Welcome to Brødrene A & O Johansen interim report for Q2 and H1 2024. For the first part of this call, all participants are in a listen-only mode, and afterwards there will be a question and answer session. To ask a question, please press five star on your telephone keypad. This call is being recorded, and I will now hand it over to your speakers. Please begin. Good afternoon, and welcome to our second quarter and first half of 2024 webcast. Let us look at some of the highlights of the second quarter. AO saw a positive growth of 2.8%. The growth was 1.9% when adjusting for the impact from Svenska VA-Grossisten. Our expectation was a flat quarter and thus a slightly higher than expected growth. Second quarter benefited from the early Easter. Adjusted for the number of workdays, the organic like-for-like growth was -1.6%. Renovation, modernization, and maintenance shows a satisfactory growth. AO holds a strong position in renovation, modernization, and maintenance. Our focus is upgrading and expanding our outlets is a key element to make AO the preferred place to do your daily business. The number of customers in our stores remain higher than in previous years, which is very satisfactory. Our B2C growth continues. For the third consecutive quarter, our B2C activities are showing growth. It is rewarding to see that households are regaining appetite to invest in improvement of their household. AO is investing in the business. When one faces headwind, the initial reaction is to cut costs. We are looking carefully at cost spendings, and we have reduced headcount by 1%-2%. However, AO is not a quarterly-driven company. We do have the best team, and we want to ensure that we are ready to embrace and serve the growth we are expecting going forward. Even we are investing in hiring new competencies in 2024 to be well-positioned to expand our business over the coming years. AO Stockholm has had a strong start. The team in Stockholm joined AO in May. With two months of growth and solid results, the new member of the AO family has confirmed its potential. We are looking to expand with an additional site and hope for an opening during first quarter of 2025. The acquisition of the Workwear Group has been approved by the competition authorities. As of the beginning of August, the Workwear Group is part of the AO and the accounts. I had the pleasure to visit the Workwear Group last week, and I'm truly looking forward to welcoming them into the AO family and to be able to bring the increased opportunities within workwear to AO's customers. Let us look at the management's observations. Demand is increasing but still falling short of wholesaler capacity. This creates fierce competition, which puts a challenge to the margin level, primarily in project sales. In AO, we stay selective to not take orders with an unsatisfactory margin, but it is still our aim to grow our share also within projects. This fact is likely to have a short-term negative impact on margins. Lower basket sizes call for internal manpower. The lower basket sizes cause more inventory picks per million of sales and more logistic drops per million of sales. Short term, this is a challenge and puts a pressure on our plan to improve the cost of doing business ratio. Cost inflation makes it tough to reduce cost of doing business. In parallel with the most cost increasing rapidly, we also face a significant number of new legislations and administrative burdens. This forces us and other companies to recruit more administrative personnel with no direct influence on increasing the sales. Consumers have paused green transition when it comes to installation of heat pumps. We are closely observing the subsidy scheme launched at the beginning of June, but it is too early to conclude, but the conversion rate is not encouraging so far. AO sales of heat pumps and other energy solution amounts to approximately 5% of AO revenues. In our rest of year estimate, we have included cost risks of approximately DKK 20 million. Although we closely manage credit, we have included slightly more losses in our second half of 2024 estimate. We also face integration costs related to the three completed acquisitions. L ast but not least, we will see increased headcount by the new competencies we have hired and will hire to proactively position ourselves to the growth we planned. We are observing the geopolitical and macroeconomic tensions. It takes an eye on each finger to monitor the supply chain risks and potential disturbances caused by global tensions. In the short run, we do not see significant changes to the geopolitical and macroeconomic tensions, but we do foresee continued uncertainty and fierce competition throughout 2024. Uncertainty is not beneficial for the customers' appetite to order projects, nor to increase investments. We had quite an intense M&A quarter in AO. Don't get me wrong, in AO, we find organic growth very important and rewarding, b ut from time to time, you do meet companies with a match that completes our business perfectly. With the acquisition of Svenska VA-System, AO gets a foothold in the Stockholm area. For years, we have had a wish to address this market, and with Svenska VA-System, we feel that we