Viva Wine Group AB

Good morning everyone and welcome to our Q1 2025 presentation. My name is Emil Sahlnes and I will, together with our CFO, Lynn Gavert, present today. This is the agenda for today. Due to our acquisition of Delta Wines, which was communicated earlier today, the format will be slightly different. We will start with our customary Q1 presentation before moving on to a presentation of Delta Wines and then ending with some final remarks and a Q&A. So now let's move on to the Q1 update and our performance summary. In the quarter, we continue to report increased market shares in the Nordics, which extends our streak to 14 straight quarters of increased market shares in the Nordics, a great achievement by our Nordic companies. Net sales were significantly affected by the timing of Easter, which this year fell entirely in April. As a result, net sales declined by 1% with an organic growth rate of negative 0.9% compared to the same period last year. We continue to deliver on gross margin, which was strengthened compared to prior year with over two percentage points to 21.2%. Due to lower sales and our step up in OPEX communicated last quarter, adjusted EBITDA for the quarter decreased to 5.5% compared to with 6.3% last year. Now let's look into the details of the financial performance and I will hand over the word to Lin.

Thank you, Emil. We have a small negative sales growth of 1% for the group, and we closed the quarter slightly below last year. The decreased compared to the same quarter in 2024 was expected due to timing of Eastern. Easter sales will not be visible until the second quarter. Group organic growth slightly negative with 0.9%, as Emil mentioned. And to mention again, Viva Wein Group performed better than the monopoly markets. All countries in segment Nordic also increased their position compared to the market. Ecom was more or less at the same level as prior year. The consumer sentiment, especially in Germany, our biggest Ecom market, was still at very low levels. However, Q1 shows positive organic growth in Ecom and we are seeing cautious signs of stabilization. We have a decreased profitability versus prior year with a lower EBITDA margin. The main reason is a combining of the timing of Eastern and as previously communicated in conjunction with our Q4 report, our strategic OPEC step up to be able to support our growing Nordic business, marketing investments in Ecom and a professionalization of our organization. The Nordic segment has strengthened their gross margins. The main reason is our well-balanced price adjustments from previous quarters. We only have a slight contribution from currency compared to last year. Due to our hedging policy, we will not see the current positive currency development in EURSEC until later this year. Looking at our net working capital, it's above last year and in relation to net sales and that is mainly from Easter and build up of inventory as opposed to Easter in March 2024. Our net debt well within our targets and net debt to EBITDA decreased to one times three. We have a lower operative cash flow impacted by mentioned seasonal effects. The buildup for Eastern had a significant impact on networking capital, which was higher this quarter. Our operating activities are in line with previous year, but netted out from the increase in working capital from Eastern. Our cash flow from our financing activities was according to plan.

Thank you, Elin. So now over to the performance by segments. We have, as mentioned, continued our steady growth in the Nordic market shares and once again increased more than the market. This is despite the overall market performing soft with decreased sales in all three monopoly markets. For the Nordic market combined, Viva Wine Group reported a market share of 23% for Q1, which is an increase of 0.7 percentage points from last year. Total monopoly sales in the Nordic region decreased in volume compared with the corresponding quarter in 2024. The Easter effect is the main explanation, but there is also an effect of a lower consumer sentiment across the Nordics. In Finland, the channel shift towards retail due to the 8% wines meant that the monopoly market decreased more than the Nordic average. In Sweden, we reached almost 29% market share in the quarter and beat the market in all wine segments. In Finland, we also continue to beat the monopoly market and have increased our market share to 22.1%. The decrease in sales at Alko have been compensated by strong sales in retail, resulting in overall flat net sales for the Finnish company, despite the Easter effect. In Norway, we increased our market share to 7.1%. The increase in market share in Norway is driven by strong organic growth and by the acquisition of target wines.

Yes, and looking at the total net sales for segment Nordic, it decreased by 1.3% in the quarter and an organic growth of negative 1.2%. And as already mentioned, the decrease is mainly explained by the timing of Eastern. The adjusted EBITDA increased along with the adjusted EBITDA margin in the quarter and ended at 7.1% versus 6.5% in prior year. Sweden is the main driver with increased gross margins.

