New Wave Group AB (publ)

Very, very welcome to the presentation of Q3 and to this day that we hopefully will spend together, all of us. If we start with Q3, I'm quite happy with the quarter. You can say I'm actually happy with all points, excluding the one-off cost we had in the US. But otherwise, the growth is up to 8.3 if you combine organic with acquired. In local currencies, I should say, because in the whole P&L, the currency affects quite a lot on all lines. So we have come closer to the minimum of 10% again that we want to have in growth. Here is really nothing new. The number of employees will increase the coming quarter due to Cotton Classic. If I understood correctly, Anna is in this figure with one twelfth part of the employees there. So that will increase. We are out in 25 countries now, and the segments you know. Yeah, nothing has changed here. I think I recognize most of you, so I think you're familiar with those three different segments. The only thing, the big change is actually undercorporate, where you now have done since 1st of September, Cotton Classic in. But the external brands they are selling, we will not take up as a brand here. And they have started to sell our, and I will come back to that in the afternoon. Yeah, on the 1st of September, we consolidated Kotlin Classic, which is very, very nice. We have that as a point in the afternoon, so I will not talk so much about that in this presentation. We had one, of course, for the COVID loans in the US that are taken in Q3, and we also announced it before the report a couple of weeks before. I don't remember the exact date. and the currency continues to have negative reflections for us. I think that it will be more stable, but no one knows. Quarter in brief, 8.3% sales increase, and including currencies, in local currencies, and including the... Oh, shit. Oh, shit. I thought it was closed, sorry. But in SEC it's 4.2% then. Promo channel was very, very strong, I would say with 7.2%. Retail was much weaker. And you can say the spread we have between... Those two distribution channels I'm very, very happy with because if we were only depending today on retail, it would be a very, very tough situation. In general, I was quite disappointed when they released, for example, the Swedish Sport Index for the third quarter. If I remember correctly, it was first 13 quarters in a row that were negative. And then Q1, Q2 was a little bit up. And I hope that that was a real change. But now Q3 came out with a small minus again. So I'm very, very happy for the promo channel and also if we see on a certain brand like Kraft, if we were only depending today on selling out from shop and didn't have team wear, corporate, it would be a very, very tough situation because the market on consumers is tough all over Europe actually. And it's a little bit hard to understand For me, because now people have started, consumers have started to have more money again, but obviously they don't spend them. And I talked with a lot of operators for restaurants, and they have the same tendency, even in Stockholm, where the restaurants actually are quite full. People spend less. They buy cheaper wines or two glasses of wine instead of one bottle and so on. And it's a bit strange. The only segment that's really doing well in retail today is the low-price segment. But it's a good combination. All regions continue to grow in local currencies. Operating profit, if we exclude this one off in the US on 66 million, this was just above last year's, which I think is very, very strong actually because we have a very high pace of investments in automatization and systems and also new markets now. So that could have been actually much, much, much worse. Also, I think we should point out an extremely strong gross margin. So we can say we don't use discounts and such things to hold up the sales. And that's also very, very nice. And this comes down in operating profit down off the one off on 253 million. Sales 2.390. I hope we soon can have a first quarter over 3 billion. Sales plus 3.6%. hand organic we have talked about and I think if retail becomes a little bit better or the situation in the sports retail especially where which are the biggest retail channels for us I think we can have and will have a very very nice growth actually corporate Net sales, we have talked about. Sports and leisure also. Gifts and home was a little bit down. And this is then not in local currencies, actually, because then it looks quite different. And geographical markets, North America continued to be the biggest one. What's happened there? Yeah, it's back. North America is biggest. Sweden actually had a quite nice growth, which are a little bit surprising because we have very high market shares here now on most things. Benelux, number three, and we have just taken Benelux out from the rest of Europe. And then Nordic regions, quite flat or flat. rest of Europe is up. And there, of course, in rest of Europe, Cotton Classic comes in nowadays. And we will look at that for not next year, but the year after, because now all Cotton Classic sales going into, I think it's, is everything going into Austria, Anna?

Yes, rest of Europe.

