New Wave Group AB

Yes, welcome to the presentation of Q1. I can start describing this as a very stable quarter. We are a bit, or I'm a bit disappointed that we still don't see any better markets. I say that it's the longest period ever for me. And then we have been on the stock exchange for 30 years when it's weak markets and unstable every time. And fortunately, I can say that I'm not the only one that thought that the market should improve the last three years, but it's still not happening. And I think as long as we have all this insecurity about the wars in Ukraine and in Iran now, and also in Gaza before, together with the politics that we have in the U.S. right now, or have had for a while, with tariffs and non-security and this i i don't think it will come a quick turnaround but i'm happy anyhow that we continue to take market shares we continue grow we have a quite good growth in u.s actually i i see that u.s i would describe as a better market than europe which is a surprise in in some ways because uh i was more worried for u.s and europe if i go back We had 2,800, just about 2,800 employees, 28 countries now. And we're selling in a few countries more than that, where we have agents and distributors. And the same three segments as before. Yeah, this year, all new, I think, corporate, sport, leisure and gifts and all. If I should comment the markets a little bit, the corporate market is more stable. It's not good, but it's more stable than retail. I saw some statistic, I think it was last week, on clothing in Sweden. And that was actually growing, where the clothing retail was growing, it was 7%. So I thought maybe, maybe it will be a turnaround. And then come the e-commerce out today or yesterday, minus 90% in Sweden for March. So it was the worst month for e-commerce in a long, long time. But the corporate is more stable. The retail is more tough. And a big part of the distribution and clients in sports and leisure and gifts and home is, of course, retailing clients then. If we look at the quarter, first of all, the currency still have a very, very big impact. So the growth in local currencies was 13.2%, which is not really enough to really make good results. You can say we are close to, we need a 3-4% higher organic growth to really deliver good and improve net profits and operating margins again. But I'm quite sure and confident that sooner or later we will have that growth because we should remember that we are still in a tough market. Organic growth 2.9 and here we do everything we can to get that up to 5-6%. And if we succeed with that, it will come down to the last line as well. Gross margin very, very strong, I would say 50.4% or 50%, sorry. And that's part of the explanation is that we have lower volumes on trading. But we should also remember that Q1 last year, we did not have Cotton Classic that are around on 25%. So I think it's a record high gross margin if we consider that they were into the figures. And operating profit 200 million, just a little bit lower than last year. And I think it's a stable result. I think on most areas, we are delivering still much, much better than competition. If you compare the bigger retail brands like Puma, Nike and so on, it's far better figures. And the costs continue to be high. Two main reasons, the ERP system that will change and that will go on for another year. For another two years. And a lot of this is, of course, extra costs because we're operating two systems right now. How many have we implemented in? How many companies now than you? France, Netherlands? Yeah. So hopefully it gets smoother and smoother as more companies come through this. And the second thing is, of course... investments we are doing in new markets and also in new warehouses and automatizations. The really big one going on now is that we open up in Texas. Hopefully we're in operation 1st of October. And that is a pure investment for the future. We are not serving South US in a good way right now, as we do in North, since we are based with the two warehouses we have. We are based in Seattle and in Renton. No, sorry, in Kentucky. And this is the investment in Texas. It's much, much bigger than a normal warehouse investment because we go for a full operation, same as Seattle, with embroidery and automatization from day one and everything. And it will cost someone in the beginning, but I'm very, very confident it will be a good investment. I think it's around 200 million SEK we invest there now. And then we should not forget smaller investments like we opened up a warehouse in Ireland in January this year and so on. So we are on a pretty high cost level for the moment. Which will not be a problem actually if we just can get this 3-4% more growth. Sales plus 6.6 again in Swedish Kronosan. Local colors is 13.2. Promo channel increased 10.8 and retail down 0.9. Then we should also remember that Cotton Classic comes into the corporate. So that's what makes it such a huge difference between them. And the growth is in Promo. It's of course the acquisition, but also the new launch we did that you have behind you of Antec