Welcome to the Alligo audio cast with teleconference Q1 2022. For the first part of the call, all participants will be in listen-only mode, and afterwards there'll be a question and answer session. I'll now hand the floor to Clein Ullenvik Johansson, CEO. Please begin your meeting. Thank you. Welcome to Alligo interim report Q1 2022. If we start at page two, the presenters today will be Irene Wisenborn Bellander, our CFO, and myself, CEO. You know how it works. We will give a brief presentation. We are not gonna repeat what is in the report. You read it or either will read it. So we will highlight a few things which we think could be of interest to you. We will focus on each call going forward quarterly on a specific topic. This time, we have two Slides on the logistics structure, and what we're doing within the logistics area, and then we'll look at the other topics, as we go along to other quarterly presentations. At the end, you will be very informed about what we are doing. At the end, as we said, we will open up for questions. If we turn to Slide three, Alligo at a glance, we will continue to repeat this one. We're a leading player in workwear, personal protection, tools, and supplies in the Nordic region. We have a mission, which is we make companies work. We focus on our customers, companies and make them work. We have several different concept brands and different product brands, and we meet the customers wherever they want to meet us. If it's in a store, if it's through a webpage, if it's a physical meeting and whatever, we are there. You can see the Alligo at the bottom, the little model. That's where we all are employed. That's our core values. You know our concept brands: TOOLS, Swedol, Univern, Grolls, and a number of specialist companies. If we turn to Slide four, this is 2021 figures. Out of our SEK 8.5 billion turnover business, close to 60% is Sweden, and then second biggest Norway and then Finland. You can see, by far the most profitable country we have is Sweden. Own brands, a little shy of 20% of our sales. Many strong brands. As you know, I continuously say it's not cheap copies. If you take Björnkläder, for example, it's the oldest workwear brand in the Nordics. We have own brands, but it's not any cheap copies. It's the real deal. We have some 200+ shops throughout our three countries. We turn to Slide five. We have eight customer segments. Of course, it differs a lot from country to country. One example, fishing and agriculture and oil and gas is of course biggest in Norway and other sectors are bigger in other countries. We say that approximately our market is estimated at SEK 50 billion in our countries per year. We have a combination of small and medium-sized companies. We love small and medium-sized companies, and we build the company for those, even if we serve all, of course, all type of customers. But we like to gear ourselves towards smaller and medium-sized customers. If we turn to Slide six. We can skip to seven directly. Q1 in brief, a few highlights. As you know, there was an extra general meeting on March 23rd when it was decided to spin off Momentum Group, and each shareholder of Alligo got a share in Momentum Group. We got a new chairman in Göran Näsholm, a very experienced person. We got ourselves a new chairman. We made two acquisitions, the Lunna business in Norway, SEK 80+ million business, perfect for us, and LUKHS Impulssi in Finland, a SEK 40 million business. Perfect fit for us. Exactly those type of acquisitions we'd like to make. We are so happy that we could do a couple of smaller acquisitions in the middle of everything else we are doing. We have changed management in Finland. You know, we reported now one or two quarters back that we are struggling in Finland. We can't roll forward the price increases we got in. We are building a new structure in Finland, and we came to the conclusion that we need a different type of management going forward, and we have made an agreement. We are now in the search process for a new country manager in Finland. The revenue increased by 6.5%. It sounds more, especially since we in Q4 report said that it will be a poor quarter, the first quarter of 2022. When Irene has described it a little more in detail, it's nothing to write home about, if you set aside currency effects and like for like and so forth. We're happy we survived Q1 with the way we did, despite all. EBITDA increased by 28% from SEK 82 million to SEK 105 million, and we have an EBITDA margin of 5%. Cash flow for us, as other businesses you've probably seen in this reporting season, dealing with importing goods, we are struggling a little bit. We had to pay upfront to suppliers, goods being stuck on sea and so forth. We have some negative development in the cash flow, which we are not worried about going forward. If we turn to Slide 8, and again, to emphasize, we want to be a fully integrated company. That's why we do all these things that we do. From a customer perspective, we'd like to be strong in the relation with the customer, i.e., will not find our own brands in other channels. We have our own brands to make ourselves strong facing the customer in