Good morning, welcome to Tokmanni's Second Quarter 2022 Result Presentation. My name is Mika Rautiainen, and together with Tokmanni CFO, Mr. Markku Pirskanen, we'll present the key points and the key results of the second quarter and the first half of 2022. Tokmanni's revenue during the second quarter was basically at the previous year's level. EBIT was clearly lowered mainly due to the cost increases. I've been working for more than 30 years in retail, and according to my experience, I haven't ever seen this kind of second quarter before, where basically inflation, pandemic, the atmosphere from the war, and mainly the non-existence spring/summer season was affecting both customers and retailers. Let's take a look at the figures a little bit more careful, like how did it. How did this, all of this, affect Tokmanni. The revenue grew by 1.7%. It was basically approximately EUR 5 million more compared to the previous year, EUR 306.7 million. Like-for-like revenue decreased by 1.5%. Gross profit was basically on the same level, EUR 1 million more compared to the previous year. Gross margin 34.8% was slightly lower compared to the previous year. Comparable EBIT amounted to EUR 27 million compared to previous year's EUR 32.3 million. Clearly lower EBIT. However, 8.8% of revenue, which is quite good level for retailer. Cash flow from operating activities was EUR 62.8 million compared to EUR 61.5 million during the previous year. Earnings per share, EUR 0.35. Some highlights, or let's say key points regarding the second quarter. First of all, there is a clear change in customer behavior in Finland. First of all, customers are more cautious with their purchasing decisions. This is very understandable and a natural. Well, inflation, energy prices, fuel prices, food prices, and now even the interest levels are going higher. Basically, people are becoming a lot more cautious with their purchasing decisions, which is pretty natural. During the second quarter, Tokmanni's sales was basically more towards groceries. Actually, it's a good product mix for Tokmanni in total, so that if we lose due to the season, which is not there, if we lose sales, there is always these grocery departments which are attracting our customers. Tokmanni's online sales decreased by 4.8%. According to our customer surveys, basically customers are saying that they're happy after pandemic. They're happy visiting our stores. There will be a slight drop with Tokmanni online business due to this fact, but we've seen that online business will be also increasing, growing in coming months, basically due to the fact that we are offering a wider assortment through the online channel. Like-for-like customer visits decreased by 2.6%. This is mainly due to the fact that the spring/summer season began only in mid of June in Finland. Average basket increased by 1.1%. We launched the new Miny product group during the first quarter. The target was to attract new customers, young female customers, and we were very happy to see that this was also happening in these stores where Miny department is at the moment. We will also continue with Miny later on. I'll come back to that a little bit later. One of the definite highlights is with our loyalty program, Tokmanni Club, Tokmanni Klubi. The program has now already 1.3 million members, which is actually exceeding our target for this moment. We're very happy about this because it gives us a lot of opportunities for example, personalized offers and customer data as well. As mentioned already, the spring/summer season in Finland started very late, basically in the middle of June, and it affected sales, profit, and especially inventory level. The Tokmanni's inventory value increased significantly. That, of course, is something where we need to be extremely careful when it comes to the focus for 2022, the second half. Some positive things also is that, you know, that we are planning to start using the new warehouse in one year's time, basically by next summer, and the construction work with the new warehouse is progressing as planned. This is of course one of the key points when it comes to the Tokmanni supply chain efficiency, so we're very happy about this progress. Let's take a look at the first half figures. Revenue grew by 1.2%. It's been a very difficult first half of the year for Tokmanni. Obviously, there are strong figures from previous years, 8.8% growth and even with like-for-like growth 7.8%, but still it was pretty difficult. Based on that, we in Tokmanni think that we did okay when it comes to the revenue development. Yes, obviously it was like as mentioned, it was a little bit difficult. Gross profit was basically on the same level in euros compared to the previous year and the gross margin 33.8%, slightly lower compared to last year. Obviously, we have been holding on with this discount or the price image, one of the best price images in Finland and keeping the price level for our customers as the lowest in Finland and of course it has its price and you can see that in our gross margin level. However, we think that this, even if it's been an investment, we think that it will be benefiting us when it comes to, for example, second half of this year. Comparable EBIT was EUR 26.5 million, clearly lower compared