movement. And also Katrin Back is doing very very good both in US and Europe actually. It's not so much to maybe to comment this. If we look geographically in the US it's minus and that's only currency. Enter. Which one is enter? Forward. Yeah. So you have an organic growth in the US by 7% in local currencies. So it's really affected the currency there. Sweden, it's nice to be back on a very small growth, which I think is a very, very strong sign in this environment. Benelux doing well. Nordic countries excluding Sweden grows as well. Rest of Europe also and other countries. It's a little bit down and there you have the trading. So you can say in local currencies, all regions are growing, excluding than other countries that are mainly the trading business. Gross margin I'm very very happy with. I think it's very few companies and competitors that actually report higher gross margins in this environment. And we will try to keep it there. Of course it can be or will be in the future also if we have quarters where the trading comes up a lot. It can be down but I think it's very very stable due to all our own brands. external cost up and there we should it's 92 million up and there we also have a pos for us positive currency effect so actually the cost increase or even higher if you look at local currencies there yeah that that's mainly it and operating profits we have talked about If we look at the different segments then, sports and leisure are improving a little bit, corporate a little bit down, and gifts and home furnishing a small, small improvement. We should also remember that for some of the companies, Q1 is an extremely small quarter, not even at the time when, or the best years, for example, in Norfolk, Costa Boda, it was profitable Q1. So I think this picture will change a lot when we are at the end of the year. Cash flow I would also describe as very stable and that's good. I feel very happy for the balance sheet that we have today that give us quite a lot of space for continued growth and investment and also a lot of security. that we feel very very safe in this and now we probably will have a little bit lower cash flow or worse cash flow in maybe in your eyes when Texas come through because it's not only the investment we should also build up the stock there is no idea to have an empty warehouse And that's quite a lot of money. So you can be prepared on that. Balance sheet, again, very, very strong. I would say probably one of the strongest if we compare with competitors in all three segments with an equity on over 55%. So it's a good feeling. And also, it's nice to feel safe because even if the markets don't improve, if we can keep a decent profit level and this balance sheet, we are in an extremely strong position. And we are, I would say, one of few sometimes that could be really patient and continue also long-term investment in more tough times. Cotton Classic is, I would say, doing very good. And the implementation of our brands are doing well. We launched them first month in September, actually 15 last year, came the first catalog out. But then no of our brands were still in their main catalog. That's all released in January. And now all those plus three new is in their main catalog. which comes out actually in mid-January and the roadshow is from mid-January to mid-February. So actually if you look at the first quarter it's more fair to say that they have sold our brands for two and a half months than three months. And was it four percent now? So already now 3.4% of their total sales is our brands in March. And interesting is also to see that the gross margin on our brands is between two and three times higher than the gross margin they have on the distributed brands. As an outcome, actually, not what we think. So I'm happy with that and it's also a new CEO in place that we have a good feeling for. So that basically, that sounds, I think we open up for questions.

Carl-Johan Bonnevier, D&B Carnegie. Looking at the global environment for the moment, obviously stress in a lot part of the system. But how do you see it affecting your sourcing opportunities? And have you been caught up in any of the flow problems that might be out there for the moment?

It's not really any very big effects, but the number of small delays and small problems have, of course, increased significantly. But as I said in the earlier report, I'm very happy that we also moved a lot of the production in good time to Africa. If we were as dependent on China today that we were three, four years ago, then it would be huge problems. And then we will see what's happening with the freight cost is, of course, a bit worrying. Oil prices, we talked about in the beginning, will probably, I mean, our CBO and the buying manager expect, if the oil price is on this level, he expects a 20% increase on polyester as raw material within six months. But again, also we have, I'm not sure, nervous about that because we have always been able to change our pricing and not be so affected. In one way it can be positive as the prices start to increase a little bit for the sales also.