In our e-commerce segment, the market continues to be soft, but we are seeing small signs of stabilizations of our customer base. We have successfully tested and invested in new channels and approaches for acquiring customers, which we are starting to see positive signs from. Sales were stable versus last year with a slightly positive organic growth. We continue to work hard on growth, and as mentioned in previous quarters, our focus is on growth in our 11 existing markets.

Looking at the net sales, as Emil mentioned, almost in line with previous year with negative 0.3%, consumer sentiment continues to show very low figures, especially for Germany, which is, as mentioned, our main market for e-commerce. In March, however, we saw small signs of recovery and we have a small positive organic growth, which strengthens our belief of further stabilization in the market. We have stronger gross margins, mainly due to positive product mix. We keep our strategy of balancing sales and profitability and invest in marketing when we see effects in our KPIs. Since we now see some stabilization of our customer base, we invest in marketing for future growth. The investments will of course be monitored closely and be KPI driven. We have a very good cost control in our efficient cost base. Adjusted EBITDA margin was lower than previous year, driven by mentioned investments in marketing.

To summarize Q1, overall it was a difficult quarter to analyze. Strong calendar effects and a shift in Nordic consumer sentiment impacted heavily on the quarter. Despite this headwind, we continue to gain market shares and reach new record levels for the Nordic monopolies combined. As previously communicated, operating expenses are higher, but they are also in line with our expectations and our strategic plan. M&A is an important part of our growth strategy and we see an increased deal flow, which we evaluate continuously. And this brings us to the acquisition of Delta Wines, an exciting strategic step that significantly enhances our position in the European wine market. To start, we will look back at our growth journey until today. Founded in 2009, Viva Wine Group has evolved into a leading wine distributor in the Nordic and operates one of Europe's most prominent online wine retail platforms. The group employs a decentralized business model, empowering entrepreneurs to lead operations while retaining minority ownerships in their respective businesses, driving accountability, agility and local market insight. Our growth trajectory has been underpinned by robust organic expansion complemented by a disciplined approach to strategic acquisitions. Our long-term vision is to become Europe's leading wine group with a clear initial objective of doubling net sales through both organic growth and acquisitions. Our M&A strategy is built on three different pillars. We are looking at bolt-on acquisitions to our existing business. We are looking at platform acquisitions to open up new markets. And then we are also considering smaller niche acquisitions to compliment our Nordic offering. Delta Wines is clearly a platform acquisition that expands our business into four new markets, Netherlands, Poland, Czech Republic, and Belgium, as well as adding to our presence in Finland and Norway. Delta Wines was founded in 1985 and is a market leader in the Netherlands and have a leading market position in Poland and the Czech Republic. Total revenue in 2024 was 186 million euros with an EBITDA margin of 6.8%. Delta Wines have a strong presence in all distribution channels, retail, sales to e-commerce platforms, food services, wine shops and export. As mentioned, we see Delta Wines as an important strategic acquisition, which will broaden our platform for growth. We strengthen our market reach and we become a more diversified group of companies. We acquire a leading B2B distributor with an excellent track record. Delta Wines is led by a very professional team that also will remain in the company as shareholders. Again, aligned with our existing model. Finally, we see a high potential for synergies. As mentioned, these synergies are expected to be those that we have successfully achieved within our Nordic operations, strengthen supplier relationships, enhance knowledge sharing, and most notably improvements in product development. In addition, both companies get access to complementary channels. OVIVA Wine Group expands into Europe to enable further geographic expansion. And also, the market access opens up for OVIVA's existing strong portfolio of brands to be sold into new markets. The combined group will have net sales over 6 billion Swedish krona with an EBITDA margin of 8.4%. And our geographic presence in Europe will be unmatched by our competitors and will form the basis for a continued growth journey.

