Rusta AB (publ)

Good morning and welcome to the presentation of the quarter four results of Rusta. This is the last and smallest quarter of Rusta in our fiscal year that runs from 1 May until end of April and this is therefore February, March and April. My name is Göran Westerberg, I'm the CEO of Rusta and I will present the results together with Sofie Malmunger who's the CFO of Rusta and we will take you through both the quarter and also the full year results. So the agenda will be as usual. I will run through a business update and then that will be followed by a more in-depth financial update by Sofie. And then I will do a quick summary and open up for questions. So first, the business update. Just to have a look at the store network development since last time. By the end of the quarter we had 212 stores. We opened four new stores during the quarter. And we are now up to 48 stores in Norway, 112 in Sweden, 42 in Finland and 10 in Germany. After the end of the quarter, we have also opened up another store in Norway actually yesterday. And we've also added three new locations. So in the list, a prioritized list of what we're having, we can see that we've had a net increase in the store pipeline going forward. So we're now up to 29 locations that are either signed or approved that will be open up. And that is in spite of a number of stores being open in the last few months. So I think the pipeline has been strengthened and that looks really good. Another thing that we can point out here is that most of the store openings now are actually in Sweden. And that's not something that we expected a year or two years ago. But that market has actually developed quite good. We have a good pipeline and we see many opportunities here. And one of the reasons we like that is because that's our oldest and most mature market. We know that it's usually harder to find the last few locations. So I think this is really positive. But we also have the highest profitability in Sweden. which means that the payback time here is actually the strongest. So that's really good both long-term and short-term. Moving over to the quarter. The last quarter is also the smallest quarter for Rusta. It has historically always been a loss-making quarter and so it is also this quarter. The numbers that you will see now fully reflects the negative impact of the Tietoevri incident. And the only adjustments that we have done is due to the IPO. And also during Q4, there have been no adjustments. So there are no costs for the IPO. The total sales development was plus 2.9%, but we had a negative like for like development of minus 1.2%. But what I would like to mention here is that we would have been in the positive if you take away the effect of the Tieto Every IT incident. We managed to strengthen the EBITDA by 2.6%, very much on the back of continued margin strengthening, which is in line with what you've seen in previous quarters and also completely in line with our guidance and our strategic priorities. Looking at the full year, again fully reflecting the negative effects of the Tietoevri incident, we had plus 9% over the year and a really strong plus 4.6% like for like over the year. We're especially proud of a really strong positive development on the adjusted EBITDA, plus 45.7% over the year. Again, very much on the back of both sales growth but also a gross margin that is much closer to our normal historical levels. Some of the key events during the year of course includes the improved margin that I've been talking about. This is not at the cost of our price position. I really want to underline that we have a comfortable price lead in most of our important categories. This is more over the year both a combination of. Better transport prices in the beginning of the year and towards the latter part of the year more and more purchase price development that we're really using the volume growth that we're having in negotiating better prices and also increasing scalability through our value chain. So this is really rusta functioning as it should. So really delivering on that. We've also continued to expand. We opened a total of four stores during the quarter and 11 stores during the full year. We've also had some headwind during the quarter. We had an unusually cold and late spring and I can say that February and March are usually quite uneventful months at Rösta normally. It's not seasonally driven. They are amongst the smallest months during the full year and nothing really happens during those months. This quarter is about April and it's about how early the spring starts. And if you have a couple of warm weeks during towards the end of April, that can really push this quarter in a positive direction. However, this year, in all of our biggest markets in Sweden, Norway and Finland, we had snow far into the month of April, and it was unusually cold by any measure, and that negatively impacted the summer season, the products that have to do with summer. If we look at the business area development, we actually had good development in the other areas, in both home furnishing and in consumables. But we would have needed more of the barbecues, the parasols, the outdoor furniture and so on. But when you have snowstorms, that's always very difficult to sell. So we really had a negative impact of April. We also had to