our shops and so forth. Our offering, we are focusing on consumables. We don't have any direct materials, and service is an important part of our offering, and increasingly so, going forward. Our go-to-market model, where we meet the customers wherever they want to meet us, and we meet them through our different concept brands. In the future, of course, we'd like to have fewer concept brands, but the way we have them today, it works well. A dream could be to have one concept brand per country, for example. If we take Slide number nine, the integration efforts. We have informed you step-by-step as we have done the integration activities, and they have been performed just according to plan, and we have got the results that we have promised just according to plan. The store integration has gone as planned. We have only four shops left, two this year and two next year. Now it's so few, so now it's integrated into our ordinary operational business. The standard assortment is being rolled out. We have had some struggles, as you know, with the private brands, our own brands, depending on the transportation and freight situation. Then we come to four headlines, which are actually all of them going live in Sweden on Monday. It's a big change taking place in Sweden on Monday, where we close down finally the Alingsås former TOOLS warehouse, and move the operations to Örebro, our highly automated warehouse. We will implement a new pricing system. We will do an ERP change, and we do the change the legal structure. We merge TOOLS into Swedol. There are four major things taking place on Monday next week. We have launched the common core values throughout the entire company. We have a value-driven management in the company, and that has been launched, as you know. We have launched new financial and non-financial targets. If we turn to Slide 10. The first of the two Slides I said we will cover this time, a specific little deep dive into the logistics structure. In less than two years, we've gone from 20 to seven warehouses, and as I just said, on Monday, we will be down to six warehouses when Alingsås is being finally closed. After Monday, we will have one central warehouse in Tillholm. We will have one central warehouse in Sweden. We have four in Norway, where we will of course, if you look at the dots, we'd like to co-locate Kvesnes og Kåssjet and Rosenholm. Neither of the two can have the capacity that we need for the Norwegian market. Those two we'd love to move to a new location and move together. A lot has been done in the logistics area, which we haven't perhaps talked that much about, but there has been a lot of activities even there. If we turn to Slide 11. A little bit more information about our central warehouse in Örebro, which is our Swedish central warehouse. In the structure we have, it's also partly a Nordic central warehouse. It's the main hub for the whole group, but mainly the Swedish central warehouse. Modern facility, 28,000 sq m. We have expanded it step by step, with the building itself and also the AutoStore, the automation system we have. That's now been invested quite a lot to take the volumes from the TOOLS business. If we look at the AutoStore we have, it's highly efficient. You can see the robots to the right in the picture. We have now 90,000 bins, 92 robots. Those are the red ones you can see in the picture. 30 picking ports, and approximately 1,000 goods received orders per day and approximately 13,000 order lines being picked a day being shipped out. That's a quick. We'd love someday to have one of these meetings physically and potentially in Örebro, but let's come back to that if it's possible to arrange one day. If we turn to Slide 12 just quickly, we said we launched the financial targets, and we launched also the non-financial targets. Looking at the non-financial targets, the responsible supplier relations, all of them should have to sign our code of conduct. We should have a customer satisfaction north of 75%. We should have a sickness-related absence of less than 5%. A share of female managers above 30%. A climate impact, we've said we will reduce carbon dioxide. To state that in figures, we need to know more what our carbon footprint is, so we don't come up with any figures which are irrelevant. We said, let's focus on reducing, and we'll come back when we can quantify that. If we now turn to Slide 14, I'd like to hand over to Irene. Yes. Thank you. The first quarter has been favored by a currency effect and earlier Easter last year, but contrasted by the strong Q4 with early winter sales. In addition, COVID-19 related sickness and increased uncertainty due to the war in Ukraine have had sales related to our small and midsize customers. As you can see, revenue increased by 6.5% to SEK 2.1 billion in the quarter where the calendar and currency effects contributed positively. A positive currency impact of 2.6% in the quarter is mainly driven by the development of NOK, but also euro. Organic growth in local currency in the quarter reached 3.7% driven by positive sales development in Finland. EBITDA increased by 28% to SEK 105 million in the quarter, corresponding to an EBITDA margin