to the last year, EUR 39.1 million. Basically the EBIT level was 5% compared to the 7.4%, which basically shows that it's been slightly difficult the first half of the year. Cash flow from operating activities was -EUR 2.3 million compared to previous years' EUR 39.5 million, and this is basically due to the increased inventory level and of course lower EBIT level. Earnings per share EUR 0.32 compared to previous years' EUR 0.48. If we then look at the market development, the red curve is Tokmanni and the black one all competitors. As you can see here, it's a tough competition. It's very difficult to win market share at the moment. We've been trying to analyze this quite a lot and we feel that the winning of the market share during 2020, as you can see from the figures, is now something where we really need to fight harder to continue winning the market share. As you can see, it hasn't been that easy. We feel that it's quite a lot due to the strong success during 2020. Next, it's Markku, please. Markku will be presenting the key figures a little bit closely. Yes. Thank you, Mika. Good morning from my side also to everyone. Let's look the figures, as Mika may already mentioned a little bit deeper. I'll take some graphs also which hopefully clarifies a bit more the figures. Let's start about the revenue and here we have, as we had also already during Q1, four years development. Why I have taken the four years development, this 2019 is perhaps some kind of basic year before the corona started and 2020, 2021 we had a corona time and 2022 we had many different kind of other issues which have affected the operating environment. On left-hand side, these four bars are quarter based and these four on right-hand side are half years figures on these graphs. Starting Q2 2022, the revenue was about the level of 2021, total revenue grew by 1.7% and like-for-like revenue decreased by 1.5%. It's clear that the operating environment was very challenging. Inflation basically started already at the end of 2021, and we can even say that it has accelerated during the first half of 2022. That, of course, has affected very much to customer confidence, which is on very low level in Finland at this moment. The other thing which affected to our revenue was the late spring and summer season. It was very exceptional timing for starting spring and summer season this year. Looking at what kind of products have sold well, we can say that home decoration, groceries, cosmetics and apparel sales has increased. If you look a little bit at these product groups, groceries, the proportion of our mix is now on higher level, as it was also during Q1. This is perhaps reflecting the customers' way to think that we really need or we are really buying the products which we are really needing, and perhaps the non-grocery is not first in their minds. Cosmetics and apparel, corona is not over, but it has been on lower level now during Q2, and people have started to move around more and perhaps this has pushed the cosmetics and apparel sales during Q2 2022. During Q2, product groups which sold on lower level was garden soil and fertilizers, plants and also outdoor activities. The selling of these product groups are quite clearly in relation to what kind of weather we have had during Q2 and the weather was not too good, so these product groups were suffering. When we look this four years time period here, how the revenue has developed, we can calculate that the average yearly increase has been roughly 6%, which is perhaps quite okay development during these four years' time. Of course, the jump during 2020 and 2021 was very high due to the corona pandemic. If we look the development during the first half of this year, it has been quite similar, compared to the Q2 2022 and also this four-year period is about the same kind of development when we look the total numbers. Next, a couple words about the comparable gross profit and margin. Q2 2022, 34.8% compared last year's 35.1%, so small decrease there. When we are looking the euros, we actually EUR 1 million more gross profit. What was affecting to our gross profit and margin, it is clear that the sales mix more groceries, it has an effect to that one. Other effect was this increase of domestic freight costs. Gasoline prices has increased in Finland clearly as it has done, I guess all places in Europe, but of course affected the freight cost during Q2 here in Finland. One other thing which Mika already mentioned was our aim to ensure the lowest price level in the market. It has clearly effect to our gross margin level. Next, the product labels managed by Tokmanni, which means mostly private labels and also direct import. Our target is to increase the share of private labels when we look a little bit longer run, but now you can see that during Q2 2022, and also when we look the half year's figures, the private labels shares was decreasing. During Q2, the share was 31.9% compared to last year's 33.1%, and same kind of development as said during the first half 2022. Direct import, we achieved about the same level compared to Q2 2021. Operating expenses. That is a big challenge at this moment. As I mentioned already, inflation, it has affected to almost all expenses what we have. Looking at our proportion