New Wave Group AB

Welcome to the presentation of Q2 and the first half a year. I'm pretty happy with Q2 actually, where we show a growth in both sales and earnings. And it also feels a little bit, for the first time in many years actually, that the markets start to be a bit more positive. It's only one point I'm not happy with in this report, and that is the organic growth, where I was hoping for more than 4-5%. And I think we pretty soon will be there. We should also remember that we have several things that is happening this fall. For example, Dallas will start selling from all distribution from 1st of October. I think the costs on Dallas is around 10 million for the first six months and it will continue to cost money in the coming quarter. And then hopefully, and what I believe is that, and that is one of our biggest investments in many, many years, it will start contributing sales-wise, of course, from October, and profit-wise, I think it will be three to six months, and we will be up running at least break even there. So it's lots of interesting thing in front of us. Today, 2,877 employees, 28 countries, and three different segments as you know and maybe there I should say also that Sweden is now down to 20% of the sales and it will continue to decrease due to the investments we are doing and the acquisition of Cotton Classic that are not there yet yeah here's not much to comment We had, and I think based on questions I've had earlier today, we have maybe a small misunderstanding regarding the tariffs, because back to the result, it's only the tariffs on sold goods. The rest is deduction of the stock value that will strengthen the margins coming quarters instead. And if you look at the figures for half of the year, it's not any big effect of it. The result in Q1 should have been better than it was. And the result in Q2 slightly lower. So you know that. And one big investment we also have done that we have not talked so much about is Toppoint, our company that producing pens, water bottles and so on. that moved into a new fantastic facility which was opened up in May. Also a pretty big investment. I don't have the numbers in my head, but it's another 250 million second investment there. The quarter net sales plus 14.6%, 12.3% are coming from Cotton Classic and the integration there is going pretty well. That's include also what they sell of our own brands today. that are also increasing all the time and 2.2 percent from organic growth and again that there I'm not really happy at we should be higher on the organic growth especially due to all investments we have done and all the products we have launched last years and so on. If we look at the different countries, you can say I'm actually happy with all countries right now, excluding UK. That has been very, very tough and it continues to be very, very tough. And we also know that our competitors there have decreased their volumes. Actually, most of them more than we, but it's not a good development there. operating profit 295 million and there I must say due to all these investments we are doing with Dallas with top points and so on I'm very very happy and the underlying profitability is very very good I would say and we should also remember here that the second quarter and the first half a year we didn't have Cotton Classic last year. So when we compare, we have taken in acquisitions on roughly one billion in a year, little over, with an operating margin on six, seven percent, approximately. So if we look at, so to say, the old group excluding investment, I think those results are very, very good and could have been much, much worse, actually. And what's holding it up is also, of course, a very strong gross margin. and I think I've said that for a few years now when it has been tough times that we will keep our gross margins we will not use the price to deduct margin to increase sales and that of course sometimes it can be tempting to do that to blow up the growth but I also know based on those 30 years that it's very very difficult to raise again if you once have start cutting April-June, 14.5%, say 2.6 billion. And currency was negative with only 1% this report. When it was its worst, we discussed that before. For example, in January this year, US was contributing minus 19% in currency. Then it's a bit hard to show growth, actually. Promo 17.5 and the reason the main reason of that that they are going very strong is of course the Cotton Classic the acquisition that are in that channel. Also retail sales up 5% which I think is pretty good. I'm a little bit afraid actually on the backlash amid in South Europe in the third quarter due to that has been very very warm I don't have any figures to base that on but when I'm talk with the retailers there it has been quite empty in the shops when it has been those really warm conditions Cut and back continue to grow Well, and I think that that growth will really increase. We also launched Tenzon in US through Kattenbach right now. And when Dallas opened up, it gives us a very, very good chance to serve that part of US. As an example, you can say, if I take a simple example, all the sales before Thanksgiving, for example, that we have on the net we have to quit three days earlier or cut order taking three days earlier in South US today than we do in North US because we can't deliver before so that will mean a lot and I think they will actually continue to increase and they have a very good growth and in retail it was in this quarter mainly Kraft but also Qlik we were a bit lucky there we were not involved in any way you can say with in the world championships of football we had no unfortunately yet no national teams playing in kraft either but what we did and what really shows the strength again about the stock is that sweden was qualifying so late so the chains couldn't pre-order or they didn't dare to pre-order since in time and we could supply from stocks. Actually, we sold into Swedish merchandise, you can say, to