have found the perfect company to front our position in strengthening AO in the Stockholm area. We expect an additional location to be opening during first quarter of 2025. For years, AO has been following VVSKupp. VVSKupp is the largest Norwegian webshop within plumbing and bathroom products. The company has its own location, south of Oslo, which allows us to handle all our activities from the same location. Last but not least, the acquisition of the Workwear Group is an attractive addition to the AO group of companies. The Workwear Group has experienced an impressive journey since the establishment in 2009. With revenue of approximately DKK 265 million, the company is a leading player within workwear on the Scandinavian market. The activities of the Workwear Group are operated from the state-of-the-art warehouse with significant unleveraged capacity. AO has approximately 28,000 professional customers, to whom we'll be able to offer an improved assortment and the strong capabilities from the Workwear Group. I'm excited to welcome our new colleagues from Svenska VA-System, from VVSKupp, and from the Workwear Group to the AO family. Now, Per, please take us through the financial performance. Thank you, Niels. Q2 sales came in at index 103 against our expected flat growth, and thus slightly higher than expected. Revenue development improved during the quarter, and the maintenance sales reached more than index 105, which is very satisfying. Projects came in at approximately index 85. Easter brought three additional working days to April, but June had two less working days. Gross margins reduced 0.8 percentage points due to fierce price competition. External costs came in DKK 3 million higher than Q2, due to a DKK 5 million higher loss in trade receivables. Number of employees were 11 higher than Q2 last year. Salary cost increased DKK 12 million, relevant to-- equivalent to 9%. A part of the increase was due to the fact that incentives were zero last year. EBITDA came in at DKK 75.1 million and an EBITDA margin of 5.8%, reflecting lower gross margins and higher cost. EBITDA ended at DKK 37.7 million against DKK 57.5 million last year. Earnings were as expected. Let's turn to the margins. In spite of a 0.1 percentage point positive segment mix, margins came in 0.8% shy of Q2 last year. Margins are pressured by fierce competition and overcapacity in the market, driving low margins, especially in projects. Let's leave the margins and turn to the segment info. The B2B segment accounted for 88.8% of revenues, and the B2C segment accounted for 11.2% of revenues. B2B showed positive growth and delivered a sales index 101.5. The sales index for projects were approx 85, while the repair and maintenance sales exceeded index 105. B2C showed positive growth for the third quarter in a row. Adjusted for one additional working day and the impact from Svenska VA Grossisten, organic like-for-like growth was index 98.4. From a margin point of view, B2B came in at 22.2% and B2C came in at 26.8%. If you look at the indirect, the non-allocated cost, it was DKK 14 million higher than last year, whereof loss of trade receivables amounted for 1/3 and salary increases the rest. Let's turn to the investments. Please be aware that the chart does not include M&A investments. The highlighted band in the middle of the charts shows the normal level of maintenance investments in AO. The investments in Q2 2024 came in lower than Q2 the previous years. On top of the normal maintenance investments, we saw approximately DKK 10 million investments related to upgrading of three outlets, which are to include the EA assortment in second half of 2024. The outlets throughout the country is a cornerstone in AO's business model. This is where we meet thousands of customers each day. Let's turn to cash flow and net interest-bearing debt. From a Q2 perspective, AO saw a relatively good cash flow from operating activities, being some DKK 70 million improved to Q2 last year. Cash flow from investments were impacted by the acquisition of Svenska VA-Grossisten and VVSKupp.no in Norway with DKK 91 million. The tax part of the dividend to shareholders amounted DKK 18 million, which also impacted the cash flow in Q2 in April. Summing up, the net interest bearing debt ended at DKK 801 million against DKK 717 million end of Q1, and the financial gearing was 2.4 × EBITDA. Let's turn to the guidance for 2024. We update our organic revenue guidance from DKK 5 billion- DKK 5.2 billion and now to DKK 5.15 billion-DKK 5.3 billion, due to the more positive growth outlook. On top of that, we estimate revenue impact from acquisitions in 2024 to be in the range DKK 150 million-DKK 200 million in 2024. Consequently, we change our revenue guidance to the range DKK 5.3 billion-DKK 5.5 billion. The changed revenue guidance is expected to bring additional DKK 30 million-DKK 40 million to earnings. However, we see a risk that gross margins may be slightly more impacted by margin pressure in second half of 2024. F urthermore, we do include approximately DKK 20 million cost in rest of year estimate related to integration cost, related to cost related to investments in new competencies, and related to risk of additional