Welcome to the Bergman & Beving Q3 2023 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound five on their telephone keypad. Now, I will hand the conference over to speakers CEO Magnus Söderlind and Peter Schön. Please go ahead. So welcome everyone to the Bergman & Beving interim report for the quarter ending December 2023. My name is Magnus Söderlind, and I'm also here online with our CFO Peter Schön. So I will start with some highlights from the third quarter. Our positive earning trend continues. We have now 16 consecutive quarters with improving operating profits. And this is despite we are facing a deteriorating market condition, both within the construction sector, but we also felt kind of declining demand in the industrial sector during the last quarter, last calendar year. W e have a very strong development, profit development in two of our three divisions. Building Materials and Tools and Consumables are performing very, very well, I would say. But the Workplace Safety division is not performing according to expectations, and I will come back later in this presentation specifically on the three divisions. We acquired actually eight companies during the calendar year 2023, and we made two acquisitions in the last quarter. Ateco is a Swedish company leading within fire security solutions. The English company Orbital Fabrications in December, that is a leading product company making systems for gas management, especially within production facilities. Getting into the financials, we have a revenue ending up at SEK 1.187 million, and that is a decline of 4% compared with last year's quarter. This is an effect of our continuous work with phasing out low-margin, high-volume products. You can see the gross margin has had a great development with close to 4% units improvement in the quarter. That is actually mainly coming from the organic work we have done with the businesses, but also partly improved by the acquisition we made of high-margin businesses. But in total, we had an organic decrease of the revenue that was a two-digit figure. That is partly explained by the phase-out of low-margin, high-volume products, but also that we are facing tougher market conditions in this quarter. Due to this, we had made a lot of efficiency measures and lower costs in many of our companies, especially with those that doesn't perform according to our expectations. We also see that the cost level is coming down on a group level. We have still costs coming down going forward as all the cost is not out of the system yet. So all this together made us improving the EBITDA by 7% compared with last fiscal year. The EBIT margin continued with 1% units, so we are now up to 9.3% in this quarter. The EBITDA ended up at 7% compared with 7.1%. And that is due to that we have increased financial costs due to the interest rate increase that we had. We continue to work with improving our cash flows, mainly by reducing inventory. That was kind of residual from the corona situation where we purposely built extra stock. So we have a 4% increase in cash flow compared with previous year. We made two acquisitions, as I said, in the last quarter, the calendar year 2023. But we made so far this fiscal year six acquisitions, two acquisitions per quarter. And as communicated earlier, we are focusing on buying product companies that have a leading position in a niche with good financial ratios already. So all acquisitions we made had an EBITDA margin above the 15% that we have set a hurdle for acquisitions and also have our profitability measure, Profit of Working Capital, above 45%. That is our group target as such. So we continue to build the group with market-leading product companies with very good financial figures. And in total, this adds up with SEK 450 million so far this fiscal year in acquisition add-on revenues. You can also see that we have started to acquire companies in Scandinavia again. Five of the six acquisitions we made in this fiscal year have been in Sweden and in Norway. S ome years back, we didn't buy any companies in Scandinavia due to the we thought that the pricing level was too high. So during that period, we were more focused on Finland and the U.K. But now we see the prices are coming down in the Scandinavian countries, and that has enabled us to close some very good deals in the Scandinavian region this fiscal year. So as said initially, we continue the positive EBITDA trend. That is something we have aimed to continue to do over time. We have also, as you said here, both in absolute terms, we increased the EBITDA quarter on quarter, but also the margin has a very positive trend. I don't think we have seen the end of this improvement in the companies that we have already today. On this slide, you see the revenue by quarter. If you compare the revenue this Q3 quarter compared with previous Q3 quarter, you can see this decline of 12%. We didn't have any currency effect in this quarter, but we had a positive effect on the acquisition we made, 8%, and then ending up with an actual of 4%. So once again, we have an organically declining revenue, partly due to the phase-out of low-margin, high-volume products, but also that we are facing tougher market conditions. And I would say the majority of this -12% is due to the market conditions. But still, we are able to produce a profit increase. And once again, that's due to that we have a very positive trend in the gross margin, and we see the effect of the cost reductions and lowering cost activities