Welcome to Brødrene A & O Johansen Q4 and full year 2024 report. Welcome to Brødrene A & O Johansen Q4 and full year 2024 report. Today's call is being recorded. If you have any objections to this, please disconnect your line at this time. All participants will be in a listen-only mode throughout the presentation, and afterwards there will be a question-and-answer session. I will now turn the call over to CEO Niels A. Johansen. Please begin. Good afternoon and welcome to our fourth quarter and full year 2024 webcast. Let us start the presentation by concluding that our revenues and results were in line with the latest guidance. Revenue ended at DKK 5,430 million against a guided DKK 5.3-DKK 5.5 billion revenue. EBITDA came in at DKK 366 million against a guided DKK 340-DKK 370 million, and EBIT came in at DKK 210 million against a guided DKK 200-DKK 230 million. Let us look at some of the highlights of the fourth quarter. The fourth-quarter sales exceeded expectations slightly. A & O showed the highest quarterly sales ever and the first time to break the DKK 1.5 billion mark. We saw organic growth in both B2B and B2C, confirming the value of our omnichannel business model. We are satisfied to observe that the number of customers in our stores has never been higher. The average number of daily customers in 2024 has been 8,800, which is some 10% higher than last year. We saw B2B growth stabilized and margins in Q4. As expected, the B2B business saw increased growth rates during the second half of 2024. The pressure on margins has been intense during 2024. In the fourth quarter, the margins stabilized somewhat. A & O holds a strong position in the repair, maintenance, and modernization market. Our focus is expanding our stores. It It is a key element in making A & O the preferred place to do the daily business. Acquired companies did well in Q4. WorkWear Group, VVSKup p, and Svenska VA all had busy Q4. WorkWear Group and VVS Kup p had their peak seasons with Black Week in Q4, and for Svenska VA, they had a busy quarter in the Vallentuna site. At the same time, preparing to open two additional sites during this spring. Organic B2C continued to show growth in Q4. The Black Week campaign in Denmark came in slightly softer than last year. The digital share of our sales continued to increase. It is essential for A & O to make the daily trade as easy and convenient as possible to our customers. We know that self-servicing has a high degree of satisfaction to our customers. The self-serving by our customers also allows our personnel to focus their service on those of our customers needing personal contact and advice. We are satisfied to see that the share of digital sales in the B2B segment increased from 43% to 46%. For the A & O Group as a total, the share increased from 49% to 53% f igure. A & O continues to reduce CO2 emissions. Back in 2020, A & O defined the ambition to reduce the CO2 emissions in our daily activities by 50% in 2025. Now, four years into the journey, we are satisfied to conclude that we have reduced by 47% and that we are in good shape to take the last steps to achieve the ambition in 2025. Let us look at the management's observations. Geopolitical tensions and uncertainty. As 83% of A & O's procurements are bought in Europe and the remaining part in Asia, we do not foresee significant risks in relation to possible extraordinary customs tariffs. But we are concerned that the tension and uncertainties will bring a negative impact to the consumer's appetite to make investments. The consumer's confidence in Denmark has not been lower since the '80s. For the time being, and to the best of our perspective, we do not see this having a material impact on A & O in 2025. But I do want to stress that the geopolitical and macroeconomic tensions bring an increased risk that consumers reduce their investments. Lower basket sizes call for internal manpower. Basket sizes in 2024 have reduced significantly compared to last year. The lower basket sizes result in more inventory picks per million of sales and more logistics drops per million of sales, as well as more customer visits in the stores per million of sales. While we enjoy the busyness, this puts a pressure and challenge on plans to optimize the cost of doing business ratio. We simply need more hands to serve the revenues. Margins stabilized in Q4, but the pressure remains fierce. There is a tough battle on the marketplace. Competition is fierce, and customers are pushing the rebate dialogue intensively. We experienced this pressure also in Q4 but managed to keep margins stable. In A & O, we stayed selective to not take orders with an unsatisfactory margin, but it is still our aim to grow our share, also within projects. Increased project activity is likely to have a negative impact on margins. As our customers will see lower interest rates, higher activity levels within projects, and hopefully a 2024 with slightly improved activity in general, we believe that the pressure will ease gradually during 2025. Economic uncertainty has caused the consumers to pause the green transition when it comes to installation of heat pumps. Heat pump sales remain at a low level. The conversion rate relating to the subsidy scheme launched at the beginning of June 2024 continues to be rather depressing, and we do not expect a significant short-term uptake. A & O sales of heat pumps and other energy solutions amount to less than 5% of A & O's revenue. Although everyone agrees