Intersport, Åhléns, Team Sportia, everybody, excluding Stadium. So that was very, very good. And it's nice to don't pay the sponsoring fee and then get the merchandise. Yeah, here you also see the different segments. In one way, I'm also pretty happy there that all three is growing, even if it was very little, 2.7% on gifts and home furnishing, it's at least a growth. yeah sales pair geographic area North America increased and Sweden was a very nice increase I will say because if you look at the market share who already have and continue grow it's a very strong development and Benelux slightly up Nordic up and there are Norway going quite strong now we finally see the effect of all the national teams we have in Norway it took longer time than we thought but now it's paying off and rest of Europe heavily up and that's mainly due to Cotton Classic acquisition and others quite heavily down and that's only trading and as we have said every report trading is extremely volatile up and down so you can have two weeks coming in with the weekly sales plus 100% and then you have one week minus 70% and so on and that's how that business is it's still very profitable for us and it's a very good cash flow so we want to continue this but there you have to get used to that it can come a very good quarter and next quarter can instead be looking bad and then it's good again so it will continue that way and the reason is of course that it's quite few number of clients compared with other channels and it's very big orders so here it's more or less if you are unlucky to or lucky to deliver in the right quarter if you look at the short term yeah as the margin we have talked about And there we should also remember that the majority, I think, 65 million a SEC, if I remember correctly, is right down on the stocks due to the tariffs, which give us a good chance to hold a strong margin in the US market the coming quarters. And we will continue the same way. We will not use discounts and so on. Very good gross margin the coming quarters that we have in front of us. and we should also remember that again Cotton Classic came in in the figures you compare with with more than 1 billion in sales with a gross margin on what is it now it has increased a little bit by 27 and it was 25 so if you take away acquisition I think actually it's the strongest gross margin we ever have had External and personal costs continue to increase and they will continue to increase. But I think also that we will see a more normal cost increase and especially investments that are taking as cost from latest third quarter maybe next year it's a little bit hard to say but then I talk more about existing business if we do more acquisitions during that time and so on or we decide to establish one more new big warehouse which I don't think we will do within one year but if we do it cannot cause effect but if you look at the normal business it will come down and there we maybe should point out once again because I had some question on that too that the different now when we in the past when you change ERP systems you put it into the balance sheet and then you write it off on five years now it's in the cloud and you have to take a big part of it as cost day one so if you look for the coming years we will have quite much lower depreciations of that and I think those changes in in the bookkeeping it's really not good because it's very difficult sometimes for analysts and investors to compare I think with the old do you dare to guess if it was working the same way as in the past you took it as an investment in the balance sheet the results so far this year would improve

I don't dare to say, but it's a big difference because we have only started to use the system in two entities and we have a majority of the cost for the entire template. So it's a huge difference.

And therefore, again, I say if we can hold... an operating margin on this level due to all those investments at the same time. I take it as a proof that 20% is absolutely reachable. Again, excluding acquisitions. You know that we love to buy companies for one sec and one sec companies is not very profitable. And we will continue. We want to continue the same type of acquisitions if we can and if we find them and you can say that all those kind of acquisitions has been quite successful over time excluding Oroforskostaboda so we are continue to look at companies that are in a problem it's of course not easy to buy them and especially not to find them but excluding that, I think that the margins are very, very good. Yeah, 11.3 in operating and you can see on corporate since Cotton Classic is 100% into the corporate sector. It's lower there. Sports and leisure increased quite good. And they're also the majority of the minority of the money we came back from tariffs is in sports and leisure. That's also one reason. and gifts and home at least finally positive margin and not negative and there I think that in that area we will never reach any 20% but we should manage 20% in average anyhow but I'm very happy if we can actually come up to at least 10% so we can quit consider it as a problem cash flow is also quite okay I think due to the again to the investment we are doing I think it's even strong and in the cash flow the effects is not yet seen by the tariffs either so I'm quite positive to that yes and also in addition Torsten mentioned the European investments they are not shown in investment investing activities the cancer from operating activities that's why that balance sheet continue to be I would say very strong which are we are very happy for we still have room for more acquisitions and later on more establishment which I think it's also very very important to have a strong balance sheet Dallas, 10 million units we can store there. And it's the most advanced in automatization and technology in the whole group, including auto store embroidery, direct to government decoration and so on. And the main reason is, of course, that