losses on trade receivables. The losses are not alarming, but we do see a slightly higher own risk exposure due to credit insurers being more selective in their coverage. Thus, we estimate the positive impact from increased revenues to be mitigated by lower gross margins and additional one-off costs, and consequently, we keep EBITDA guidance unchanged in the range of DKK 340-DKK 370 million, and we keep earnings before tax unchanged in the range DKK 200-DKK 230 million. As always, we do stress the fact that the geopolitical and macroeconomic tension result in market activities being more volatile than normally, which puts the additional uncertainty to estimates. This concludes the presentations, and we are ready to take your questions. Thank you. If you do wish to ask a question, please press five star on your telephone keypad. To withdraw your question, you may do so by pressing five star again. We will have a brief pause while questions are being registered. The first question is from Christian Treldal. Please go ahead. Your line will now be unmuted. Thank you. I have a couple of questions. I'll do them one by one. So first of all, for your Swedish business, you say that you will be investing in a second site in, in Stockholm. Can you elaborate on this? Is this sort of pure organic? Have you acquired a site and are gonna set up a warehouse, or exactly how is it done? Hi, Christian. Yes, we are going to open a site, not an owned site, not a greenfield site, but a rented site a nd hire a good team, partly supported by our team in Svenska VA. Okay. Thanks for, for that clarification. Then I'm also just a bit curious, 'cause obviously I know that, that part of your, the potential for your business in, in Sweden is to gain a bigger share of wallets with, with some of the very large customers here. So now that you have sort of officially established yourself in, in Stockholm, how has your dialogue been with the, the national customers? Good dialogue, Christian. We will see the result there later. It will not be from day to day, but we have entered a good dialogue, and it's our impression that the nationwide customers in Sweden appreciate having another player to play with. W hen could we expect that sort of be visible in the revenue? Well, I think that in 2025, one should begin to see the impact from that side also. Okay. Clear. Then a question to your acquisition of the Workwear Group. So, just reflecting on the EA acquisition, which I know was different, but obviously here, the rollout of the EA opening, your AO stores, is taking some time. How should we think about the implementation of the Workwear assortment, in the whole AO, both store and webshop and so on? How fast can you execute that? It will be a faster one, Christian, and it's a totally different game. This is a pure digital company, so the trick is to allow our B2B customers to do their digital trade and get this produced and delivered by the Workwear Group. T hen obviously, we will also include more workwear in our shops, but it will be a much much easier and faster implementation than EA. Okay, that's interesting. T hen to these DKK 20 million in additional costs, you flag, how should we think about that going forward? So, I guess my question is really simply, should we expect that DKK 20 million or something the like again next year, or is it more of a one-off nature we shouldn't expect to repeat next year? Yes, you could say the transaction cost is surely a one-off, right? The increased risk that we put on losses from trade receivables, time will show. But what we often see in times where people have headwinds is that the financial insurers, they get more selective and that, as we said, in the presentation, that increases our own exposure. So it's actually not a higher degree of bankruptcies, but it's a higher degree of own exposure that I'm nervous for in 2024. We believe that the market will return to positive growth, and the economy will gradually be improving in Denmark and in our markets. Then we should see the losses, I hope, to reduce again. When it comes to the new competencies, it's another one-off, so they will sit on our cost base also next year, but they will of course create revenue. So when we refer to the cost addition in 2024, it is to get them established, and we are hosting the cost before they impact revenue-wise. The main part of the DKK 20 million is due in the second part of 2024, but some of the 20 has already been spent in during the first half. Okay, understood. T hen maybe just the last one from me, 'cause I think, as you said yourself, it's been fairly eventful on the M&A side. So, are you done for now, at least o r do you have appetite for more acquisitions? We have had quite a busy M&A period, as Niels said. I think we ought to harvest the synergies now, b ut you know, when we see a potential, then we are interested. As Niels said, it goes for both Svenska VA and VVSKupp, that actually, we have been looking for them or companies like them for quite a few years. So it's a coincidence that they came in the same quarter. We are not done with M&As, but don't expect more in this quarter. All right. That, that sounds fair. Great. Thank you so much. That was