of 5.4%. Improved profit is primarily driven by the Swedish business and relates to the integration synergies and the good effects of implemented price adjustments. However, there are unfavorable mix effects in the quarter that contrast. First of all, there's the negative trend mix due to growth mainly derived from Finland with lower margins, but also negative mix effects when it comes to product category in customer segments. The intensive integration project between TOOLS and Swedol that Jenny mentioned earlier is running according to plan. During the quarter, SEK 13 million was utilized from the restructuring reserve, and the remaining restructuring reserve amounts to in total SEK 140 million. Turning to Slide 16. Let's have a closer look at the development in each market. In Sweden, we have growth in the industrial segment in the quarter. Meanwhile, the uncertainty in the market has generally decreased among small and midsize companies. Higher sales prices have in particular affected the transport, construction, and agriculture segments. The EBITDA margin improvement in the Swedish business is related to synergies improving the gross margin, but also because of the cost base. Moreover, we have been able to implement pricing increases that have offset the supplier price increases and higher costs in SEK. On the other hand, the quarter has been negatively affected by base comparisons and mix effects. The unfavorable mix effects are both related to product category and industry segments. For instance, high-margin safety workwear decreased due to stock that was of the sales already in Q4. In Norway, we're not back to the 2019 sales level in local currency and the organic growth in the quarter was 6%. There was a slight improvement in the oil and gas segment, but COVID-19 related sickness has affected small and midsize customer sales in the period. There's a slight positive EBITDA margin development and the integration between Ginza and CDON have created synergies, but unfavorable for the category primarily related to workwear compared. We have a positive sales development in Finland. The organic sales reached about 10%, but profitability remains weak, mainly as a result of the non-repeatable development in the customer mix in which prices in the top and midsize increases from our suppliers. With the new leadership in Finland, there will be a focus going forward on increasing the portion of small and midsize customers together with improved sales and category mix. Let's move on to cash flow. Slide 17, please. Cash flow from operating activities in the quarter amounted to SEK -13 million and was negatively affected by decreased accounts payable, prepayments to own brand suppliers, and continued build-up of inventory. The inventory build-up is driven by sales growth and the ongoing assortment launch of Ginza and CDON, but also includes focus on growing our own brands, combining higher volume purchase orders with strength. In addition to this, we are focused to ensure higher product availability despite the disruptions in the global supply chain. The right-hand graph shows the development in liquidity at the starting period position of SEK 345 million at the end of Q4 last year, adding the cash flow from operations, deducting the impact of investing activities, the majority of which is M&A related, but also related to store and central warehouse adaptation and IT related investments. Finally, the financing activities which are primarily related to the amortization of leasing liabilities, bringing us to the period end of SEK 40 million of liquidity that's found. Slide seventeen, please. Alligo has been refinanced during the quarter in connection with the spin-off of Momentum Group. Capital structure remains unchanged, but the funding conditions are somewhat more favorable. The group's net debt amounted to SEK 1.5 billion at the end of the quarter, and the ratio of net debt to EBITDA amounted to a multiple of 2.0, which is an increase compared to year-end, but still within the financial target range. On top of our liquidity position, we had unutilized credit facilities at the end of the quarter of SEK 1.2 billion. In summary, our strong financial position means that we can continue to invest in organic growth and we take advantage of potential good M&A opportunities in our market. Handing it over to Clein for summary and outlook. Yes, thank you. So our four overarching themes for 2022, we try to make it clear to all in our organization, make our people grow, continue the coordination work and make sure that we deliver on all those ongoing activities, get back on track with growth, and focus on margin development in all parts of our business. That is of course of the greatest importance to do, especially since we've been very much in a project phase the last two years, and where we have a big delivery on Monday, as I said. We've had a big chunk of our sales force spending in March and April, up to 30%-40% of their time on different types of training. Now it's we need to launch all those activities and get back on the growth track and improve our internal work, how we work together and processes. Those