that it is critical to step up the green transition, the geopolitical and macroeconomic tensions do not fuel the green transition at all, which is concerning. Cost inflation makes it tough to reduce the cost of doing business. In parallel with those costs increasing rapidly, we continue to face a significant number of new legislations and administrative burdens. This forces us and other companies to recruit more administrative personnel supporting sales activities and requirements to meet administrative regulations, but with no direct influence on increasing sales. We acknowledge that this is a necessity and an investment in the future to serve our customers professionally in the long run and to stay compliant. No doubt, these hard efforts taking place now are essential to secure competitive advantage and license to operate in a future environment. As long as we are onboarding competencies and increasing investments to address the increasing regulatory burdens, we will see a higher cost of doing business ratio than we ideally want. We are not satisfied with the level of earnings. A & O delivered as expected in 2024. Given the challenging business dynamics, we see the earnings as acceptable. However, the level of earnings did not meet our earnings ambition. In order to meet our ambition, A & O will need to continue our journey within profitable growth and high efficiency. This will also take some help from the business climate. Increased demand, increased basket sizes, and less new regulations will surely be welcome. Now, Per, please take us through the financial performance. Thank you, Niels. Q4 sales came in at DKK 114 million. Organic growth was 4%, and acquisition amounted to further 10%. As Niels said, first time ever to pass the DKK 1.5 billion mark. As estimated, growth has gradually increased during the year. B2B had a good organic Q4 growth, while B2C saw a slightly softer Black Week campaign than last year. Margins stabilized during Q4, partly due to a mix and higher B2C proportion of sales, but also impacted by a lower reduction in B2B margins than what we experienced during the past quarters. Cost of doing business reduced on an organic level in Q4 due to the growth, but remains at a high level. The cost of doing business ratio is higher in acquired companies. EBITDA came in at DKK 123 million against DKK 95 million in Q4 last year. The EBITDA margin was 7.9% against 7.0% in Q4 last year. The EBITDA margin was higher during Q4 than for the full year due to an overproportional B2C sales in this quarter. EBIT ended at DKK 80 million against DKK 58 million last year. Earnings were as expected. Let's turn to the full year performance. Organic revenue was 3% in the second half of 2024, on top of a soft start in the first half of 2024. Acquisitions had a positive impact of 4% on full year growth. Organically, margins reduced from 23.5% to 22.8%. The positive impact from acquired companies mitigated the margin gap, and totally, margins ended at par with last year. Salaries and external costs increased by 9%. Organically, the increase was 3%, while the 6% increase came from acquired companies. EBITDA of DKK 366 million and EBIT of DKK 210 million were both as expected, as Niels said. Let's turn to the margins. Q4 margins improved from 23.4% to 24.1%. The increases were mainly due to the relatively higher B2C sales. The B2B margin reduction of 0.6% was a lower shortfall than what we experienced the past quarters. B2B share of sales ended at almost 20% in Q4. The B2C sales bring a higher margin. Let's leave the margins and turn to the segment info. The B2B segment accounted for 85% of full year revenues, and the B2C segment accounted for 15%. B2B margins reduced 1.1% in 2024 and were under pressure from challenging business dynamics. The B2C margins increased by 2.6% and ended at almost 30% full year, significantly above B2B. The increased scale in the B2C segment resulted in a significantly improved 9% EBITDA margin. B2B delivered an EBITDA margin at 11%. Indirect non-allocated cost amounted to 4.2% of revenues at par with last year. Let's turn to the investment. Please be aware that the chart does not include M&A investment. The highlighted band shows the normal level of maintenance investments in A & O. The investments in 2024 amounted to DKK 160 million. Several stores have been upgraded, including the flagship stores in Hillerød and Odense. Furthermore, land in Albertslund has been acquired and will be a good addition to the central warehouse. Let's turn to the net debt. Cash flow from operations amounted to 3.7% of revenues, which is not satisfactory. Margin pressure and increased cash tied up in inventories took the top of the cash flow generation. Working capital at year-end was 7.1% of revenue against 5.6% last year. Increased assortment and increased credit demand from customers challenged the net working capital management. A & O had large investments of DKK 465 million, including the three acquisitions. Net interest-bearing debt ended at DKK 993 million against DKK 1.3 billion at the end of Q3. Interest-bearing debt over EBITDA was 2.7x compared to 3.9x EBITDA at the end of Q3. Let's turn to the guidance of 2025. We expect sales to increase by 7% to 12%. Our assumptions behind are a market growth of approximately 2% to 5%, a full year impact from acquired companies of 3% to 5%, and 2% from A & O utilizing our momentum and us winning market share. We expect an EBITDA in the range of DKK 410 million-DKK 