Yes, and the summary of the acquisition is that Viva Wine Group acquires 88.59% of Delta Wines for a purchase price of 57 million euros. This follows our strategy, as Emil mentioned, of keeping our entrepreneurial model to secure long-term incentives, skin in the game and the same incentives as the shareholders of Viva Wine Group. The adjusted EV to EBITDA, according to preliminary unaudited IFRS, result in a multiple of five times nine. The acquisition is expected to be accretive to Viva Wine Group's earning per share from day one. Viva Wine Group will finance the acquisition with a new term loan provided by our bank club that consists of the prominent Nordic banks SEB and Danske Bank. The net debt to EBITDA is expected to temporarily correspond to slightly above three times. Viva Wine Group will consolidate Delta wines into the existing Nordic segment. The new segment will be remained to business to business and will account for approximately 89% of the sales. The current Ecom segment will be remained to business to consumer and account for approximately 11%.

So to summarize, today we have taken a big step towards our vision of becoming one of the leading wine groups in Europe. The acquisition of Delta Wines is an important strategic move where we see a lot of synergies for growth. There's a great cultural fit between the companies. We have similar history and share values and a willingness to adapt and grow. The acquisition will be accretive and create shareholder value from day one and As a last point, following the closing of the transaction, our board will also review our financial targets. So we will not go into these today. With that, it's now time for the Q&A session.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Rauli Juva from Indiers. Please go ahead.

Yeah, hello, Rauli from Indiers here. A few questions from me. First of all, the Nordic market development, I guess you have now already figures for April and you mentioned that there has been a weakness in the consumer sentiment as well. So has that been kind of weaker than you originally expected going into the year?

Well, we see the positive effects from Eastern and that is visible in the market. So that effect has been reversed completely. However, the markets in general has opened a bit slower than the markets expected if we look at the monopolies guidances for this year.

And You still had a quite good cross-margin development. Is there any pressure on the pricing or cross-margin given the continued weak market?

No, we expect our gross margins for the Nordic segment to be strong. And as mentioned, we also have, if the currency development continues as currently, we will also see positive effects later during this year in the gross margins for the Nordic segment. So we expect the margins to be stable for the Nordic segments. And if the currency development is as it is, Today in the market, we will see positive effects later this year.

Yeah, okay, that's very clear. And then on Delta Wines, I was wondering what kind of integration you are planning with Delta Wines, kind of how independent component that will remain as an operation, and how much are you planning to integrate?

Yeah, but Delta Wines will just slide into our existing business model and will continue to operate as a decentralized individual company who takes a lot of decisions close to the market, as is our model. Then, of course, looking at the countries, Finland and Norway, where we... where we already have existing businesses, we might coordinate a little bit in the background of the platforms for finance, logistics and stuff like that. But also in these countries, the plan is to operate the companies as individual companies.

Yeah, sure. That makes sense. And you didn't give any kind of number estimate on the synergy potential in the release, I guess, on purpose. Can you give any color on that subject?

Yeah, absolutely. So even if we don't disclose specific synergy estimates, we expect to realize benefits very similar to those we have successfully achieved within our Nordic operations. And those include strengthened supplier relationships, enhanced knowledge sharing and product development and assortment planning. And these have been key contributors to the strong performance in Nordics recently. And this is what we expect to leverage also with Delta wines going forward. But I think to be clear, we're talking a lot about growth synergies. And these take a bit of time, as we have seen in the Nordics. And also they are much more difficult to quantify. That is why we are not quantifying. any synergies as such. On the cost side there are no identified clear synergies apart from again knowledge sharing, best practice and stuff like that which also is more of a slow rollout.

But also important to mention that they have a very efficient cost base as we always strive for also in our group, the OPEX net sales for that business is expected to be around 9% or something. So very efficient cost base that we will keep.

Okay, that's very helpful. Thanks. That's all for me.

The next question comes from Frederick Iverson from ABG. Please go ahead.