we have done across the group, even if we haven't seen all the effects yet in the numbers. And as earlier said also, we are focusing both organically but also in terms of acquisition to acquire high-margin businesses. And that translates typically into owned product companies, proprietary product companies. You can also see in the figures on the right here that we have an increasing part of our total business is related to our product companies. So we have a steady increase, even if it takes time. We have set the target to reach the 75% here over time in portion of the owned proprietary products on a group level. So I will now leave over to our CFO, Peter Schön. Okay, thank you, Magnus. We'll start out with the earnings per share, maybe the not-so-positive thing in the report, as Magnus mentioned earlier. We had a decrease in earnings per share, and of course, that's the higher interest rate affecting the quarter, and has done so the last four quarters, I would say. Hopefully, going forward, we'll see stabilizing interest rates so we can continue increasing our earnings per share and also the interest rates going down a bit. So let's move on to the inventory where we've done a lot of good work. Organically, the inventory has been reduced with SEK 260 million since last year, Q3, and the acquisitions have added SEK 80 million. So we are continuing with our three main themes: decreasing safety stock, decreasing high-volume, low-margin businesses, and improving product mix and streamlining assortment. So we've been working with that. But as you can see in the last quarter, the decrease has not been as great as before, so a bit slower rate in destocking. And that is, of course, due to a bit lower, weaker sales. But we will continue working on that, and the inventory will come down as well. So we expect that to continue the good trend. The lower sales also impacted, of course, the inventory turnover negatively. But that is, of course, the reason why we use inventory turnover. So if we reduce sales, our companies should reduce the inventory accordingly. And then to the positive thing in the report, cash flow from operating activities, very strong cash flow in the quarter, and we have had that the last year. And the main reason, of course, is improved profitability and reduced inventory levels. In this quarter, we had an extra boost, I would say, of almost normalizing accounts payable. As I mentioned, last quarter, we had a really low accounts payable because we stopped buying products, and we have slightly started to buy a bit in the companies. So that has come up a bit. So that was a boost. But then, of course, the lower sales also gave a positive cash flow, and that's maybe not so positive. If we move to net debt, here you can see that we had a decreased net debt. I think that's a really good, strong position as well. We made acquisitions of SEK 133 million, and still, we managed to reduce debt. Over the last year, in the period, we did SEK 300 million in acquisitions, and the debt is really stable. So we feel very confident in that, and we do have a very strong acquisition pipeline. So we will continue doing acquisitions. One thing that I want to - oh, I'll come back to that. Good. Oh, no. Yeah, good. I just want to say that the next quarter's cash flow is normally a weak quarter, so I should have mentioned that. So let's go back here. As you can see, the normal Q4 cash flow is a bit weaker, and I think you should expect a bit weaker cash flow next quarter due to seasonality. But then, yeah, we should continue our strong cash flow. Getting into our three divisions then, Building Materials had a profit increase of 55% despite the construction industry exposure. You read a lot of things about residential new buildings, and that is very low in the Nordic regions. But our companies are not so affected of that specific segment of the construction sector. It's more related to renovation of residential building and then more into commercial buildings and infrastructure projects. We cannot see that we will have a big effect on the underlying demand in the construction sector that would affect Building Materials in a negative way going forward. And I think this figure in this quarter shows the strength of the resistance of the Building Materials Division despite the market conditions that we face on an overall level in the construction sector. So we also have a profit increase here of, sorry, revenue increase of 8% and an EBITDA margin improvement of 1.5% compared with previous quarter, comparable quarter. And all the units within this division improved their results compared with same quarter last year. So it's not a single company that generates this great profit increase. It's actually all over this division. And it's a combination that we improve efficiency in some of the companies and added on some acquisition that has been the driver behind these improvements. Getting into the Workplace Safety division. And here, as mentioned in the introduction, we are not happy with the results. Here we actually see a revenue decline and also an operating profit decline. And we also see that the margin is going down in this division. And we have made cost reductions before this quarter. We made additional cost reductions during this quarter, and we have initiated during the last quarter additional cost effects reductions that will affect quarters going forward. We need to see this Workplace Safety division back on track and perform a profit growth over time. We