are our four overarching themes. Moving to Slide 20 before the Q&A. We've done a lot of changes in our operation. We have prepared ourselves as good as it's possible. We feel we are ready for Monday with a new pricing system, new ERP system. We are relocating the logistics structure. We are still being challenged in the supply chain due to a situation in the freight market. It takes a lot more time. It's uncertain if you get deliveries. We have managed well. Am I totally convinced that we will not be affected in any way going forward? Absolutely not. That is a challenge that we are continuously working with. We will continue to roll out the standard assortment and especially our own brands. If you look at our synergies and our activities we are driving, which are most of the value for us, it's the rollout of own brands. That needs to work. We'd like to find growth opportunities. We have the financial structure to be able to do so after refinancing. We need to focus on M&A, and we need to reactivate our sales force again. Let's open up for the Q&A. Thank you so far. Thank you. If you wish to ask a question, please dial zero one on your telephone keypad now to enter the queue. Once your name has been announced, you can ask your question. If you find your question has been answered before it's your turn to speak, you can dial zero two to cancel. There'll be a brief pause now while we register your questions. Currently, we have one person in the queue so far. That's Emanuel Jansson of Danske Bank. Please go ahead. Your line is open. Yeah. Hi, Claes, and hi, Irene, and thank you for taking my questions. Can you hear me, guys? Yes, we hear you. Hello. Yep. Hello, hello. Perfect. Coming back to the country and the region for you in Finland, you said that you are changing the management in the country. Could you give us some color on the persons and what they have for kind of experience that will help the region to hopefully perform better going forward? Sometimes it's like a football team. You need a new manager to create a new start. We love the Finnish spirit. It's a great fighting spirit in everybody there. But it is a new company there now compared to what it has been. We need somebody to come out from the outside and then see that clearly and take the opportunities that we do have now to roll out a better shop concept to keep the customers we have, but also continuously focus on small and medium-sized customers, rollout of the standard assortment, the Nordic assortment, and also the own brands assortment in Finland. The acting country manager now is our assortment and purchasing manager, Mika Mantsinen. During his month there before we can welcome a new country manager, a lot of things will happen in the assortment side. Besides that, he is a very, very good sales manager. Mm-hmm. It's well planned for and well executed and will have positive effects going forward. Yeah. Perfect. Sounds good. I know you don't have it as a financial target or at least I don't think you have, regarding the private labels or private brands, or own brands. Do you have any specific, like, maybe not a target, but how much of revenue do you think you could stem from own brands going forward? I mean, it's like 16% now adjusted for the divested operation, right? Mm. Yeah. I mean, let's pass 21% and then 25% would be a very nice figure sometime in the future. We still can go full speed. We had almost a problem in the old days in Swedol when we had an all too big share of own brands where our offer to the market is the best product available. If the share would be extremely high, which would be a nice problem, then we need to look at our concept. If we were to arrive at 25% sometime in the future, I would be very, very happy, and that would have a very good effect on our gross margin, of course. Yeah. Perfect. Have you been able to roll out the all other brands, or how is the sourcing going from, I guess, from China or Asia at least? As we communicated earlier, first we delayed it, and then we said, "Let's roll out Gesto shoes in Norway and Finland, so they get a little flavor of what we have in our portfolio own brands wise." That we have done. Now actually we are rolling out workwear as well. For the shop sales, it's easier. I mean, if a customer comes into a shop and wants to buy a specific brand and our very skilled shop person says, "Why don't you buy a Björnkläder trousers instead?" That goes quickly. For bigger customers, bigger accounts, it's already agreed on which brand and which color it should be. That takes a little bit longer time. The bigger the customer, the longer the time to implement our own brands, normally. Yeah. Okay. Sounds reasonable. Also going into the comparison between small and medium enterprises and the large customers. You said that the large customers in general in the industrial industry has had a comeback in this quarter. Is that mainly why the gross margin was reduced compared to the last period last year? Normally, you say mix effects when you can't really describe what's happening. But for us it- Yeah. Country-wise, assortment-wise, and customer-wise, we can see a positive development, gross