carry the lion's share of the burden of the IT incident. In Q3, we had a negative impact of it, but we also flagged that it would be bigger during this quarter, which it has also become. And the reason we have a bigger headwind in this quarter is that most of the cost for rectifying and building up the systems, consultancy costs, overtime payment, catching up and so on in our delayed deliveries and so on. Most of those costs ended up in this quarter. And that's also why we had a significant part of the negative EBITDA effect here, 48 million. But Sophie will go through much more of that. I also want to say that I want to reiterate what we said that now we've seen the end of it. We don't see any significant cost going forward. We have been back in normal operations since long and we're of course really happy to leave this part of the year behind us. Some key events after the quarter, looking into the future. Some things that we have done. One is that we've opened a new sourcing office in Turkey. And this is completely in line with our main strategy, to be as close as possible to the leading and most important suppliers that we have around the globe. We already today have significant purchases in Turkey and in the surrounding countries. And for this move is both a way for us to see that we have a bigger focus on markets closer to our sales markets. We know that we're living in a more unsecure world today where global supply chains are sensitive. This is a way for us to have a B plan, also to build up alternatives to purchases in the Far East. But it's also a way for us to take a stronger grip on both quality development and sustainability development in our entire supply chain. So this is really something that we want to build for the future in our global sourcing organization. We've also... seen on the back of our growth and on the back of our volume driven growth that there's been opportunities for us now to further increase efficiency in our supply chain even in the distribution central capacity we have but we've also seen now that there is a possibility for us to work more efficiently with manpower Also reducing the need for trucks and so on. So we have decided to implement a system that's built on goods to person logic. Basically that the products are coming to a picking stations where persons are then sorting it and packing it to move out. It's a total investment of under 300 million crowns. The payback will be under five years, and it will be a positive EBITDA effect already in the first year of operation, which will be FY26-27. So we think this is a very positive step. And that will also, as an added benefit, increase our capacity even further. And after the quarter, we had a very cold April, as I said, that had a negative impact on summer sales. But fortunately, May was really good. It was good weather, warm weather, and that was more than enough to compensate for the bad development in April. So as a whole, considering the spring and the start of the summer, we've had a good start on summer sales. And why is that important? Well, that usually goes a long way to support our gross margins in our first quarter, because the more of our summer sales we sell in the beginning of the season, the less the need for sellouts towards the end of the quarter. All things considered, we believe that we're in a good place when it comes to the summer season and that this will overall be good for continued positive margin development. Some of the achievements I want to mention, turning to the full year and some of the achievements. One of the things that we've talked about during the last quarters is the change of behavior, the influx of new customers into low price and in particular rusta. We see that very much reflected in our loyalty program. We're now, at the end of last quarter, up to 5.6 million fully registered Club Rusta members. 150,000 members were added in the last quarter, and again, mind you, this was negatively inflicted by the IT incident again, because our systems were down for a total of a month, where we could not recruit new members. But in total during the year, in spite of this, 850,000 fully registered new members, which is an increase of 18%. So the largest loyalty program in low price in the Nordics just got a whole lot bigger. And I think this is important for us long term because these are members that we can now work with. We know that they usually have a much more positive trajectory in ticket value and visitation frequency and so on. So this is positive. Another important strategic priority for us has been to increase the share of private label. And at the time of the IPO, we had 64% of our sales under our own brands, under our own private labels. This has increased by 3%, which is quite a big step. So we're now up to 67% private label share in the company, and we expect this to continue to grow. I think the last thing that I really want to underline again is that during the year as a whole we're solidly back into volume growth and this is so important for our business model. It gives us scalability and it gives us better purchasing power with our suppliers. So I think this also helps to support the positive gross margin development that we've seen so far during the year. And now I turn over to Sophie that will take us through the financial performance.