we have a lot of actually also existing clients that we don't serve in a good way today. in that part of US so I think it will go quite quick to come up to breakeven and if we can reach breakeven six months or something on that fulfillment center I think it's very good and it will really means a lot for the future growth in the US market I got a question earlier today how big we can be in US or what is the level we can take and we should remember that we are still extremely small in US I haven't counted the market shares because I don't have enough zeros in my calculator so if we really succeed there it can should be nothing is easy but theoretically if we can at least do 10 times what was it doing today within six seven eight years so it's a very interesting market and it's also interesting because I was misjudging US as I said in an earlier report because I thought that US should be our most difficult market due to all things with everything from tariffs to Trump's different decision to the war in Iran and so on. But I repeat that it seems that the Americans have some kind of gene in the body that we don't have in Europe, that they just continue buying whatever happens. That's actually a feeling. So the US, I think, will have ever been one of the strongest markets also in general the last years. So it will be a very interesting and I'm quite excited to this and I go to US on Saturday morning and we'll meet the people responsible on Monday. Top point we have not talked so much about before but it's a company we have doing hardware located from the beginning a Dutch company but located with their production nowadays in Poland since quite many years but there we start up 35,000 square meter big production facility started in May it's also cost a lot of money also in actually decreased sales for a short while it's very modern 25 different printing techniques that we are quite alone about many products available in 24 hours we do do that we are at the same level or better than the competition after this so this would also be very very interesting to to see what we can do there and you can say we had still two areas on the corporate There we are in a European perspective or quite small and top point and hardware is one of them and the other one is workwear. So it would be theoretically easier for us to continue taking market shares in this area than it is on corporate in most European countries. As I mentioned, without stock we have lost all the sales, just so you know. This is again a proof that especially on merchandise and happenings and those things, it's speed to market that are the absolute most important thing. So now we hope that in more of our big countries in the future the countries qualify but very late. Too early is not good. For the first time also we have champion playing in Kraft it was Aarhus that won Danska Superligan which we were very happy for and Kraft is really moving forward on the teams another nice example was that you had the first game I think the second game is still left to play between EFK Gothenburg and KAA Ghent. I think it was the first time it was two teams playing in Kraft in a European Cup. So it's really moving and here we can also see sometimes it's very very difficult for us to also give forecasts on some things because if Aarhus wouldn't win then we probably have sold merchandise for 20 million lower so this is also quite important so I have nothing against Sirius but now I hope that Hammarby is pausing And it would be very nice to have both Danish and Swedish champions as well. This is one of the biggest events we ever have supplied. Rogel Run in Denmark. 112,000 runners. I think it was in six cities or eight cities maybe even. And all of them, those 112,000 run in a Croft T-shirt. It's fantastic also, not only fantastic for the sales, it's also fantastic for the exposure of the brands. so it's happened quite a lot in those areas half a year it's not very much to say there in one way because it's more or less falling Q2 and you don't have any big effect of tariffs if you look at the half a year figures as I said before Q1 would be a bit better Q2 a little bit worse or half a year is quite correct yeah 4.9 billion million not billion yet 10.2 percent up in sales incorporates 14.4 and retail 2.0 and again the big difference there is also that Cotton Classic of course was not in first or half year last year yeah not so much to say here Geographically, you have pretty much the same picture. North America minus 2% is due to currency and the currency effect there for first half year I don't have in my head, but do you have that or not? soon okay Sweden plus six percent there I must say that if I'm a little bit negative surprised in for example Great Britain I'm positively surprised in Sweden because to have that grow rate with the big market shares we have here is very good and especially when you don't use discounts and so on you really grow on full margins minus 8.6 so on half a year the local currency US is plus 6% Benelux plus 5 and there we now start to see positive effects of the automatizations we did in New Wave Netherlands last year we have been operating there since May last year and for a while we lost sales due to bad service when we had all the movement and so on now we start increasing again so that's good at the Nordics 5% and the rest of Europe plus 43 and the reason for plus 43 the main reason I should say not the only reason but the main reason is again cotton classic then and others minus 23 and that's one single reason and that's the trading came in low in Q2 Corporate minus 33 million. Sports and leisure plus 57 and gifts and furnishing and improvement on 17 million. Cash flow also pretty happy with that also if you look at half a year. and that's of course also one of the reasons we continue to have a strong balance sheet which will keep strong even if we do acquisitions so that's more or less that I think we open up for questions instead yes yes you should