need to make that happen very soon because this is not satisfactory. Lastly, the Tools and Consumables division had an all-time high result and had a double-digit margin in this quarter. This despite that this is a division very exposed to the industry segment. As said before, we faced a weakening market during the quarter. You can see on the revenue figure that it's actually going down with more than SEK 60 million, more than 10%. The EBITDA increased by 27%. So very strong profit increase and also very strong margin increase, as you can see on this picture, close to 3% units. This is a combination of mainly two activities. One is that we have made profit and margin improvements in, for example, Luna Group, where we had taken some major cost reductions already in previous quarter that we now see the effect and also phasing out low-margin, high-volume products. The Luna actually had a result almost on par with the previous year despite that we have an additional SEK 5 million extra profit previous year due to the backlog we had from the external logistic partner since they had an IT attack that didn't enable Luna to deliver in the Q2 quarter last year and then had an extra backlog in the previous Q3 quarter. We had a very positive development. The acquisition has developed in a very good way. So this is a very satisfactory result that we had in the Tools and Consumables division s. During the last quarter also, we announced some additional financial targets. We had earlier communicated the target to reach EBIT of SEK 500 million, latest fiscal year 2025/26. We have now added during this quarter an EBIT margin target that the same period reached at least 10% EBIT margin. And we also set a target to reach our profitability measure, Profit of Working Capital, of 45% one year later. And we have this as an internal target. We call it 500/10/45. So we summarize those three targets internally as well. And we have not changed the dividend share. That is 30%-50% of the net profit. But we also added targets around acquisitions, and we have now communicated that we will acquire going forward SEK 50 million-SEK 80 million in combined annual earnings per year. That is in line with what we did last fiscal year and that we should reach 75% owned product as a percent of the total group level latest fiscal year 2025/2026 again. So how will we reach the 50/10/45 targets? We will continue what we always do, prioritize profit expansion over revenue expansion. We have, as earlier communicated, our capital allocation model, the B&B Focus Model that we have been in use now in the group for 2.5 years. And we will even follow that even stricter going forward, i.e., we will allocate the capital for growing companies that have a Profit of Working Capital above 45% and have a profit growth potential. Actually, we will continue to focus on profitability, margin improvement, cost reductions in companies that are way below those target level. That could also include a top-line decrease to get a better focus on better margin business. As we also have communicated, we have 29 companies in the group now, and they are all separately run. They are a separate entity having different products addressing different customers in different geographies. It's really company-by-company strategy. We have goals and activity in all those companies that ensure that they keep the eye on the path without losing sight of the summits to get above the 45% and make priorities and actions according to where they are in our capital allocation model. We also have supporting our companies in the development. So we have the B&B Toolbox that we will continue to offer and apply in the group to help the companies to make good progress on the activities and the goals that they have. We will continue, as Peter was saying, we have a good net debt/EBITDA ratio. We have the capacity to continue to acquire, and we continue to acquire highly profitable B2B companies with leading position in expansive niches. We also have some specific current group teams based on kind of where we are today. One is to continue to increase the cash flow. The major lever for that is to continue to reduce the stock, improve the inventory turnover, and to get back to pre-Corona level. We are still not there, so we still have work to be done. We have made some good progress, but we are not happy yet. Based on the kind of uncertainty in the market conditions, we are very cautious in investments. We have a tight cost control. We really follow the cost of goods sold percentage very closely in all our group companies and really make sure that we have a tight cost control. Many companies also have cost reduction programs going on currently. We also show the great gross margin development we have, but that we can't take for granted that that will remain on that level. We have activities in all our companies to make sure we protect the good gross margin development and position that we have in our companies. That were our presentations for the quarter report. We now open up for questions. If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Zino Engdalen Ricciuti from Handelsbanken. Please go ahead. Good morning, and thanks for taking our questions. I have a couple. If we just start off with the gross margin, could you give some kind of indication of how much of the sequential change was organic compared with contributions from acquisitions? The majority is from organic. We have organically a gross margin level very close to the