Thank you. Good morning, team. I've got a few questions on the financial performance and then a few on Delta, but maybe we could start with the Q1 results. And I guess you touched upon it a little bit, Erlin, on the gross margin. And I want to allude to the Nordics in particular and the bridge from Q4, which was down, I guess, one percentage point roughly. Is that only a sort of normal seasonality or anything else that we should be sort of aware of in that number?

no that is normal seasonality effects and looking back going back a couple of years this has always been the case of course hard to analyze due to currency effect but but it's normal season effects where we have the christmas sales that always is a bit stronger in the gross margin percentage so um yeah and that is the effect and as we mentioned when Raoul questioned is that we believe that these gross margins will stay strong and even expect to increase towards the later parts of the year yep that's clear and second one on OPEX you guided for OPEX in relation to sales in line with 2023 for the full year yes and now in Q1 it was up

And now in Q1 it was up one and a half percentage points. So how should we view the sequential facing of OPEX over the year?

Yeah, well, I think that also should be in line with previous year OPEX developments, the seasonal patterns that we have had. And I mean, the net sales is the biggest deviation where we have always weaker sales in Q1, depending on Easter, and then the strongest sales in Q4. But looking at the historical pattern of the spend is good.

but as mentioned we still have this guidance as you said for the full year okay right and then if we could move into the delta acquisition so my assessment of your previous strategy has been to focus on nordic monopoly and then e-commerce outside of the nordic more than anything else so this looks like a little twist of that focus maybe. So what made you sort of start looking outside of e-commerce? Or am I completely wrong?

No, it has always been being part of our strategy. But yes, we have spoken a lot about Ecom, but our vision has been to become a European market leader. And I think we are looking at all different kinds of acquisitions along those lines. And then, of course, I mean, it has been difficult to find good Ecom acquisitions as well. So maybe we've had to twist our strategy and look a little bit harder on other kinds of targets than than previously. So yes, a slight twist on the strategy. But on the other hand, when we met with Delta Wines for the first time and when we spoke with them, we realized, I mean, on a personal level, it was almost love at first sight because they had done exactly the same growth journey as we have done. They built up a group with same values, same work ethic and so on in a different market. And for us, that was like a really really good eye-opener that there are other companies like us in the world and we hadn't looked as hard for them before now we we found them and this will be really really good for us going forward but slight twist in the strategy that's correct yep that makes sense and i agree it looks like a good company for sure uh what's the gross margins in this business is it roughly in line or slightly below the nordic cross margin

Yeah, it is slightly below, I would say, since it is an open market with several channels.

Right. And I guess private label share is lower as well.

Yeah, but they have a significant part of private label as well. But that is also something we will continue to work on together. But I would say approximately 20% today. So still very good.

Okay, good. And the interest rate on the financing, would you be open to give a ballpark number on that?

We don't discuss. I mean, that's according to our agreements that we don't disclose them. But I would say that we have very good financing terms that will not significantly change towards our current financing terms. So that's a good answer.

As I said. And lastly, from my side, maybe I just didn't understand, but is the current management team in Delta also owners?

Correct. So the CEO, Joris, the managing director, the CFO and the commercial director are main shareholders owning together around 10% of the company. And then there is the 0.9% that remains, which are also then shared with other management in the Netherlands. So in total, I think we will have between 10 and 15 shareholders in management in the Netherlands.

Okay, great. That sounds good. Well done. That's all my questions.

Thanks very much.

Thank you. The next question comes from Nicholas Elmhammer from Carlsquare. Please go ahead.

Yes. Hello and good afternoon. Good morning, I would say. Regarding sort of factors impacting your Do you have an estimate of the impact from Canada Easter on Q1 and also regarding price adjustments so far in 2025 in Sweden and elsewhere? Is that something you could comment on?

Yes, mentioned the sales development is clearly related to Eastern and has been reversed looking at April. So that has been fully reversed. So looking at the historic seasonal patterns, they are in line. And looking at our price adjustments, as mentioned, what we see today in our gross margin is the result of price adjustments going back quarter by quarter the last years. We don't expect significant price increases in general, but we still expect gross margins to stay strong in the Nordic markets and then

if currency stays as it is today give a positive effect towards the end of the year okay thank you and looking at the current macro environment what kind of market trends do you see and how do you make any adaptions