all for me. Yeah. Christian. We have had a number of, of- A s a reminder. Oh, okay, while we wait, if there should be more questions from the telephone, go ahead with the written questions from the webcast. Thank you, and we have had quite a few. Thank you for that. First one being, if we are going to rebrand the logo and the name of Svenska VA-System in the Stockholm area? The answer is no. We are going to continue with the Svenska VA-System, but add to the name that it's a part of the AO group. We also have a question related to Svenska VA-System. What about the assortment? How are we going to select the assortment? Well, as you know from previous webcast, the business in Sweden is mainly water and drainage a nd we have a very good business and a very good management within that area. We will choose the same assortment in Stockholm. So it's not at least near term, it's not our expectations to broaden the assortment. So it will be the same assortment that in western Sweden. Then we have a question also related to the M&A in Scandinavia. The VVSKupp in Oslo, it's located in Grålum. It's quite near the Swedish border. Do we see a possibility to supply VVSKupp efficiently with our trucks from AO Denmark, when we go to Göteborg, Borås, Malmö, anyway? It's an interesting thought. Y es, the main road will be for us this way through Sweden and then crossing the border. It is, on one hand, a synergy for us in VVSKupp, that we are now able to buy more from the Norwegian suppliers., but on the other hand, it's also a synergy to VVSKupp, that we are able to supply from Denmark whenever that's an advantage a nd to put B2C and B2B articles on the same truck will be an option for us. So it's a good thought. Then we have a couple of questions with regards to the pricing out there. If we are seeing competitors being more aggressive on pricing, and if we have the visibility when the situation will normalize. Well, you know, the market attractiveness has improved in Q2, as we also said during the presentation, but it's still a tough game out there, no free lunches a nd we for sure see a margin pressure, especially within the projects a nd that's also why we say that we remain. The project business, accounting for, like, 30% of our total business, is an important area for us, but we remain selective. We see some of the pricing being extremely low, and we would rather not take such an order than spoil our margins too much. So for sure, it's a fierce competition out there. When will it normalize? Well, I don't know, b ut if we see a positive growth in the market, then I think everything will tend to normalize. We have a question: What sectors are weak or strong, respectively, especially when it comes to the project sales? Well, private building has been a weak one. What we are seeing now is that private building is picking up, more projects are coming in a nd, as late as the other day, we had a meeting with one of our big, you could say, customers within that line of business, and they are also seeing a pickup of activities. I think we will also see a pickup of commercial buildings. Now, we all expect the interest rates to lower in the future, but at least for now, we see a stable interest rate. So now people, they know, they know what to deal with, basically. A year ago, when we saw 6-8 increases in interest, people were reluctant to bid because they didn't know if they were calculating on the right basis. So we have a much better visibility when it comes to interests. interests. Then we have a question also regarding the acquired companies. Why did the sellers sell? Did we reach out to them or did they contact us, et cetera? Well, I think every M&A, its own story, I guess, b ut one of the companies which we had been looking for for years, they kind of fell out of their original owner's strategy a nd it fit our strategy quite well. So it was a good time for us to approach them in order to initiate a dialogue. That's just one example. I think yeah, different stories to different M&As, but three very good companies a nd now we have had the Svenska VA since May and the VVSKupp since July, and we will integrate or wholly own the Workwear Group from August. T hey are all, all the three of them are fit and, and ready to grow. Yes, another question. What would it take for margin pressure to ease significantly? Bond yields have been declining significantly recently. Was this... Will this help? Probably, yes. As we said before, I think the bond yields and the interest levels have all... I think they are all fueling that we should see a little bit more activity, and I guess it takes more activity to see a ease of the margin pressure. Then we have a question that relates to the general revenue growth contribution per working day, a nd yeah, it's a good question. It's a relevant question, because this is also how we measure our progress and our performance. That's like-for-like per day. If you look at your calendar out there, you would see that in Q1 we had 62 working days, and in Q2 we had 59 working days. In Q2, we had a higher revenue, so the math is that our revenue per working day in Q2 was 9% higher than our revenue per working day in Q1. So this is actually also one of