gross margin that we presented in this quarter. Okay. And looking ahead, do you see that there are, so to say, low-hanging fruit on the organic side to the gross margin? We have been working on this gross margin topic for quite some quarters now. We have been phasing out low-margin, high-volume products. We have not really come to an end in that process, but we're getting there. So I would say there are, unfortunately, no low-hanging fruit left yet. But with that said, I don't say that we can't improve the gross margin going forward, but it will require a lot of efforts and work on our side. Okay. Very good. Moving to M&A, you mentioned that you want to continue to broaden your acquisition approach and look for B2B technology companies. What is your reflection regarding facing competition for those targets, given that there are several other companies that make acquisition in that niche? As mentioned during the presentation, I mean, I would say one and a half years ago, the competition for acquisition candidates in Scandinavia was quite fierce, and that pushed up the prices. We selected not to join that game. Instead, we put our effort in the U.K. and Finland, as communicated, to get some acquisitions going there. I would say I feel that on a kind of total level, the competition is less fierce now than it was one and a half years ago. Okay. Just lastly from me, given your target to reach the Profit of Working Capital of 45%, for units which you suspect won't reach the goal, well, firstly, do you already have companies in mind which you might already are looking at alternative structural solutions, as you mentioned in the strategic review? And how do you assess the interest in those companies from potential buyers? As communicated, we have the target on all our companies to reach the Profit of Working Capital of 45% within three to five years. And some of our companies kind of have a longer way to go to reach those 45%. But we have signed off all the management teams to reach the 45% in all companies within three to five years. So that is the expectations. And we expect all the companies to show steady improvements towards that 45% during this period. And in this point in time, we haven't seen any kind of signals that that shouldn't be possible. But of course, if that changes over time, we need to kind of revisit if we are the right owners for those companies going forward. So we still have plans and activities in all the companies to reach that 45%. Until we have decided or kind of concluded that that is not possible, then we need to revisit if we are the right owner. Understood. Thank you. I'll get back in line. The next question comes from Markus Almerud from Carnegie. Please go ahead. Hi. Marcus from Carnegie here. Can you hear me? Yes. Hi, Marcus. Yes. Hi. So my first question is on the acquisition market. So you say that you've seen, I mean, we talked a while about the lower expectation from sellers. I just want to ask, is it a combination of that? What's the financing for make acquisition look like? And is the reason for getting, I mean, that it's easy to make acquisitions, that also the expectations for the sellers have come down? So you could just talk a little bit about the environment in total. Yeah. I mean, one and a half years ago, when the interest rate was very low, there was a lot of activities going on, mainly, I would say, once again, in Scandinavia. A lot of companies were out there trying to buy companies. The interest rate was low. And my perception is that many companies were not as focused as we are on net debt/EBITDA ratios. So I think that was driving up the kind of valuation of the company and also the valuation expectations from sellers. But since many of those companies are not in the market of acquiring companies any longer, there are fewer players out there. And with that said, in processes where there are competitions, I mean, the seller gets a better understanding of what is the fair market value for the companies. They are now, I think, accepting a lower kind of valuation compared with the levels that were in the market one and a half years ago. If you look throughout 2023, would you say that because interest rates have, I mean, continuously come up and interest costs have continuously come up, would you say that this is a picture that has evolved during 2023 that has become easier and easier throughout the year and that expectations have come down throughout the year as well? Or is it kind of a flattish environment if you kind of look sequentially? I think and I guess the kind of the expectations and the levels of 2023 that we experienced is something that will continue in 2024. Maybe then if the interest rate is coming down and some of the players have kind of worked down their net debt, maybe they get more active in the market. But most likely, they have learned some things during the last period and don't get so aggressive on valuations and on number of acquisitions. So I don't expect the market to come back to where it was one and a half years ago. Okay. Okay. Perfect. And my second question is, you were saying that the -12% organic growth was mostly due to market. Does that mean that we're reaching the end of the phasing out of the product kind of cycle? Is that more or less done now? We're not finished yet. But I guess when we get to the summertime, autumn time this calendar year, I guess we are more or less there. I mean, this is a continuous job that will work on year on year. But if you look at