Welcome to Brødrene AO Johansen's financial presentation for Q1 2025. Today's call is being recorded. Welcome to Brødrene AO Johansen's financial presentation for Q1 2025. Today's call is being recorded. For the first part of this call, all participants will be 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. I'm pleased to present CEO Niels A. Johansen and CFO Per Toelstang. Niels, please begin. Good afternoon, and welcome to our Q1 2025 webcast. Let us look at some of the highlights of the Q1. AO saw the highest Q1 in sales ever. The combined growth was almost 19%, adding more than DKK 200 million to our quarterly revenues. Organically, we saw a growth of 10%. Sales were positively impacted by the timing of Easter, but the underlying like-for-like sales showed growth as well. Sales met our expectations. The B2B business delivered a solid quarter. The B2B activities confirmed the increased growth rate that we observed during the H2 of 2024. The pressure on margins is still fierce, but the B2B business managed to deliver margins not far from the margins we saw in Q1 last year. In Sweden, we have opened our shop in Västerås near Stockholm, and we are close to opening a shop in Uppsala as well. The number of customers in our shops is high, and we are happy to welcome customers to our stores. Daily interaction is an important part of our understanding of the customer's agenda. The customer's current focus on priorities and how we can make life easier for our customers. AO holds a strong position in removal. Our focus on expanding our store is a key element in making AO the preferred place to do the daily business. B2C delivered a strong quarter and saw organic growth for the sixth consecutive quarter. The 60% growth was heavily fueled by the acquisition in 2024. Gross margins came in at 31%, more than 3% higher than last year. As expected, earnings increased significantly. EBITDA amounted to DKK 50 million and was almost 50% higher than last year. The increase was expected caused by high growth and higher margins. AO is buying VVS- Eksperten's webshop. We have made an agreement to buy this webshop as per January 1 of 2026. VVS VVS-Eksperten is a well-known and popular webshop, which will be a good add-on to the existing webshop universe of AO. On the day of takeover, AO will buy relevant parts of the existing inventory. AO will not acquire the physical shops or other activities from VVS-Eksperten. It will be business as usual until 1 January 2026. We are very happy to add this acquisition to the AO online universe. Let us look at the management's observations. Competition is fierce. Demand remained lower than supply of wholesale capacity in Q1, and this caused a somewhat one-sided customer focus on price, especially on project sales. During such time, we observed an increase in tendency from customers to negotiate even smaller orders, as it is normally done for larger projects only. Over time, we expect a more balanced demand-supply situation. By then, we expect a less one-sided price focus and an increased customer focus towards service adds-on, such as how customers are offered and do experience the best and most convenient service. Lower basket size has called for internal manpower. Basket sizes in the Q1 of 2025 remained low due to lower project sales and lower sales of heat pumps and likes. As we have mentioned before, the lower basket sizes result in more inventory picks per million sales and more logistic drops per million sales. While we do enjoy the bustle, this puts a pressure and challenge on executing plans to optimize the cost of doing business ratio. We simply need more hands to serve the revenues. Economic uncertainty has caused the consumers to pause the green transition when it comes to installation of heat pumps. Sale of heat pumps remained at a low level. The conversion rate relating to the subsidy schemes continued to be rather depressing, and we do not expect a significant short-term uptake. AO sales of heat pumps and other energy-saving solutions amount to less than 5% of our revenues. 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 cost of doing business. In parallel with most costs rapidly increasing, we continue to face a significant number of new legislations and administrative burdens. As mentioned before, 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 do acknowledge that this is a necessity, an investment in the future to serve our customers professionally in the long run and to stay compliant. Geopolitical tensions and uncertainty. AO buys 83% of all goods in Europe. The rest we buy in Asia, and more than 99% of our sales are within Scandinavia. As we speak, we do not see any signs of geopolitical tensions in our numbers nor order backlogs. However, any future implications caused by US tariffs policy are currently difficult to assess. A scenario of rising inflation and increasing uncertainty may lead to a lower appetite to invest, which is likely to have an adverse effect on demand and thereby on sales. For the time being, and to the best of our perspective, we do not see this having a material impact on AO in 2025. I do want to stress that the current geopolitical and macroeconomic uncertainty does increase uncertainty to current outlooks. Now, Per, please take us through the financial performance. Thank you, Niels. Q1 sales came in at index 119. Organic growth was 10%, and acquisition amounted for the further 9%. As Niels said, highest Q1 revenues