And there we should divide, if we can, when we have had it for a year, the different markets. The gross margin I mentioned, I think it's a very strong margin. It actually surprised me a little bit as well. And that also, I think, shows our position on the market, because with this weak market, a lot of companies are discounting extra and so on, and we can actually continue to grow with a full gross margin. And the quarter on 51.1, I think is... I'm not 100% sure of what I say now, but I think it's the highest ever, actually. So that's very, very nice. External costs increase. We will start to increase the IT costs again from at least 2027, I would say. And the reason that the IT costs increase is that we just right now pay actually for two systems, the old one and the new one. So it's not so much we can do about it. Operating profit, 253. And the contribution from Cotton Classic was 14 million this quarter. Here's the operating segments. And it's not so much to comment, I think. Of course, they are affected very much on sports and leisure on the one-off costs. and also a little bit actually on gifts and home, because it's all related, of course, to the U.S. and to this. Cash flow, operating minus 249, and that's planned, so that's nothing that worries us at all. It's both that we increase stocks and the new investments, so in launch we are doing with Teamware in... U.S. We also opened up now a new warehouse in Ireland, outside Dublin, in January. And we also launched a new concept in corporate and merchandising called Antec Movement, where the launch actually was this week, first at an exhibition in Germany, in Germany and Belgium, and then it should be rolled out in all countries in January. All European countries, I would say. For nine months, sales increased by 2.6% and promo up five. I also wrote in the report that I hope that we have the toughest time behind us on corporate because the growth has been better and better. And also we today meet much more positive clients and clients are more active today than they were a year ago. Then you can say it's very hard to predict because what is good today can be bad tomorrow because of what's happening around in the world and it's still very unstable. But hopefully it's a trend. And per operating segment, it looks like this. Done. And the geographical areas. And now this is in SEC. So, for example, North America is much, much better in local currencies. And that's a little bit surprising for me that the US is still, I wouldn't describe it as strong, but it's much more stable on the market than I expected with all those things that... and you wake up one morning and it should be 100% duty on China and the next day it's 50% and the third day they delay it. It's a total mess actually. So I'm surprised that the market there is as strong as it is. Gross margin also 0.1% higher than last year if we look at the nine months period. And the rest is more or less the same comment as it's on the third quarter. And operating segments, an operating profit on different segments. And here you can say I would be quite happy with all segments except gifts and home furnishings if it was not for this 66 million in the U.S. then. Still a very strong balance sheet, after consolidation of Cotton Classic we still have 52% equity so we can continue to grow, both by more acquisitions if we find the right ones and also of course we want to speed up the organic growth. with the new investments, with the new warehouses, and also with a lot of new products. I think I can say that we haven't had so much new products launched in many, many years. I think the last time we had so much new was actually when we launched craft teamwork. So we have a very good pipeline on products. Cash flow, it's not so much to comment. Rolling 12 months, we are 9.7 billion in sales. We would have been over 10 if we had the same currency in the past, but I hope still we can go over 10 billion very soon. in the rolling gross margin good costs we have talked about operate the margin 12.1 which i'm of course not happy with but i think we if we can be between 12 and 15 until we are coming down a little bit in investments i think it's still very good and i think we then have a very very strong position to actually start climbing up against our goal, that R20. Yeah, that's more or less what I had to say, and then we can open up for questions, if you have any.

Thank you, Magnus Romann, SP1 Markets. First, I'd like to ask about the underlying gross margin being so strong. I think you said it's a record. I think looking back at Q3 cities, if you look at absolute quarters, you haven't had a better Q4. How would you describe the main drivers here behind this strong gross margin? I mean, you mentioned that you have not been discounting, but can you help us understand the viability of this?

A little bit. It's the product mix and that we grow, for example, in growth team where we have good gross margins. One part of this quarter is also that the trading was less, which is what we operate with the lowest portion in the group. But then also I think we have a very, very strong position and we have had a strong service for a long time now. So I would say on the market we have an extremely good reputation. We gain clients. Very few or no one leave us. And we don't need to use the price as an argument as it is now. So it's a totally different situation that we had, for example, 12, 13 years ago when we had taken down the stocks and couldn't service the client and clients left us. And if you want to keep them, you have to give them extra support and discounts and so on. So I feel quite confident that we will continue with a high gross margin. Maybe not on this level because another quarter of the trading can come up, for example, and then it goes down a bit. But on the main business, I think we can continue to have a very good gross margin. And we should also remember that Cotton Classic operate on around 25% that take the gross margin down. Also, not so much in Q3 because it was only one month in the figures, but... So if you include that as well, I think Q3 was very, very good.

Yes. And speaking of which, you mentioned that we will speak more about Cotton Classics later, but one can't help just to ask one quick question here on the EBIT of September. Is there anything you would like to highlight to make us not too enthusiastic? Because if we analyze this EBIT, we might get very enthusiastic about the prospects here.

I'm enthusiastic. No, it's, again, I mean, I have, if you exclude, and I think I said that also after Q2, if you exclude the first six months of the pandemic and the last quarter and the first two quarters, 08, 09, I think this is the absolutely most difficult situation to navigate in. With the different wars, Ukraine, Gaza, now also Sudan, you have Trump, where we don't know sometimes from week to week what duty we will pay in the US, depending on country, of course. So it's... I mean, right now I'm feeling quite optimistic and it looks better, but that can be changed on Monday. So it's a very tricky situation. So I think that... a bigger turnaround in the market in general, we will not have before we have a more stable situation.

And you mentioned the tariff, and we might hear more about that in a presentation later perhaps, but... Do you know or can acknowledge if you expense the cost of the tariff at the point of sale of that good that you brought in that was tariffed, or if it is already at the point of purchase?

The problem is now it's going into the purchase, of course.

And I don't know, I think... So when we will see the negative gross margin effect, essentially, if it is at the point of sale of these goods... I believe in the case of H&M, for example, they have warned later into this year that we will see increasing negative effects due to that fact.