the kind of big portion of that work. And then finally, I guess, last year, we were talking about this Spring order. No idea what it's called in English. But there was a lack of Spring order last year. When do these Spring orders come in? And when will you see if this will be the same as last year or kind of normalized? Yeah. Just for everyone to understand and know, we have a company in Building Materials called ESSVE. And they are a leading product company within fastening and screws products in the Nordics. And typically, the resellers are building up stock during the spring to be able to sell and deliver during spring and summertime. So they kind of pre-book orders that we deliver out then or ESSVE deliver out in this quarter, actually, the Q3 quarter, our fiscal year. And as you were saying, and we have communicated that last year, this spring order was weaker than the year before. And this year's spring order is roughly on the same level as the year before. So there is no kind of pickup in that market. Okay. It's perfect. More on the same level. Okay. Excellent. Thank you very much. I'll get back in line. Yes. The next question comes from Karl- Johan Bonnevier from DNB Markets. Please go ahead. Yes. Good morning, Magnus and Peter. Yes, I want to come back to the sales of the low-margin, high-volume products again. Sorry for that, Magnus. But if you look at, I think you talked about it now for, is it six, seven quarters or something like that? And just to get a little better feeling for, you mentioned now that, okay, we should be through this kind of negative impact in the autumn. Is that only related to Luna at this stage, or is it also ongoing in the workplace safety area? Yeah. I would say this is an activity we run across all group companies. But of course, if we look on a group level, Luna Group is more than SEK 1 billion in turnover. And they have a higher portion of these low-margin, high-volume products. We also have the Skydda Group. That's roughly SEK 800 million in turnover within the workplace safety. And they also have a higher portion, I would say, of low-margin, high-volume products than typically the product companies have. So of course, when two big companies, wholesaler businesses within the group, have a high portion or relatively high portion of low-margin, high-volume products, if they phase them out, they have a big effect on the top line on the group level. When you look at the recalculation of the EBITA/WC 45% target, I guess those kind of volumes normally have quite a high inventory turnover. Yes. Is it more important for you to reach the 45% in that respect, or the 10% margins, which I guess would be more difficult to get on those kind of products? Yeah. If we choose how to prioritize, the Profit of Working Capital has a higher priority than the profit margin. So, let's say the right type of high-volume, low-margin product will still be a part of the offering if you look at it even long-term, so. Yes. Yes. Yes. Good to know. Good to know. Looking at the target of acquisitions, and you're talking about business-to-business, technology-oriented companies. You have put up a good string of those of late, no question about it. Is it logical to maybe create a new business area or a new grouping of the companies in the business portfolio? You have to really show the underlying development better in how these companies are coming into the numbers. It's a good question. I mean, if we look at the names of the divisions today, maybe they don't reflect the focus of those divisions going forward. So if you should expect something, maybe it's kind of a renaming of the divisions to kind of better explain what we are aiming for to build going forward. Over time, we are currently 29 companies in the group. I think it's a question about number of companies per division that is manageable. And I think we still have a good number of divisions, i.e., three divisions, for the number of companies we are today. But of course, over time, if we get like 40 companies in the group, we will most likely have a new division as well. I remember you used to talk about and you still talk about the traffic lights are key in the way on when companies are allowed to go growth initiatives when they are just having a profit margin focus. If you look at the 29 companies today, how would you spread them out over this, say, already above 45%, maybe below 25%, and then the in-betweeners? We have 29 company groups today. 17 of those companies are above the 45%. Nine is below 25%. So in those nine companies, we don't talk about top-line growth at all. We don't want those companies to grow top-line. We only want them to focus on profitability. So of course, if bigger companies are included in those nine companies, that type of focus will have an effect on the top line, on the group level, if they are big enough. Definitely. Definitely. No, thank you for that. That's fair. That's a very good one to continue to follow as well, I guess, when you develop towards the group target of 45%, so. Just a final one for me as well. Looking at very good cash flow in the quarter, so hats off for that. And giving, say, the acquisition volume, still keeping a gearing of 1.7 to operating debt to EBITDA, obviously very good. But when you look at the capacity and the now strengths and cash flow profile of the company, what kind of gearing level would you be comfortable to go up to to complement, say, the growth ambitions and the return ambitions you must present there? That's