ever. Organically, we saw the second highest revenue ever. Organically adjusted for number of working days and Easter, growth was 8.3%. As expected, growth has continued from the growth rates we saw in the H2 of 2024. Both B2B and B2C delivered the expected sales. B2B margins came in 0.3 percentage points below Q1 last year. We are satisfied with the relatively low slippage. B2C margins came in at a strong 31%, which is some 3% higher than last year. Acquired companies are fueling margins significantly. Cost of doing business ratio reduced from 18% to 17.5%, but remains at a high level. The cost of doing business ratio is higher in acquired companies. EBITDA came in at DKK 94 million, 37% or DKK 25 million higher than Q1 last year. The EBITDA margin was 6.3% against 5.5% in Q1 last year. EBIT ended at DKK 50 million against DKK 34 million last year. Earnings were as expected. Let's turn to the margins. Q1 margins improved from 23.4% last year to 23.9% this year. The increase was mainly due to the relatively higher B2C sales after the acquisitions. The B2B margin shortfall of 0.3% was at the same level as we saw in Q4 2024, which was a lower shortfall than what we experienced in second and Q3 2024. B2C share of sales ended at 16.5% in Q1. Since the B2C segment brings higher margin, the impact was 0.8 percentage point up on the overall margins. Consequently, margins ended at 23.9% and up 0.5% compared to Q1 last year. Let's leave the margins and turn to the segment info. The B2B segment accounted for 83.5% of the Q1 revenues, and the B2C segment accounted for 16.5%. We are quite satisfied with the segment performance. B2B revenue grew 13%. Organically, B2B grew 10.9%, and like-for-like adjusting for number of working days, B2B grew 9.2%. As said before, margins reduced 0.3 percentage points in Q1, which was expected since Q1 last year saw quite healthy margin levels. B2C revenues increased 60%. Organically, the segment grew 3%. B2B segments increased, or B2B margins increased 3.3 percentage points and ended higher than 31%, almost 9 percentage points higher than B2B margins. The increased scale in the B2C segment resulted in a significantly improved EBITDA margin, close to 9%. B2B delivered an EBITDA margin at 11%. Indirect non-allocated cost amounted to 4.5% of revenues, which is down from 5.0% of revenues in Q1 2024. Let's turn to the investments. Please be aware that the chart does not include M&A investments. The highlighted band shows the normal level of maintenance investments in AO, estimated to be DKK 60 million to 90 million on a yearly basis. The investments in Q1 2025 amounted to DKK 28 million against DKK 51 million in Q1 2024. Tangible assets consisted mainly of maintenance investments and equipment for the two new shops in Sweden, while intangible assets were mainly related to IT and integration investments related to acquired companies. Full year investments in 2025 is expected to be approximately DKK 200 million, roughly half relating to the expansion of new warehouse in Albertslund, which will kick in later this year. Let's turn to the net debt. Traditionally, Q1 is a cash negative quarter. The quarter had a significantly higher sales in March than last year due to timing of Easter. Consequently, a significantly higher amount of cash tied up in receivables end of Q1. Furthermore, the last working day in March was a payment day in AO, and thus trade payables were DKK 175 million lower than Q1 compared to last year. Dividend payout in Q1 amounted to DKK 66 million compared to DKK 102 million last year. Summing up, net interest-bearing debt ended at DKK 1.3 billion against DKK 1.0 billion end of Q4. Interest-bearing debt over EBITDA was 3.4 compared to 2.7 times EBITDA end of Q4. The change being due to dividend payout and timings and working capital. Finally, let's turn to guidance for 2025, which are unchanged. 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 AO utilizing our momentum and win market share. We expect an EBITDA in the range of DKK 410 to 450 million, up from DKK 366 million in 2024. We expect an EBIT in the range of DKK 235 to 275 million, up from DKK 210 million in 2024. As Niels said, we are following the macroeconomic and geopolitical situation closely. We do not see the uncertainty reflected in our numbers, neither in the Q8 numbers nor in the order pipelines. Having said that, it is fair to say that the situation does indeed increase the uncertainty of the outlook. The most significant risks towards our guidance are, one, that the margin pressure will increase instead of gradually reduce during 2025, and, two, that the geopolitical and macroeconomic tension result in lower consumer investment appetite and market activity being more volatile than normally. As we said, we do not see anything in the numbers for now. This concludes the presentation, 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'll have a brief pause while questions are being registered. The first question is from the line of Christian Torner from SEB. Please go ahead. Your line will now be unmuted. Yes, thank you. A couple of questions from my side. You say you expect supply demand to better balance and hence cost pressure easing, if I understood you correctly. Can you just elaborate a bit on the timing and how much of this effect you expect in 2025? Hi, Christian. That's a good question. It's difficult to give you a precise answer, but we don't expect much positive during 2025. On the