New Wave Group AB

Q2 was a bit less good than we thought. We knew before that it should be tougher than Q1. We had a positive calendar effect in Q1 due to Eastern and that came out negative in Q2 that we know from the beginning. Then we also have quite high effects on the currencies. So in the end, I was hoping for 3-4% organic growth in local currencies and we ended up with one point something. So it was less good than planned. The market was very tough, I have fought for a long time now. that the market will be better, but we still don't see any big signs on that. And I think that all these worrying things I use all the time about duties and tariffs and I don't know really what will happen and so on, put a wet blanket on the market. And I think that we will continue to see at least one or two more quarters with the tough market situation. We're pretty sure that we continue to take market shares and we continue to invest. We have the same speed investing in both sales, marketing and automatization and warehouse and IT and so on. And we will not pull on the brake because of this. We will continue the same way. One very good thing, hopefully, if you never know that before, of course, but one thing I'm very happy for is the acquisition of Cotton Classic that gave us a very, very strong position in several countries. So we've been the market leader in Sweden over Finland, Benelux, for quite a long time. Now we are very, very key market leader in Switzerland, also Austria after this. And we come in as number... between number three or four in Germany. And they also have quite a lot of activity in four Middle Eastern countries. So Czech Republic is a big country for them. We are not there at all. Same with Hungary. So it's also opened up Eastern Europe a bit for us, where we have been. And this is also much easier for us than it was to acquire BTC. BTC is a very similar operation, but since they were outside EU, it took us quite a long time before we could start introducing our own brands on the upside, both in BTC and Cosmoclassic. It's really to introduce our own brand that have more than double gross margin than they have on the distributed brands today. And here we could be much, much quicker. So we actually introduce not full collections, but partly of click and harvest and printer and cut them back already now in their September catalogue. We were quite time-pressed at the end of the acquisition because they released their collections twice a year on that September and January and if we wouldn't be ready for the first of September we couldn't have done anything before January. That was quite a lot of work but I think it's very important for the position in the future. So, better? Okay. I will not repeat this. Nothing has really changed here. You can say after the quarter is not a very big thing, but after the quarter we sign also an agreement now on a new warehouse in Ireland. So we will also... be much more active in Ireland. And I think it's also an important step for us because it's not a big market, but it's, again, inside the EU still. And the market in Ireland is dominated by companies in the UK, which give them a lot of problems with tariffs and duties and so on. So that will start hopefully in October. Yeah, nothing I've changed here really. So I jump in. Here I have a funny story. That or not, we should have that on photo, but I forgot that. You know, IFK beat guys on Monday, I think it was. And we produced a t-shirt with a big mackerel and wrote under a cod or a torsk. Cod is not so fun when you use English, but in torsk, that was very appreciated. And it's nice to see. Here you can also see the importance of speed and stock. Because the sales were starting directly after the game. And the day after they have sold, I think it was 2,300 shirts. So pretty nice. Yeah, this is insane. Second quarter then, as I already said, a very, very tough market. And I actually think it was developed in general in the wrong way compared with Q1. A quotation of Cotton Classic I talked about, and I think it's a very, very important thing for us, especially for future growth in Eastern Europe as well. Then we have one thing that we don't know where it will end and that the Department of Justice in the US have started an investigation where they claim we have done wrong or it's not any criminal investigation. But they count the number of employees in a different way than we did. So we have a possibility that we can be forced to pay back some or all or nothing. We actually don't know of the loans that was forgiven during COVID. And the total amount is 5.4 million euros. We have not taken anything into the P&L because, again, we don't know if it will be zero or if it will be all or if it will be in the middle. And we don't know if it takes three months or 12 months or two years. But we think it's such an important information. So we want to inform about it to be transparent. So it's not come as a surprise like this if something happens. And the currency affected us, of course, a lot, especially on the P&L this time. Last reported was on the balance sheet that had the biggest effects. But now it's on the P&L. a strengthened presence in Central Europe and I would say also Eastern Europe with Cotton Classic. And you can say right now we hope to have the permission from the competition authorities in Austria this week. 18th of August.

That's the last day when they need to inform that they want a deeper investigation. Yeah.

But we don't see any high risk that we haven't know about it. It also says a little bit about what kind of market shares we start to get to the point that they even should judge it. And Cotton Classic have a fantastic platform, actually. Much better than ours and also BTCs. So that will also be interesting if we can also take that the other way. And as I said, we're now working very, very hard to introduce as much of our own brands as possible, as fast as possible. And this is, again, much more easier than it was in BTC since we already have stocks in a lot of EU countries that we can use also for Cotton Classic. Otherwise, it's a very similar business to BTC. Maybe also I should add there that for sure they will take down our operating margin for a while because they come in on 5.5-6% in operating margin and it's such a big turnover on more than 1 billion SEK. So it will affect operating margin. So that isn't any surprise for you and it will not be for us either. And it will take a few years to take them up. Yeah, 1.3% in organic grow. Again, as I said, I'm not happy with it, but the expectation from my own side was more 3-4%. It was not very high that quarter during the Easter, but it's still a a little bit lower than than i thought and the currency we have talked about uh promo channel was down two percent retail by eight uh that was the in second yeah so it's not uh yeah and operating profit amounted 241 then and more operating more than 10.5 and i think that it's it's still an okay result actually because again we continue to investing and take market shares and spend money we were also affected a bit about in may first domain i think to us The first company in EUA Group that are quite big entity for us was the first company that installed high robotics, totally new picking and they had at the same time that was the first company out with a new ERP system. So that was quite a high risk. And it went okay, but it was affected in May, June, July. They were 100% up running everything. But now we're quite happy to have done it because now it will be easier to implement both iRobotics in other warehouses, but also the new ERP system in other companies. But I am very, very tired to say who they are. So... 2.3 billion, decreased in SEC 4.1%, but again, organic in local 1.3. Here's not so much to comment. I can say maybe that on the retail side here, especially... Retail is still a very very tough situation. You have a few clear winners the last quarters and that's for example Ullared and it's the low price chains. All other are struggling and struggling a lot when you talk sports and also when you talk home furniture gifts. So it's a quite tough situation in the retail side. And I would say that corporate is more stable than... The good thing, I think, on the retail side is that most of the clients have much lower stock positions themselves than they had one or two years ago. So when it starts speeding up, I think we will see quite high effect from it. There's not maybe so much to comment. Gross profit down a bit and it's not price decreases and not increased buying prices. It's a big effect there is the trading took a bigger part of the total turnover that quarter. And as you know, since before, trading is very up and down. So the gross margin and then the other business are stable as it is today. We were affected, I don't have any amount, but we were a little bit affected by tariffs in some of the US companies. I don't know, a couple of million cents maybe. So it was not a big effect, but even if we really have worked hard and fast to move production, we are not able to move 100% of it. so you have some effects but not any big ones and you will have some effect the coming quarters as well but again not huge amount but it's a couple of million i guess each quarter yeah and here yeah the only thing you can comment here is that that uh On the operating profit, I must say that corporate are very stable if you compare with the times of retail and gifts and home. And gifts and home is also a majority retail. Had much tougher quarter than corporate. Cash flow is not so much to say about. We have planned and I think now I'm sure I said already fourth quarter last year that we will go into a period with less good cash flow depending on that we're building up the stock and we continue the investment in warehouses and IT. So it was no surprise that either. If we look on half the year you had a sales increase by 2.3%. And that is in SEC. So I don't have that in my head. What was it in local currencies? Do you have a comment? Sorry, the growth in local currencies, the annual regime, because 2.4 must be in SEC.