margin-wise in most of the different categories we have. But from a- Yeah. From a mix perspective, if you sell workwear with a high gross margin or tools with a lower gross margin, and as you know, the workwear portion of our sales Q1 has been lower, then you have a mix effect there. Yeah. Okay. So Yeah. We see, and I think you've seen that from most reporting companies that the industrial sector has a good speed. We can see that our industrial customers have developed nicely. Unfortunately, industry is not our most profitable customer segment. Could you give us some flavor on how large a chunk the large customers are in the total customer base? I don't know. No, it depends from country- to -country. As you know, Finland, I think we have communicated. Yeah. The top two customers are more than 20% of our sales. That is not a situation we would like to have. Yeah. Traditionally, if you talk concept brands, traditionally, TOOLS concept brand has been industry customers, and thereby larger customers. The old Swedol brand was very much smaller customers, not at all bigger customers. In combination, it's very, very good. In this situation, it's a bit challenging sometimes. Yeah. Good. What was the gross margin when you were at Swedol before the merger? Oh, I can't remember. What was the peak gross margin? Any of you remember? Mm. I was about to say 0.5 as well. Yeah. If that were possible to come back to that, but nobody knows. I mean, it's a different company now. Yeah. We are more, quite a lot more bigger than doubled. Yeah. I understand. Could you give us some more maybe coloring on the small and medium enterprises you said that have been restrained to a certain amount, given the uncertainty in connection with the invasion of Ukraine and so on. Do you think this impact to be much more severe maybe in Q2 and going forward? It's a very good question, and it was an interesting thing to see. I mean, we normally take pride in our small or medium-sized customers because many times it's the managing director or and/or the owner of the business that are in our shops because you have a few employees or you are working totally on your own. What was obvious now when the uncertainties in the world happened that those are the ones, of course, which are closest to the decision. If I own my own business and I Yeah. I'm getting a bit worried, then of course, I don't buy the new set of tools or a full new workwear outfit. As opposed to if you are employed by a bigger company and you go to one of our shops with more or less a requisition saying. You don't think that much about your spending. The smaller the business, the quicker they respond to uncertainties. That was an interesting thing to see. I'm not so worried about that in the longer run. What is more worrying is, of course, the increasing interest rate and then the pure fact that the inflation is at one certain point. I mean, there's been so many price increases that, of course, that in itself will cool down the demand, unfortunately. Yeah. Do you know how the inventory levels are at the customers? I mean, we don't have. We have this smart service solution, so we don't have so much of that. It's more if they run their business, they have a need. Of course, they could stop and use the things they have a little bit longer, but at one point it's broken, the tools are broken, or the workwear equipment is broken, so then they need to buy. They don't stock up much, the consumables at least, except for smaller warehouses, but it's nothing that affects us much. Just a last question from my side regarding you're having kind of busy Monday coming up. Just regarding the warehouses and so on, you told us that you have 6 warehouses as of now, if I understood it correctly. You have 4 in Norway, and you're looking into maybe have 3 in the future. Is that correct? Yeah. Yeah. Yeah. Okay. If you look at the dots close to each other, of course, they could be co-located. The biggest step we need to take is being done on Monday at Sandvika, Oslo, or the second biggest step to take is when we move together the Rosenholm and the Skedsmokorset business to a new premise one day in the future. When that is done, we have a really good logistics setup. Of course, we have also said that we're not happy with the central warehouse we have in Finland. It's too small to cover the business already as it is today and what our plans are for Finland, it's for sure doesn't have that capacity. Yeah. I guess it's based on the also the landscape in Norway why you need more warehouses than in the other regions. Yeah. Yeah. Well, perfect. I think that was all the questions from my side. Thank you very much for answering them. Thank you very much. Thank you. Once again, if there are any further questions, please dial zero one on your telephone keypads now. Okay. There seems to be no further questions from the phone at this time, so I'll hand back to our speakers for the closing comments. Thank you very much for dialing in. We know there has been a press conference simultaneously in Riksbanken describing the interest rate increase. Thank you all for tuning in and speak to you next quarter. Take care. Bye-bye.