, so we would have a similar situation throughout 2025, Would you say that you would be satisfied with a similar sized margin then? Or satisfied is not the right word, but it would be reasonable to expect a similar sized margin.

If it's no improvement at all in an economy, I think it's realistic to be around the same. But as you said yourself, I would not be satisfied at all with it.

Got it. That's clear. Thank you. And then just also on this quarter with the other countries, it was an increase of about 65 million in sales. Is that all trading orders or some Canada?

It's also Canada that are growing. But the main part, always there when it's up and down. The main part of the ups and downs are trading.

Right. So also then the main part of the 3% growth in Q4, year-on-year growth, is the trading orders.

Yeah, but it could have been... Q3 or Q1. So it's very, very hard to predict. I mean, the biggest order we still have had there was Costco, for example, some years ago that ordered 400,000 pull-up packages on one order. And if we deliver them in Q1 or Q2, it's a huge difference. So it's growth included in Canada, but the main part, I would say, is trading business, et cetera, but not.

That's interesting. Perhaps one final on this, because many investors I speak to are curious when I relay what you say about Amazon and Costco placing these massive trading orders with you. Could you perhaps elaborate to make us understand why these massive global players place trading orders with New Wave Group?

Because we have an extremely great sourcing operation in Asia.

Is it price or is it sustainability? Is it price only or is it your ability to secure sustainability factors?

It depends on sustainability, quality, price. It's a lot of different factors. And there of course different clients are different. Some of them have very very high demands on sustainability and are prepared to pay a bit more for it. Other clients want to pay less, but it should be okay in a sustainability point of view. There you can say that You can have, you know, all those classifications with ecotechs and organic and not organic and so on. But we see a clear trend that it's going to more and more sustainability. But it's huge price difference. I mean, if you take... a product from the Côte d'Hiver collection I would say it's 30 at least 30-40 percent more expensive to produce than a t-shirt that are still okay but in for example non-organic So it's very, very different. And most often it's American, most often it's the American companies have a higher demand than Europe, which sounds, in my ears, I think it's a little bit strange if you see what's politically going on in the U.S. compared with Europe. But companies are more aware of it.

Very interesting. And just one final final. You mentioned you signed many clubs now in the American initiative and team. Could you help us understand a little bit what clubs are these? How many youths are invested in these clubs? What sports? How does the contract length look like? And so on.

I don't know the exact answer because I can't follow every club. But I know the biggest one we have signed, I have 3,000 players. and the length of the agreement is most often or always three to five years. Is it soccer? after all kind of clubs track and field tennis soccer the main part so far has been soccer but we will of course also go to table tennis or to track and field we are already doing and it's easy to say what we're not doing there we are still not doing baseball american football because we don't have anything for them thank you

We have one question that has been sent in to us. What will you do to improve gifts and home furnishings?

Everything. No, but first of all, we work quite hard to get a better gross margin. We have cut down costs quite heavily in the biggest one for Costa Boda. mainly the fourth quarter and it's still not in effect all of it. Help me if I'm wrong, but I think I'm right.

Can you repeat what he said? I beg your pardon?

Can you repeat what he said?

Yeah, he said that it will have the cost cuttings we have done has full effect from March next year. And then it's, of course, a lot of activities to try to improve sales. But that's in all companies, whether they are doing good or bad.

That was all we have.

Thank you. Thank you very much.