a really good question. So long-term, we could go up a bit. But I think short-term, we could stretch that quite a bit upwards because we feel quite confident in our ability to generate cash flow. And when the business climate, if it worsens, the cash flow normally comes as well. So we haven't really set a number for that. But we can't say anything. I I mean, with the debt ratio we have currently, we feel confident that we can acquire the SEK 50 million-SEK 80 million annual earnings this fiscal year. But when you look at it, stretching it to 2.5x-3 x, that wouldn't be a trouble, so to say, for you with the kind of credit lines you have and the covenants you might have on those? No. It wouldn't. Excellent. No, thank you very much, and all the best out there. Thank you. Thank you. The next question comes from Emanuel Jansson from Danske Bank. Please go ahead. Good morning, Magnus and Peter. Thank you for taking my questions. I think we can start off with the workplace safety area. Obviously, it's been a frustrating development a couple of past quarters. But would you say that these cost initiative measures, is it somehow somewhat targeting also the offering, or is it mostly on the cost side here on the workplace safety? It's mainly on the cost side. Could you possibly look onto acquiring some kind of new niches into this division, or how should we view it going forward? Are you satisfied with your current offering here? Is it mostly because of maybe a destocking situation from your customers at the moment? We don't actually know what portion is destocking and what portion is kind of the market. But if we look at the revenue and the top line, we see a lower revenue than the market kind of reflects, the market decline reflects. So we kind of think that there are some destocking also in those numbers. But we don't have an exact number on that. Talking about acquisitions, we acquired Ateco in the last quarter as part of the Workplace Safety division. And that is not really maybe the typical workplace safety company, but it's within the safety space. And going forward, we are still seeing a lot of interesting acquisition opportunities, companies related to safety. And you can expect going forward that this will be a continuous focus area within the group to acquire highly profitable niche companies within the safety space. Okay. Great. Thank you, Magnus. That's very clear. And just jumping onto your product companies here, can you maybe give us some insights on how ESSVE and Luna have developed in this quarter in terms of both sales and profitability, if it's possible? Yeah. ESSVE is part of the Building Materials division. That is the biggest company. It's close to SEK 1 billion in turnover. And they are facing a small decline in their top line. It's not a big number, but still, they are facing tougher markets. But the profit has a positive development in this company due to increased gross margins and some cost activities. The Luna is part of the Tools and Consumables division. It's also SEK 1 billion in turnover. And as said on the slide, they are close on par with the previous quarter last year or the same quarter last year in profit, despite that quarter, they had an additional more than SEK 5 million in profit due to this backlog. So Luna has also a double-digit revenue decrease. Part of that is, of course, this phase-out of low-margin, high-volume products, but also due to the market conditions. They have also an improved gross margin, mainly due to these phase-out activities, but also have made some major cost reductions in that group. That, in total, leaves them on coming out well in the quarter. Okay. Great. And would you say that there's still room to improve the Luna business even further from here? Yeah. As said earlier, we had taken some cost measures that we don't yet see in the figures. And we also have some margin activities that we haven't materialized all of that yet. And then, of course, the underlying market, that's very difficult to kind of know what will happen. But I would expect up until late summer, early autumn this year, I think we will continue to face kind of tough underlying market conditions for the industry and the construction sector overall. Yeah. I understand. That leads me to my next question. During this quarter, have you seen the demand have continued to deteriorate during the quarter into your fourth quarter? I would say, once again, we haven't seen such a big deterioration within the construction sector. But I would say that has been quite flat. But the new thing is that during the last quarter, we see a decline in the industry sector. And that was previously quite stable. But in that quarter, we saw a decline. So that was kind of a new thing for us on a group level. Yeah. Got it. Perfect. I think that was all for me. Thank you, Magnus and Peter, for taking my questions. There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments. So we have a question here from Rasmus Engberg. Do you expect working capital to continue to generate cash flow in absolute terms, or is this to be understood as relatively to sale? I mean, we focus on measuring inventory turnover because that relates to the sales figures. But even if the sales will be flat, we expect that we will lower the inventory, and that will free up some cash because we're still not on the pre-Corona level in terms of stock levels. So the answer is yes. So I think that was the last questions. Thank you very much for participating in this call.