of operating expenses against the revenue during Q2 2022, it was 20.5% compared to last year's 19.2%. So quite significant increase there. If we compare to the 2020 figures, which was 18.5%, still the bigger difference. We have to remember that 2020, the revenue started to increase very rapidly, and the cost was following a little bit later on, and that's why this Q2 2020 figure is so low. Looking at the 2019 level, it was 21.5%, so now we are a bit lower level at this moment. What kind of cost items was affected or was increased mostly? We can name three, salaries, real estate and marketing. Salary rises according to the collective agreement and also still during the Q2, the amount of sick leaves were on higher level compared to last year. Real estate costs, the general cost inflation affected there, but also that we had more stores compared to Q2 2021. Marketing costs, there are some surprising element where these paper costs and paper prices. The paper prices increased during Q2 strongly, which affected our marketing expenses. We made some more activities if we compare Q2 now this year compared last year's and our activities was mainly in relation to our Tokmanni Club marketing activities. Comparable EBIT, it's of course the end result when we take in revenue, gross profit and expenses and also adding the depreciations there. Comparable EBIT Q2 2022 at the level of EUR 27 million compared to last year's EUR 32.3 million. A clear drop by EUR 5.3 million. The main reason for that is increasing operating expenses, but also increasing the depreciations. We have to remember that our rental costs are calculated as a depreciation due to the IFRS 16 standard. When we have more rental costs, it is shown in our depreciations. But at the same time, I have to say that also the so-called basic depreciations were increased due to the reason that we have invested during the last couple years a bit more compared to the so-called normal investments. Next, looking and transferring to the balance sheet, financing and cash flow part. The dominant issue here is clearly the inventory, which Mika already mentioned. At the end of June, we were level of almost EUR 314 million compared to last year's EUR 253 million, so very big difference between these two figures. There are three different main reasons behind of that. The higher purchase prices, late start of a season, and also we have targeted to have a better shelf availability. Also we have some new stores, as I already mentioned. These reasons are behind of that increase on about the inventories, inventory increase. It's clear that we have to make the actions to decrease the inventory level because we can say that at this moment we are on higher, too high level on that. Cash flow - EUR 2.3 million compared to last year's EUR 39.5 million and the reason behind of that lower cash flow is clearly increase in inventories or higher level of inventory amount, but also the lower result what we achieved during the first half of 2022. Interest bearing debt. Now we are at a level of EUR 448 million compared to last year's EUR 384 million. If you look at what we have here in our debts, it's EUR 100 million so-called non-current corporate bonds. We have taken current corporate bonds now during Q2, and we have EUR 55 million here. Last year we didn't have these kind of bonds and loans. The rest of our debts are so-called liabilities, which are based on leases coming through IFRS 16. Even the interest bearing debt has increased, we can say that we are still on the good position when we are looking at the ratio of net debt to comparable EBITDA. It was 2.6, which is higher compared to last year's 2.0. At the same time, we have to remember that we have set the long-term target, which is 103.2, and we are clearly now under that target. Net capital expenditure, meaning the investments, looking six months period, January to June, we were level of EUR 22.4 million, which is clearly more compared to last year's EUR 5.9 million. The main explanation there is our new construction work for new warehouse, which part was EUR 12.8 million out of this EUR 22.4 million. The other investments was normal store investments for store network and also renovating stores. Also at the same time, we like to invest to develop our digital services. When we are looking what kind of investment we are expecting during this year, it's still at the level of EUR 18 million-EUR 20 million. That amount is not including the construction of a new warehouse. Comparing the last year figure, it was EUR 21.7 million, but you have to remember that it also included the acquisition of TEX stores. That's about the figures at this time, and I'll still transfer the speech to Mika. Please, Mika, go ahead. Thanks. Thank you very much, Markku. Yes, obviously, Tokmanni strategy is guiding basically all operations and activities of Tokmanni. In this situation, in this retail environment, obviously, our full focus is in 2022, basically the second half of 2022. The focus is especially on sales, inventory, and costs. First of all, as mentioned already, customers are more cautious with their purchasing decisions. Actually, customers, they need to do savings. They need to save money for the higher fuel, energy costs and things like