Sure. So, we will start by taking a closer look at our Q4 numbers, but first I would like to continue the guiding regarding the seasonality in Rusta's quarters. Rusta has a financial year that stretches from May to April. Q1 and Q3 are generally our strongest quarters in terms of sales and profit, mainly driven by the summer and the Christmas season. Q2 and Q4 are generally our smaller quarters, and today we are presenting Q4. The negative profitability, just as Göran said, in Q4 has to do with the seasonality, with lower sales after the Christmas season and before the summer season kicks off. It's also a very weather-dependent quarter in that sense that a warm April means that sales kicks off earlier, and a cold April that sales are moved to the first quarter of the next financial year. So for the Q4 we have a total sales growth of 2.9% and a negative like-for-like of 1.2%. These numbers are lower than previous quarters this year which is explained by the negative effect of the IT incident and also by the cold April. We are meeting two years of strong fourth quarters with high increased sales both in total and like-for-like numbers. On the positive side, we have a gross margin that has increased with two percentage points, which is then an increase of 8%. We have an adjusted EBITDA of minus 2.1, but that is a 0.1 percentage point stronger than last year. There are no adjustments, just as Göran said, so the IT incident has not been adjusted for. It's fully reflected in the results. For the full financial year, we can now summarize strong increased sales, improved profit and improved margins. We have a total sales growth of 9% and a like growth of 4.6%. In addition to strong sales, we have a gross margin that has increased with 2.4 percentage points, which is then an increase with 15.5%. We also have an adjusted EBITDA of 7.1%, that is 1.7 percentage points stronger and an increase of 45.7%. And the same here, adjustments during the year are only for IPO costs, nothing else the IT incident has not been adjusted for. So a short summary of the full financial year is that Rusta take clear steps towards the mid-term financial targets with increased sales, improved margins and profitability. The financial effect by the IT incident in the fourth quarter amounts to a loss of 61 million SEK in sales, with a negative EBITDA effect of 48 billion SEK, which includes both lost profit and extra cost. This is in line with what we have communicated earlier. The total effect for the full financial year is then a loss of 120 million in sales with a negative EBITDA effect of 74 million SEK. Looking to the right, you can see that our fourth quarter, excluding the IT incident, would have been 2.8 percentage points higher in sales. That means that we would have had a net sales growth of 5.6 instead of 2.9. We would have had a like-for-like growth of 1.4 instead of a negative like-for-like of 1.2 and an EBITDA margin of 0 and actually profitable instead of minus 2.1. This means that our smallest quarter for the year that always has had a negative profitability would actually have been profitable above 0 without the IT incident. As for the full financial year, we would have had a double-digit growth of 10.1%, a like-for-like growth of 5.7% and an EBITDA margin of 7.5%. Just as Göran said, we expect no material financial effects due to the IT incident beyond this financial year of 2023-2024. We have an ongoing discussion with Tieto Avery regarding compensation and might shortly commence arbitration proceedings. Looking at our markets we see negative effects of the IT incident which affects both sales and profit. The numbers you see here for sales are excluding currency effects and the grey boxes at the top shows the loss in sales and profit for each market due to the IT incident. Sweden and Norway had a sales growth of 2.5 for Sweden and 7.7 for Norway. To the right you can see the profitability in these markets, which are 10 for Sweden and 3 for Norway. Our third segment, other markets, consists of Finland, Germany and online. The impact of the IT incident is higher in this segment. Online was unavailable for about a total month, and the replenishment of goods were prioritized to the larger and closer markets during the IT incident, which were then negative for Finland and Germany. Sales growth are 0.1 for other markets in Q4, but it would have been 3.1% excluding the IT incident. The profits is negative, but it would have been 1.4 percentage point higher without the IT incident. And if we look at the full year, we can conclude the performance for each segment. We see a strong performance and growth in all our markets with increased sales, improved gross margins and increased profit. Sweden has a sales growth of 6.2% and an increased profitability to 16.8%. During the year, we have opened three new stores in Sweden. Norway has a sales growth of 7.9% and the profitability of 11.6%. The slightly lower EBITDA margin compared to last year is explained by negative currency effects due to a weaker NOC and also a 0.5 percentage point negative effect due to the IT incident. During the year we have opened four new stores in Norway. Other markets have a total sales increase of 16.5%, really strong, and an improved EBITDA margin of 2.9 percentage points, which then means that our most immature segment, other markets, now are profitable on the full year. And it would have been even more profitable without the IT incident. We have focused on increasing the gross margin to ensure a positive effect of the profitability. We also see a very positive development in profits for Finland. And during the year we have opened four new stores in other markets. Our profitability has continued to increase during the year, and if we take a closer look at our adjusted EBITDA, we see some clear profit drivers. If we start by looking at our fourth quarter, we see positive effects of improved purchase prices from Asia in our gross margin, which is in line with what we have guided on previous quarters. We also see positive effects due to optimized sales prices, which is mostly a year-on-year effect of a general higher sales