longer run, we will expect a better balance between demand and supply. However, we do expect in our guidance that it doesn't reverse the situation. Okay. You sort of anticipated an unchanged situation? In your guidance. Perhaps not. A slightly improved situation. Okay. That's great. The next question goes to the acquisition of work. Can you just update us on the integration here and especially the rolling out the assortment to your AO B2B customers? Where are you, and when can we expect sort of some sales synergies to roll in? A lot of work has been going on since the acquisition in order to provide a good solution for 28,000 B2B customers, Christian. As per today, we are ready with a solution where the B2B customers are able to order on their AO accounts. One should expect from this quarter, Q2, to see a traffic, a B2B traffic, but of course, it will be smaller steps in the beginning of the quarter. You should gradually see more traffic during Q3 and Q4. Have you planned for sort of a marketing campaign or anything to push this, or how do you approach it? Sure. Makes sense. Then you mentioned regarding your acquisitions as well as that the cost of doing business ratio, as you called it, is higher in the acquired businesses. Is there sort of a plan to get that down in line with the AO average, or are they simply just different in structure and require a higher fixed cost rate? I think the structure in, for instance, AO Workwear calls for a higher cost of doing business. Hopefully, with increased sales, we will manage to reduce the cost of doing business. From a structural point of view, you would see higher cost of doing business ratios in B2C companies as Workwear and Viveskup. Okay. They will have a higher than average, but I guess my question could still stand. Is there potential to optimize it as well? Maybe. I think the main optimization will be from increased growth. Obviously, the management in Workwear, they are working as we are to optimize costs. Makes sense. Perfect. I think that was all for me. Thank you. Thank you, Christian. Let me just remind you, if you do wish to ask a question, please press five star on your telephone keypad now. At this moment, we do not have any more questions on the telephone, so I'll hand it back to the speakers. Please go ahead. Thank you. We received a couple of questions. First one, why not cancel dividend until debt is lower or spend more on bold acquisitions? You have proved a good track record here. Thanks for the nice words and the trust. With regards to the debt level, you're right that at the end of Q1, it's above our, you could say, our capital allocation guidelines. However, we are not worried about the 3.4 times EBITDA level end of Q1. You will notice that it's often high in end of Q1. In this quarter, it's even higher than what it was last quarter or Q1 2024 due to March being a higher month. Receivables were simply significantly higher. You will also see from the balance sheet that suppliers were lower. If you in your spreadsheet normalize working capital, I think you will come to the same conclusion that I do, that it's only timing. For the time being, we have no plans to cancel dividends. On the contrary, we like to pay a healthy dividend and to be a value share and a growth share. We got another question. Even if Sweden is still small for AO, wouldn't it make sense to list the share in Stockholm as well? Wholesalers generally seem to be more appreciated among Swedish shareholders than Danish ones. Interesting. Thanks for the question. I haven't prepared a solid answer, but I don't think you should expect us being listed in more than one stock exchange. Your question is interesting. I hope that the investor communities can learn that Danish shareholders to be more interested in wholesalers then. Another question. When do we expect that the lower interest level will have an impact in AO's financial cost? Do we expect financial costs being below the level for 2024? I think we to answer the last part first, I think we will expect the financial costs to be roughly at the same level in 2025 as we did in 2024. We do indeed see the lower interest level impacting us now, but as you will know from your own banks, it has only been smaller reductions we have seen until now. I hope for a couple of reductions later this year. Also the interest level world is a bit fragile and difficult to predict as we speak. Another question. When do you expect to achieve in line with historical average profitability for the group? What does it take in form of market development? This quarter, we increased the profitability compared to Q1 last year. You're right that we are still lagging behind the records we saw during the pandemics in 2022. There is a special issue when it comes to price increases. When our line of business has price increases from, you could say, supplier-driven price increases, often the wholesalers will have a short-term gain since the prices to customers increase as suppliers increase their prices. We have a short-term financial gain from the inventories being in place at the time of the price increase. One would probably say that breaking records, apart from seeing solid growth, will also take supplier-driven price increases. If we don't have any more questions, I think that sums up the questions we received. It is just left for us to say thank you for the good questions and thank you for listening in. See you later this year in August. Bye for now.