this. Obviously, low prices are emphasized in customers' purchasing behavior, and that's, of course, very good for Tokmanni, which is the biggest discounter in Finland. We are doing that. We are offering basically our customers, and of course targeting at the same time for sales growth by low prices, attractive assortment, targeted marketing with the help of Tokmanni Club, and excellent service. Low prices will be in customers' focus in Finland for sure. We feel that will be a competitive advantage for us. Obviously, we'll continue with expanding the store network. Actually, in one month time, there will be the next new store opening in Nurmijärvi, if somebody's interested in the location. Of course, the Miny lifestyle concept will be expanded. We'll probably have more than 20 or approximately 20 stores with Miny lifestyle concept by the end of this year. Obviously, as mentioned already several times by myself and Markku, we'll focus on the inventory level and actually all the actions to optimize the level are already in place. After a couple of years with a very problematic supply chain, it now seems a time where we can basically start building a better efficiency and cost control with the supply chain and our stores. That's of course to improve the profitability. At the moment, we can see that if I take an example, for example, from outdoor furniture, where basically first of all, to get any shipments to Finland this year, we had to place the orders in May last year, actually even before the season start. Now it's actually a situation where we can basically decide on the orders in August, even late August, which basically means in Finland that the season is practically already gone. Of course, it helps and it gives us the sign also that the supply chain is in a way getting more normal. That's of course always a situation where basically we can start building the higher efficiency in our supply chain. With all these changes, when it comes to customers, the retail environment, of course, fast reactions and flexibility are extremely important. We feel that Tokmanni is in a very good position to act fast and be flexible regarding the market changes. These all will be in focus for the second half of 2020. Sorry, 2022. The outlook is basically the same. We expect the revenue for 2022 to be at the previous year's level and comparable EBIT in euros. We expect to be EUR 90 million-EUR 110 million in 2022. That's the key points and key results. Thank you. Actually, Markku, please join me. Thank you, this time is also for Markku. This is the last time, the last result presentation for Markku. Markku has decided to still do something else, not only CFO for Tokmanni. Obviously, I would like to thank you on behalf of everybody in Tokmanni for basically a fantastic job you've done. Markku also, I don't know whether it's a record in Finland, but Markku has more than 100 quarterly result presentations in stock exchange companies the last five years, or a bit more, more than five years in Tokmanni. That's really great. Thank you very much for your professionalism and also as a friend. Thank you very much. Okay. Thank you very much. All the best for you. Oh, okay. Thank you very much. By the way, during the Finnish session, we already gave Markku some flowers. In the name of cost control of Tokmanni- Yeah. It's only one bouquet. Yeah, that's good. Let's go to the questions. Let's move on. Yeah, let's move to the questions. Okay. Operator, now it's time for questions. Thank you. If you do have a question for the speakers, please press zero one on your telephone keypad. Once again, it's zero one on your telephone keypad to register for a question. There will be a brief pause while we register for any questions. Our first question comes from the line of Nicklas Skogman from Handelsbanken. Please go ahead. Your line is open. Yes. Hello, good morning. Hi. I have a couple of questions, please. The first one is on the gross margin. It is only down 25 basis points year-on-year, and that is despite what you said about those negative mix effect from grocery sales. As far as I can see, your private label sales are also lower compared to last year. Then you mentioned freight costs as well. Then you also mentioned that you've been sort of holding back price increases. For me, I would have thought the gross margin would be down by a lot more if you factor in all of those items. I guess the question is it really that much of a negative impact from not raising prices in the way that you basically needed to compensate for higher input costs if you factor in the negative mix and then the freight and so on? I'll start, then Markku you can continue. Yeah ... afterwards. Yeah, it's a little bit like a mixed situation. We actually, since the late start of the season, we basically lost sales with the big garden products. Maybe one of the biggest, I think the, I don't know how you call it in Swedish or really what's what. For example, garden soil or dirt, whatever you call it, fertilizers, things like this. We basically, we're the biggest retailer for garden soil and it's very low-margin products. And basically we lost the sales, but in a way it affected. Well, no, I cannot say positive, but it wasn't affecting that much our gross margin. It was, at