price level compared to last year. There are also some positive effects due to a healthier level of our inventory, such as lower obsolescence reserves and similar. For the full financial year, we have managed to increase our adjusted EBITDA from last year's 5.3% to 7.1%, as you can see here on the slide. The profitability drivers for the year are higher sales where volume is the single largest driver to the overall growth, both in total and in like-for-like numbers. We also have optimized sales prices, reduced shipping costs and positive inventory effects that all three have increased our gross margin. We have slightly higher operating expenses, which is due to extra costs for the IPO during the year, also extra costs due to the IT incidents, and then of course the inflation. The depreciations are slightly higher compared to last year. So to summarize, despite inflation and costs for 11 new stores compared to last year, Rusta has managed to increase the profitability and the adjusted EBITDA has increased with 45.7%, which we're very proud of. And then some comments on our balance sheet and cash flow. We have worked actively with Working Capital during the year. Despite higher sales and 11 new stores, our inventory has decreased with 2% compared to last year. The inventory would have been even lower with a warmer April and an earlier start of the summer sales. The value per item is lower compared to last year thanks to lower freight costs and lower purchase prices and this will continue to have positive effects on our gross margin in the coming quarter. Thanks to the improved profit and positive change in working capital during the year, we have had very limited use of our overdraft facility. We are positive in net cash of 130 million SEK at the end of the quarter compared to a net debt of 255 million SEK last year. And we're using 380 million SEK less of our overdraft facility compared to last year. Cash flow from operating activities has been negatively affected during the quarter due to the IT incidents, since the deliveries and the payments from Q3 were partly pushed to Q4. But for the full financial year, we have a cash flow from operating activities of 1.4 billion SEK, which is an increase of 39% compared to last year. So all in all, we have a solid balance sheet, we have a positive cash development and a very stable financial position. And then some words on our financial targets. We are committed and feel confident to deliver on our financial targets. Our accumulated numbers for this financial year shows that we have a total and like-for-like sales growth well above the 8% and the 3%. And we have an EBITDA margin moving towards the 8% in the medium term. Earnings per share grow with 56%, which is higher than both sales and EBITDA growth. And regarding the dividend, the board proposes to distribute 1.15 Swedish crowns per share, which then means 43% of net profit and a total of 175 million SEK. This is in the higher end of our dividend policy of distributing 30 to 50%. Last year's dividend was 0.69 Swedish crowns per share. And with that, I hand over to Jara.

Thank you. Yes, so just to summarize, I think with that we're adding yet another year where we, in spite of, how should I say, not so positive macro and also certain incidents that are external that have somewhat hindered us, we're adding another year of profitable growth. So we reach a total of 11.1 billion, almost a billion higher than last year. And I think this really goes to prove the resilience of the organization, the culture and also the strength of the concept of Rusta. I again want to reiterate that this is I would say at no means the best positive environment for us to be in a slow economy. We usually excel when the economy turns to the better. From our point of view we really like what we're seeing with improved consumer confidence and a stronger economy. Looking at the strategy going forward this remains very much the same it's to maintain the low price position that's the number one priority for us that's the job that we're doing for our customers and we believe with the strength of our purchasing machine and the increased efficiency that we have in our value chain we will be in a position to deliver those low prices better than anyone in the segment. We're also going to work with a very differentiated assortment, and introducing news to the market will be important for us going forward. As we've said before, Rusta is very much an organic case, and where like-for-like growth is really important. During the last year, we have prioritised gross margin normalisation to our historical average. But as we move along now and we see that we're closing into the gross margin, more and more of our focus will be to use some of that efficiency to actually propel growth again, and especially like-for-like growth. Further increase efficiency across the value chain. You've seen a couple of initiatives on that, both the opening of Turkey during or after the quarter, but also the investments that we continue to do in Norrköping in our distribution center. This is all in line with making sure that we have scalability and efficiency and that we're really leading in the way that we're building our value chain. And of course, we will continue to open stores. We've opened 11 new stores during the year that just passed. And looking forward now, we see that the influx of new store locations that are approved or signed has actually increased over the year in spite of the openings. And I see that as a very positive sign going forward. So with that, just summarizing the year, plus 9% total growth, a like-for-like of 4.6%, 45.7% improved adjusted EBITDA growth with fully reflected negative effects of the Tieto-Evry incident, and also a proposed dividend at 1.15 crowns. which is higher than last year but where we both in management in the board are comfortable that we can do all of the investments we do and maintain our strong financial position and still deliver this dividend so with that i open up for questions thank you for listening so far if you wish to ask a question please dial pound key five on your telephone keypad