the measures that brings our mood into a positive. We have a significant increased revenue per working day in Q2 compared to Q1. We have a question related to the activity outside Denmark. It has been relatively small so far. Are the recent acquisitions outside Denmark opportunistic or a sign of strategy to expand across Scandinavia? We have had that same questions a couple of times, asking, "How should we see AO? A Danish company, a Scandinavian company, a European company?" You should not see us as a European company, but you should see us as a Danish company being interested in growing more in Sweden and Norway. Then we have a question with regards to the long-term goal for the profit margin, and that may be the 10% EBITDA ambition you're referring to. It's a tough ambition. It's definitely an ambition that you will not reach in a period of time where our economy is scarce and competition is extremely fierce. But we stick to the ambition. We want to build a company that can have an EBITDA margin of 10%. It's not easy because the profit margin is under pressure, and we don't expect otherwise. In the long run, you'll have to be more and more efficient as a wholesaler, a nd at the same time, it's extremely difficult, as Niels also said, to slim your cost of doing business. You know, we are getting extremely loads of new regulations all the time, and yet we stick to the 10% ambition. It won't be this year, it will probably not be next year, but we stick to the ambition. Then we have a question regarding the EBITDA guidance, which implies a higher EBITDA margin in second half. I t's a very relevant question, and I imagine then that then, yeah, that many of you have the questions in your head, how on earth are we going to earn the double in the second half of 2024 compared to the first half of 2024? First of all, I confirm that this is our expectation. It is our expectation to earn the double. So why is that? Primarily four sources, one being the organic additional revenues. This will actually hit the bottom line quite effectively, and that amounts to approximately half the additional earnings that we are going to deliver in second half. The other one being the earnings from acquired companies. We don't disclose the earnings from acquired companies, but one should probably... You know that from our announcements, we have indicated what we see from an earnings levels from the three companies a nd based on that, you would probably in your Excel spreadsheets arrive to that those three companies should amount to approximately DKK 20 million in EBITDA impact in second half compared to first half. Then you should remember the holiday allowance. It's a, it's an expense in the first half of the year, and then it's an income in our profit and loss in the second half of the year. So that was the third source. T hen the fourth source is supplier bonuses. When having higher revenues in the second half of the year, we will in value, of course, have higher bonuses, but also relatively, because the vast majority of supplier bonuses, they are flown into the PNL, mechanically. But the last supplier bonuses, there you want to see the evidence that you hit the target, that you reached the upper stairs in the contract and earn the extra bonus. So the Q4 will always be a more attractive quarter when it comes to supplier bonuses, when you are growing. We also put in a reserve, so you will often see a higher profitability in fourth quarter than in beginning of year in AO. So those four sources and a couple of other sources will in fact result in our expectation that we are going to double earnings in second half of 2024, in spite of the pressure on margins and in spite of the DKK 20 million, where some of it has been used in first half, as I said. I hope that that makes sense, because I fully appreciate that the math is a bit complex, but it is our expectation. I think that concluded the questions that we have received. All question has been relevant. Okay, we probably got another one. Obviously, the reason for me pausing is that I'm reading at the same time. We have a question if the top-line guidance is still very conservative. I don't know. I will leave that to you, and if you find it too conservative, I hope you are right. But what I can say from a fact point of view is that we had 121 working days in first half, and we have 128 working days in second half of 2024. So we have 6% additional working days in the second half of 2024. If you combine that with the increased revenue per working day in Q2 compared to Q1, then you can do your math in your spreadsheets. A gain, if you arrive at a higher number than we do, we hope you're right. I think that concludes the questions. They were all good and extremely relevant. Thanks for participating. Before I close down, I just want to recap that our next publishing will be the third quarter. We will publish... There has been quite some confusion we observe to when we publish and when we host the webcast. We publish our next third quarter announcement or interim report, the 23rd of October after stock exchange closure. The following day, the 24th of October at 1:00, we will host the next webcast. Great! Thanks for now. Bye-bye.