450 million, up from DKK 366 million in 2024. We expect an EBIT in the range of DKK 235 million-DKK 275 million, up from DKK 210 million in 2024. The most significant risks towards our guidance are that the margin pressure will increase instead of gradually reduce during 2025, and that the geopolitical and macroeconomic tensions result in lower consumer investment appetite and market activity being more volatile than normally. Let's turn to how we bridge EBITDA from 2024 to the outlook 2025. We expect a DKK 121 million positive margin impact from increased revenues, partly due to the full year impact from acquired companies, but also from organic growth. On top, we expect a slightly higher margin. The major part derives from the fact that the acquired companies bring a higher margin, but also fuels our expectations that margin pressure is expected to reduce gradually during 2025 as demand increases. The full year impact from acquired companies is expected to impact costs negatively by approximately DKK 60 million, and organically, we expect costs to increase approximately DKK 50 million. This leaves us with a mid-guidance EBITDA of DKK 430 million, which represents an increase of DKK 64 million compared to 2024, and an EBITDA margin of approximately 7.2%. This concludes the presentation, and we are ready to take your questions. Thank you. If you do wish to ask a question, please press a 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 the line of Kristian Tornøe from SEB. Please go ahead. Your line will now be unmuted. Yes, thank you. I have a couple of questions. Maybe to start with, you mentioned you have bought land, or at least secured land, at the central warehouse. And as I understand it, it's my impression that the recent expansion you didn't do too long ago has ensured that you have plenty of available capacity right now. So maybe if you can elaborate a bit on this strategic move. Hi, Kristian. Well, you're right. When we built the shuttle system, the automatic shuttle system, a couple of years ago, we mentioned that this would cover some growth ahead in time. Now, the land that we have bought and the building that we are planning to build in 2025 will host an automated solution of odd-size goods and not small-size goods. So that will allow us to increase efficiency in odd-size stuff. Okay, that makes good sense. Then to your earnings bridge, just the DKK 50 million related to salary and cost inflation. I think in your presentation, you said 3% inflation in 2024. What's the assumption here, at least, if I take the DKK 50 million up against your 2024 SG&A cost base? It's a bit more than 3%, but I understand that's not necessarily applicable. So have you assumed a higher inflation rate in 2025? I guess is my question. No, we haven't, Kristian. But if you look at our run rate, then we hired people throughout 2024. So end of year leaves us with a higher run rate than beginning of 2024. And then we have areas in our cost base where we expect increases above general inflation, for instance, within IT. So that's the main reason. So similar inflation level, but also some deliberate decisions to increase costs. The increased run rate during 2024. Understood. Then to the topic of basket size, Niels, you highlighted the challenges you had in 2024. Just curious on the development in basket size in Q4. Was there any improvement there, or was it unchanged? Let me take that now, Kristian. Basically, we saw the same basket size, the same lower basket size, also in Q4. We don't expect a change from the beginning of the year, but as we will see, hopefully, a slightly higher level of projects. One would assume that basket sizes would increase during 2025. Okay, understood. And then you said you sort of fought back on this price pressure you saw in Q3 and performed better in Q4. What exactly have you done to avoid or stabilize prices? It's a tricky question, Kristian, and there is no simple recipe. But what you normally do in sales during times where you see the margin decline is that you basically agree in management to be a little bit more robust in your sales and margins governance. So you may refuse deals that you used to take, or you may try to manage prices in a more strict manner. And then, as we also said, the major part of the increase in Q4 was due to the mix and that the three acquired companies, they bring a higher margin to the house than our organic margin. But you are right that also from a B2B perspective, we managed to reduce the decline in Q4 compared to Q3. And that was due to a number of focus areas. But the main part would fall under the umbrella of more strict governance. So you've said no to the high level of discount that we saw in Q3, essentially. Yeah, that's typically what sales management and management will agree to, that we have a more strict modus operandi when it comes to the margin setting. All right, excellent. The next one, can you just give us an update on the rollout of the EA assortment and also the workwear assortment in your physical A & O stores? Yes, we are pretty far in rolling out the carpenter or the EA assortment in our stores in Denmark. What we see is that, and what we also knew, is that the horizon from when you have the assortment available and until you become the preferred supplier or the preferred number two supplier, it takes time. We knew that, and it's not a matter of months, it's a matter of years. It takes time. It is now our project and our focus area to