Sometimes, sometimes not. And this depends on if the goods are already sold when it's shipped, which is a minor part. Otherwise, we also adjust the selling prices. I mean, if they increase tariffs from 20% to 100%, we can't absorb that. But as it is now, I would say we had a few millions, I think, in extra costs in Q2. Q3, I actually don't know the figure. I don't know if you have any figure on that, Anna. I said I think the result was directly affected with some millions due to tariffs in Q2. But I don't know about Q3, if we had anything there.

The salt is affected in many ways. It's a bit tricky to navigate because it's both in cost and also increases in price. But for example, I know that since May, going forward, Karen Buck, for example, has had $3 million additional tariffs. But that is not in the P&L because it's a net effect in the P&L so far.

But you can at least say, I can add that I'm extremely happy that we start moving a lot of production already last period to mainly Africa. Because if we should be stuck totally in China now, then it would be a huge problem.

Any other questions? In that case, we have some questions that have been sent to us. Cotton Classic contributing with 14% profit margin in Q3.

Still see 5%... Sorry, 14 million, if I remember correctly, not 14%.

All right, 14 million in Q3. Still see 5% as a good level for a 12-month period.

There's no question mark there, so I don't really know... Oh, yeah, you can say that September, they had a very good month. Of course, we... hope that continue, but I think that still that it will take some years, even if we have been much, much faster with those than with BTCs before we get them up. So if they can do like five, six, seven percent, I think it's good. We should also remember that They are a typical company that look as New Wave did in the past when we only have corporate. So September, October, November is very strong months. If we were to consolidate them first of January, they will have contributed with a big loss because generally they have all the marketing costs and losses and sales. So it's also a question of timing and that we should change they're operating margin very, very fast that I don't believe in. Maybe we can climb 2-3% a year with a start from half a year or something because I don't want to answer more now because then it's not interesting enough.

Maybe you already answered this, but how did FX and tariffs impact gross income and EBIT in the quarter?

I don't know exactly, but you maybe can repeat that now.

How did FX and tariff impact gross income and EBIT in the quarter?

We don't have the figure. We release how the revenue is affected.

Another one here as well. You have improved the results for gifts and home furnishings. What have you done there in connection with the business in Kosta? What do you need to do to improve more?

It's a long list, I can say. No, but I think there is maybe the area that we are most affected, excluding retailing maybe in Crofton, because there we're really depending on the consumers. And there we can also... I didn't refer to Kosta before when I talked about restaurants. But, for example, in August, we were in record in visitors, but we didn't have record sales. So people spend less and so on. So we need a general turnaround a little bit. And then, of course, we have a lot of things we are doing in the companies, everything from product development to marketing. of course, try to improve the operations. But that has also been a very tough market. It was very much up during the pandemic when everybody was working from home. They spent a lot of money in these categories and that we paid back after. But it's a tough job and you can also say that We as managements have two options, try to put our time into the companies that are doing already good and improve them to be even better, or spend a lot of time trying to improve quite little down there. And now, I must say, we have worked more with improving the already good businesses. And also, of course, integration of Cotton Classic can take quite a lot of time for finance, but also for me regarding products and marketing as well.

Thank you. Any more questions in here?

Thank you, Andreas Lundberg with CB. You talk a lot about inventory, but receivables were up quite a bit. Could you talk about the general dynamics of your receivables and whether that was an effect of strong September sales? Thank you.

I think it's two effects there. One is that September was strong. The second one, help me if I'm wrong, was that we took in Cotton Classic. So when they get consolidated, we get 100% of their receivables into our balance sheet, of course. So I think it's those two things. And I don't know how much the contribution... Yeah, you want to fill in, Anna?

You're completely correct.

And because I think the average time we get paid on have not increased a lot. So...

But the strong sale at the end of September is, of course, effective.

Cool. And then maybe a general question on competitive behavior. You experienced big difficulties during the financial crisis, basically, are you? Are we seeing a similar behavior among today's competitors that cannot afford or have the guts to keep inventory?

Not as it was in 2009. But you see in some cases that they have less good service drag. So it's a little bit in that direction, but not that all of it was 09. I mean, then everybody or a lot was panicking at the same time. I think our chairman, Olof, described it quite good because he said it's not a crisis anywhere, but it's like a wet blanket over everything. So it's not as bad as it was then, but we see some tendencies.

What do you think as it relates to uncertainty, financial situations or... Knowledge or what have you.

But I think it's uncertain, definitely. It's not my opinion. I can be wrong, of course, but it's not the financial situation. I mean, if you look at... We have a lot of... I think you know this better than me, but I guess, for example, that people are still saving much more money in the past. I'm just guessing, because it's not that they don't have money. And you can say that some... segments are still doing quite well. And low prices, we said before, is fantastic. But that, for me, means that people spend, maybe not, they are more careful on what they spend on also. But I think it's uncertain. And I think now it will be very interesting to see what's happened in the US after the elections that was in New York and some other places. But we need a more stable world.

Cool, thanks.

Okay, then I say thank you very much for listening and then I should leave to Stefan.