the same time, for example, outdoor furniture, we were doing actually pretty well. There was, like, a sales increase with outdoor furniture, this kind of products. But we lost with big volume products during the second quarter regarding the garden. But always with the big volume products, the prices are also extremely sensitive and the price level is very competitive. That obviously had a basically background to this situation. But would you like to add something, Markku? Yeah. As you said, it's clear that the drop was not too big. We are following what is the competition situation in Finland and looking- Yeah What the competitors are doing. He's said also earlier, we are targeting to be on lower level when we are comparing to our competitors. Of course it means that the prices has increased, but at the same time we have taken care that the prices are under the competitors' level. Yeah. Of course, to be honest, other costs are also increasing, you should be- Yeah should be able to increase even more. When you are losing your gross margin in this kind of situation, it leads easily to the situation that your EBIT decreases. Yeah. Well, exactly as Markku said, obviously the buying prices are increasing for all retailers and for us it's extremely important to show the lowest price level for our customers. You know, like when the competitors are increasing their prices, obviously it gives us some space for also checking the price levels. Hopefully that was Yeah. No, I think I understand what you are saying. If we look at your guidance, which is still very wide in H1, your profit or EBIT is basically down 32% year-on-year. With the EBIT guidance of EUR 90-EUR 110, that implies development in H2 being you know either up 25% or down 5% EBIT-wise. If we assume then perhaps you know your OpEx will continue to grow at a pretty high pace, to me it feels like you must be expecting a gross margin that's you know either it must basically be up year-on-year in H2 for you to have still have this sort of the upper part of the range in place since the midpoint implies a 10% EBIT growth in H2 year-on-year. Yeah. Well, obviously, at the moment it's so very difficult to see what will be happening in the market. Basically, for example, as you very well know, July is the summer holiday month also in Finland. People are actually coming back to work already next week. July has been a lot of traveling abroad for Finns, as probably in every country, after two years of no traveling. Basically, already starting from next week, we will be seeing a little bit more carefully like, okay, what's happening in the market because, you know, like the people will be back from their holidays, not that much of traveling anymore. We also see like how people will react with all the pressures with increasing energy, fuel, food prices and things like this. It's a little bit early. We definitely want to see like, okay, what will be happening in August. We obviously expect that we will be like on a, let's say on a strong side when it comes to sales as well because, you know, like the competition will be pretty hard and we've been trying to position ourselves very clearly on the low price level, and we should be benefiting out of that during the coming months. It all starts from there. When it comes to the guidance, in this kind of environment, it's extremely difficult to be more exact with the guidance. I don't know, Markku, would you like to add something on that? Yeah. That's that was very good. Good. Perhaps something what I like to say is perhaps when you asked about the gross margin, we certainly has had during the first half of this year lower level of private label, for example, compared to last year. We can assume or we can push more private labels during the second half of the year, which of course means that it gives us a possibility to achieve a bit higher gross margin, at least a possibility for that. We have to remember that also last year when we look Q4, the costs already started to. Yeah Increase at that time. Perhaps the change compared to this year's costs when we are looking at the end of the year is not as big as it has been during the first half of this year. Okay. That makes sense. Thank you very much. I think that was all from me for now. Thank you. Thank you. Okay. Thank you. Our next question comes from the line of Markus Heiberg from Kepler Cheuvreux. Please go ahead. Your line is open. Thank you. Thank you for a good presentation. A couple of questions from me as well. You started answering a bit earlier here, but on the traffic development, you see that like-for-like traffic is down about 3% year-on-year. This is quite stable versus 2019, the way I see it. How have you seen this metric develop through the quarter and into Q3? What should we expect in terms of traffic? Also you can touch upon the basket size, which is still at a very high level, and how the number of items has developed. If you could elaborate a bit on how you see traffic and basket develop over H2. That would be my first question. Thank you. Okay. Maybe I'll start and you can continue. Yeah. First of all, it's like two sides with, when it comes to the traffic. It's two sides. Basically, during the second quarter, the traffic was clearly affected by the