become preferred or second supplier of tooling, etc., to carpenters in Denmark. EA, they had a very good brand and reputation in Western Denmark. In Eastern Denmark, they only had one site when we acquired them in Brøndby. So it's a bigger task for us to become a preferred supplier in the Eastern Denmark, and it will take some time. We have a steady growth, and we are satisfied with the development. Although I have to say that also from within the carpenter segment, the past two years has been a little slower than what we saw early on, but we are happy with the development. We know it will be an interesting project to harvest the carpenter synergies in east, and we are excited to go on with that project during the coming years. When it comes to WorkWear Group, yes, we will add workwear in some of our physical shops, but I think the main synergy will also be to ensure that our 28,000 professional customers, they digitally are able to buy working or workwear sold from workwear, but you will see more physical workwear and personal protection equipment also in many of our shops, and that will also be perhaps throughout 2025 and 2026, Christian. Understood. Then the last question from me. So you did three acquisitions in 2024. Should we expect any acquisitions in 2025? The way we normally work in A & O is that we want to, when we fall in love with a target and we buy it, we want to integrate it. We want to harvest the synergies. And we have three new family members where many synergies are waiting to be harvested. So I would rather focus on harvesting synergies in 2025 than buy more companies. Should we meet the ideal one? I wouldn't guarantee that we are refusing to acquire, but you should expect us throughout 2025 to focus on harvesting synergies. Excellent. That was very clear. That was all from me. Thank you so much. Thank you, Kristian. We only got a couple of questions in writing, and as normal, I will read the questions and try to answer the questions. So, one question: can you give an update on your Stockholm acquisition and expansion plans in that region and in Sweden as such? Indeed, we had a good year in A & O Sweden. We don't disclose the numbers, as you know, but we are pretty satisfied with the development in A & O Sweden, and in the late spring, we acquired the company in Stockholm. They had a site in Vallentuna. It was a very efficient and very good performing, high performing site, so we have had good results from that acquisition throughout 2024. As we have also stated in the annual report, we plan to open two new sites close to Stockholm during spring 2025. I think it's public news that one of the openings will be in Västerås. I believe it's the seventh largest city in Sweden, north of Stockholm. And this site will open within a month or so. The other one is not public yet, so I will be back later to name the city. But we are excited about the development also in Stockholm. We are excited about the opportunities in Stockholm. And the two sites that we will open during this spring will not be the last openings in that area. Then we have another question. Could you talk a bit about the potential synergies from the new acquisitions that you could see going forward with your B2C? Maybe give some concrete examples. I think Kristian asked the same one regarding workwear. The main synergy regarding the workwear acquisition will be to sell workwear to A & O's professional customers. In the Norwegian acquisition, B2C acquisition, VVSKup p, we have a couple of synergies. We have sales synergies from offering our assortment to them. They bring us synergies since we have a stronger footprint in Norway. Norway is not an EU country, so it was a bit cumbersome for us to deliver from the central warehouse to Norway. Now we have a more fully fledged organization in Norway. Also from a cost point of view, we expect synergies from being able to run now three web shops more efficient than when we only had the two. Hopefully that answers your question regarding synergies. We also have a question that your turnover has increased by 3%. How much has cost increased? Salaries and cost. As we said in the presentation, cost increased 9%, salaries 10%, but cost all in all increased 9%. Of those 9%, the 3% were organic and 6% came from the acquired companies. We have a question regarding staff cost relative to sales increase from 2023 to 2024 as a percentage of revenue. Yeah, I guess the question is that the staff cost relative to sales decreased from 2023 to 2024. What do we expect from this ratio going forward? You are right. With open eyes, we have chosen during 2023 and 2024 to invest further in our organization. It takes years to establish and develop the best team, as we believe we have in A & O. We don't let our team go because we have a couple of quarters with headwind. On the contrary, in 2024, we have chosen to attract new competencies. The bill you get is that your staff cost relative to sales increases. This is also what we saw. Hopefully, we have been quite open about that fact during 2024. It is simply a management decision and management agreement that we want to be able to capture growth as it comes and when it comes. It's much more important to us than to do short-term cost savings. Actually, those were the questions that we received today. Good questions. Thank you for the questions. That basically concludes our presentation of today. Our next webcast will be the disclosure of Q1 2025, 1st of May. Bye for now.