I think that we have already adapted our approach to the market. We have launched many more new products in more affordable price categories. We are meeting this slower the purchasing power of Nordic consumers has been a little bit reduced in the last few years. And I think this change in consumer sentiment that is mentioned is that it seems like the whole, and when we look at also other businesses that have been reporting in the last few months, a lot of people have been talking about this slightly more cautious consumer. And I think that's what we're seeing as well. So it's really like,

very very small signs so it's not no big break in in any trend at all but small signs that that the consumer is a little bit more cautious about his or her spending yes thank you and and regarding your uh sort of strategic opex investments uh how long before you see any top line benefits or have you already that already what you're seeing now

I would say that the OPEC step up is, as we mentioned, planned for this total year. But then we expect, I mean, the sales to follow. So it will go back again to more in relation to last year's number in relation to net sales. So, I mean, we expect these investments to give us further growth in the Nordics and also of course now we see some traction in ecom hope to retain a more stable situation in our customer base where we see effects so that's those investments and then in general we are investing in professionalization of the organization as well and now is the right time okay and finally regarding delta do you see

regarding the profitability potential if you could answer is there any reason why Delta should be lower than your current Nordics in terms of profitability system the customer and market structure

Yeah, I think regarding that question, it is clearly well known in our business that of course the profitability in the monopoly market compared to a totally open market will have a different profile. So basically that means that the delta will always, well always is a hard word, but will at least for the near future have have a more lower profile than at gross margin level at gross margin level while of course on the cost level they are super efficient so but there is a difference and I think that once we have a bit more verified numbers and we can guide you a little bit more regarding that in future sessions okay sounds good thank you

The next question comes from Johan from Fred. Please go ahead.

Good morning, guys. Johan Fred there from SEB. Thank you for taking my questions. A first one on your investments into the organization, which drew up quite a bit higher year on year. Do you mind elaborating a bit on or specify what your actually investing in. You mentioned marketing, but any additional color would be much appreciated on that topic. Thank you.

Well, as mentioned, if looking at the Nordic segment, it's marketing, of course, but then also the Nordic segment has grown a lot during the last three years. So also some personnel and then also some investments in one time effects. We have also made investments in for example ai to be even more efficient going forward but and then looking at our ecom segment it is now investments in marketing mainly the efficient cost structure that we have worked with during the last year will stay for ecom It's mainly related to that we now see some traction in the customer base stabilization that makes us invest a bit more for future growth there. But as mentioned, that will be closely monitored and is KPI driven. So I would say the main focus is on marketing in Nordics and e-comm. And then for the Nordic market a bit also support with personnel. But then we also have the general professionalization of the company, where we invest in, for example, more functions that will help us in the M&A agenda going forward. And also, I mean, we have the strategy to become the leading European wine company. And those things that we do now will support that journey of being this, from today, a much larger group. So we're very happy with those investments and see that they are in line with where we are going with our vision.

Very clear, thank you. And a follow-up on that topic, and you sort of alluded to this in your prior answer here, You guided for OPEX in 2025 to be in line with 2023, but as mentioned, it came in quite a bit higher than that in Q1. Is sort of the OPEX level seen in Q1 a good reference for your cost base coming quarters? And of course, accounting for seasonality, but should we use the delta between 2023 and 2025 as a sort of reference point?

yeah and and as mentioned what we said when we reported q4 it was a reference net sales opex to net sales percentage looking at 2023 for the full year so that is the guidance so at looking at the different quarters it is of course higher in q1 because we have lower sales and so on but the spread of the opex during the year is in line with previous year so that is more a seasonality our of our opex structure as well um yeah so so that remains yeah yeah good very clear thank you so much

And a third one, if I may, on the gross margin development, a very solid development. It expanded by, I think, 2.2 percentage points year over year, which I gather is mainly driven from Sweden. You mentioned that FX will have more of an impact on gross margins in coming quarters. What drove the increase that we saw in Q1? Is this mainly price or is there any FX in the mix? Any color would be much appreciated.

Yeah, well, we have very small positive effects from the currency. So, I mean, looking at the average rate at Riksbanken compared to last year, it's almost at the same level in Q1. So no effects. And on top of that, we have our hedges. So positive effects from the currency is expected to come later during this year, Q3, Q4, the positive effect from the currency. But as mentioned, we have been adjusting our gross margin to current levels. That is work that we have been doing since 2022 to catch up with all negative headwinds in the general market condition. So this is hard work getting new products in to the correct new environment that has the correct gross margins from the beginning that boost this, but also the price adjustments that have been made over the last two years.