start of the season, which was really, like, slow. Like it started in the middle of June, and that's it. Unfortunately, we lost quite a lot of the from the season start, and it affected. Let's say that we didn't get those. Well, in Finland, when the season starts, usually in April, a lot of people coming to the stores, buying their garden soil and plants and fertilizers and things like this. We basically lost all of that. Actually, it was in April and May. In June, it finally started, unfortunately too late. Obviously, when it comes to the third quarter and fourth quarter, there is no this kind of issue. When it comes to the Christmas season, it will be there whether it's snow or not, but the Christmas season will be there for sure. Basically, this is the positive side when it comes to the traffic part. Obviously, the negative side or I don't know whether it's gonna be negative, but there will be like clearly more competition because people need to be cautious with their spending and today in Finland or any day in Finland, if you open the TV or radio and look at the news flash, they're all the time saying that the costs will be rising. People need to be extremely careful with their spending because the interest rates are getting higher and so on. Obviously, we Finns are like this, that we definitely become more cautious if, you know, like all the authorities and experts are saying that this is exactly something we need to do. In a way, this is the downside. On the other hand, that's the place where we'll be, well, hitting the market or targeting the market, showing that, "Hey, listen guys, we do have the lowest price level. If you need to save money, visit Tokmanni." Yes, let's see. I don't know exactly how this will be ending up, but yeah, there are like... Obviously, we target with the positive traffic during the third and fourth quarter, but we cannot say how dramatic the customer behavior will be due to the situation. Now when it comes to the average basket, we haven't seen any major changes with the average basket like that, for example, that people would be buying only, how do you say, low price unit products or something like this. Actually, we had a very good sales growth also with product groups or products over EUR 100 price point. We haven't seen any major changes with the average basket. The only change is due to the seasonal issues that we're basically selling more groceries instead of the garden products. Yeah, it's gonna be interesting third and obviously a fourth quarter as well. Hopefully, that was giving you some kind of idea how we see the business. Yeah. Thank you. That was actually very helpful and very interesting with the sort of quite unchanged customer behavior so far, if I can understand you correctly in terms of the items people are buying. My last question is on the inventory actions that you are mentioning. What kind of actions are these? Should we expect higher campaign level into Q3 getting rid of seasonal items which could impact your gross margin in H2, or is it more of a sourcing adjustment that you are making? Thank you. Yeah. Well, if I take a product group which was affecting on the inventory level by, you know, like increasing that, mostly that was, of course, garden. Now we've been following extremely carefully the buying prices for example, for outdoor furniture products. We made very careful calculations regarding the buying price level. At the buying prices, they haven't been coming down enough for us to basically clear the inventory for outdoor furniture or let's say the garden products. It means that based on our calculation, it's more beneficial to keep the garden products for the next season compared to start campaigning with let's say, -50% to -70%. I think that we've seen some -80% discounts in the market and that's not for us at the moment. Obviously, we'll have some campaigns, but not like we would need to clear the inventory level totally. We made the calculations that we'll keep the, for example, the outdoor furniture or let's say garden products for the next season, even though it will be costs from storage and so on. No, not emptying the inventory level at all. About the actions, it's clear that. Yeah When we are looking at our logistics and our sourcing, it's more normal today. We have had to order earlier, but we are sure that we have these products, and we have a good shelf availability. Now it seems to be that the logistics is working at least about the normal way. Yeah. Which means that we can postpone our orders to later dates, which should of course affect our inventory levels during the second half of the year. Yeah. We've had almost one and a half years, we've had quite strong buffers regarding to make sure that we have goods for our customers, and now it's time to clear these buffers because the supply chain seem to be very getting back to the normal situation. Thank you. That's very clarifying. That's all for me. Thank you. Thank you. Thank you. Once again, it's zero one on your telephone keypads for any questions. As we have no more questions registered, I'll hand back to our speakers. Okay. Thank you very much, everyone, and one more time, thank you, Markku. Let's see in October with the third quarter result presentation. Thanks. Thank you.