So the delta is driven by price mix, is that correct?

Yes.

Got it. And the final one, if I may, then, on the acquisition. As I gather, it's a B2B distribution platform. How does the sort of business model and strategy from Delta differ from your current strategy, given that your B2B business is predominantly based around the Nordic monopolies? What do you see as sort of the main challenges with expanding your B2B offering outside of the monopolies?

I think that if you look at the outside monopoly countries, the first thing you have to realize that these are multi-channel markets where a lot of the channels are much stronger than in Sweden. So for example, the restaurant side has a bigger percentage point of sales than they would have in Sweden. On top of that, there are wine shops, there are e-coms, there are of course, retail. So many more channels to work with. Looking at our strategy, I mean, what we do share from the start and we will continue to share is that we put the consumer first. So again, we have this consumer centric model of always delivering what the consumer wants to buy. So that's more of a similarity. We feel that we have to gather capabilities as a company, since Delta is new to us, in these channels, and we have to learn much more about these channels. We have in the Nordics learned about fin in finland about working in retail and we've been successful there and i think we're looking forward to to sharing insights on on working on in a multi-channel environment which will then further strengthen our possibility to grow in the future but do you see that do you see your your sort of limited experience in the multi-channel environment sort of as a risk No, not at all. It's more me being a little bit modest about challenges and not knowing all the details about different markets. But if we look at it overall, I mean, their business plans are very clear and very easy to understand. And again, I mean, the only thing is that you have to work with many more channels. And in many of the channels, it's also many smaller entities. And that is different from, of course, where we work with basically one huge client in every monopoly market.

Got it. And the final one, if I may, what's the reason for Delta selling?

Yeah, I think the main reason is that the Navitas Capital, who was a financial investor, wanted to invest in other things and that started the process. And then, as often is the case, some of management sold some of their shares, so they have sold some shares as well. But the main owner wanted to invest in other stuff after having owned the company for, I will mention a number, but a number of years, let's say. So I think that's the main reason.

Make sense then. Those were all of my questions. Thank you for taking the time.

Thank you. There are no more questions at this time. So I hand the conference back to the speakers for any written questions.

Great. So Alexander has sent in a bunch of questions and we have answered a few of them. Can you give examples of synergies on cost as well as revenue from Delta and perhaps some numbers behind it. We already mentioned that we mainly consider this as a revenue synergy case and we do not elaborate on numbers. Gross margin guidance for Viva, I think we already mentioned that.

Yes, and it has been much focused on the Nordic level, which we expect them to stay strong and then grow towards the end of the year.

And in Delta?

And in Delta, we expect them to be stable, but lower level than the Nordic market, but just a few percentage points.

And then regarding Easter effect, there's a question regarding in order to understand the Easter effect, can you quantify it and perhaps say how much Aviva grew sales in the Nordics in April? We basically said that sales March, April together were developing very nicely compared to last year. So I think that's the guidance that we can give. Then, do you want to add something, Lin? No. No. All right, guys. Then a question regarding the dividend. Can you cancel the dividend after the acquisition? Are you comfortable with the current gearing? There are no plans that I know of. And in this case, I may put on my owner hat as well of canceling the dividend in the near future. Then, of course, as mentioned, we will look at our financial targets in the future. But we do see ourselves as a company that will give dividend for the long future.

Yeah, and we expect the leverage from this initially tree to, within a year, be within our targets. So that is our plan.

Great. And then last question from Alexander regarding Delta's EBIT and EBITDA in 2024.

Yeah, well, approximately, I would say EBITDA level of around 8 million. I must mention that these are all still not according to IFRS audited. And EBITDA margin, they don't exactly have that measure and it will be reviewed when we do the full IFRS conversion, but approximately 10 million.

Well, that concludes the written questions as well. So thank you all and look forward to seeing you when we present the Q2.