Welcome to Brødrene A & O Johansen's Q4 and full year 2025 annual report presentation. Today's call is being recorded. If you have any objections to this, please disconnect your line. All participants will be in a listen-only mode throughout the presentation. Afterwards, there will be a question and answer session. To ask a question, please press five star on your telephone keypad. I will now turn the call over to CEO, Niels A. Johansen. Please begin.
Good afternoon, welcome to our fourth quarter and full year 2025 webcast. Let me start by concluding that our revenues and results were in line with the latest guidance. Revenue ended at DKK 6.121 billion, against the guided DKK 6.0 billion-DKK 6.1 billion, thus, slightly above guidance. EBITDA came in at DKK 434 million, against the guided DKK 420 million-DKK 440 million, and the EBT came in at DKK 260 million, against the guided DKK 245 million-DKK 265 million. Let us look at some of the highlights of the fourth quarter. Q4 sales slightly exceeded expectations. AO showed the highest quarterly activity ever. Sales came in at almost DKK 1.7 billion. This is almost 8% higher than last year.
We saw organic growth in both B2B and B2C, confirming the value of our omni-channel business model. We are satisfied to observe that the number of customers in our stores has never been higher. The average number of daily customers in 25 has been 9,300, which is 6% higher than last year. We had a satisfying Black Week, and our 24 workshops performed according to their well-orchestrated campaign plans. Gross margins appreciated in both segments. I am particularly satisfied to conclude that gross margins have increased in both B2B and B2C. The pressure on margins has been intense during 25. Rising margins in this atmosphere is not a trivial exercise. Many initiatives to optimize margins and distributions have proved valuable. AO holds a strong position in modernization and maintenance.
Our focus on expanding the assortment in our store is a key element in making AO the preferred place to do the daily business. The B2C segment has a step change in 25. B2C sales across DKK 1 billion mark in 25, gross margins increased by more than 3 percentage points to 33%, and the EBITDA segment margin climbed to 11.6%. Acquisitions did well in 25. Workwear Group, VVS Group, and Svenska VA-Grossisten all had a busy 25. The combined revenues increased by 23% compared to full year numbers for 2024, earnings increased by 85%. On top of AO's performance, the acquisition of Svenska VA-Grossisten also proved to be an enabler to set up greenfield sites in the Stockholm region. Three new sites were established in 25.
The acquisition in 2024 have further confirmed to us that the way to future expansion and growth will be a combination of organic growth and M&A steps. We propose a dividend of just above 50% of the net results. At our general assembly in March, AO will propose a dividend of DKK 3.75 per share, adding up to some 52% of the net result. Last year, the dividend was DKK 3 per share. It's the 5th year in a row that dividend will be 50% or more of the net results. Let us look at the management's observations. Project margins are under pressure. Battle on the marketplace, especially within project. Competition is fierce, and customers are pushing the rebate dialogue intensively.
In AO, we stay selective to not take orders with an unsatisfactory margin, but it is still our aim to grow our share also within projects. Increased project activity is likely to have a negative impact on margins. We remain positive about the longer-term outlook. As our customers will see steady interest rates, we expect to see higher activity level within projects and hopefully at 2026, with slightly improved activity in general. We believe that the pressure will ease gradually during the coming years. We don't expect any margin miracles in the short term. AO invest on top of cost inflation. We expect cost and salary inflation to be around 3%. On top of this, you should expect the cost burden to be impacted from the full year's impact of new initiatives during 2025.
Furthermore, you should expect AO to remain willing to invest in new growth activities, as well as to spend the amount needed to ensure that IT, digitalization, warehouses, and our competencies are meeting the requirement of tomorrow. As long as we are onboarding competencies and increasing investments to address the increasing regulatory burdens, we will see a higher cost of doing business ratio than we ideally want. AO is tying up more cash as working capital. Net working capital amounts to 7.6% of revenues, against 7.1% last year, and a few years back, below 6%. The increase is despite the many cash-paying customers in the growing B2C segment. This increase is due partly to AO behavior, since a broader assortment calls for larger inventories, and partly to customer behavior, where especially the consolidation amongst customers comes with increased focus on credit negotiations.
Given the challenging business dynamics, we are satisfied with the earnings level in 2025. However, the level of earnings did not meet our longer-term earning ambitions. To meet our ambitions, AO will need to continue our journey within profitable growth and a high efficiency. This will also take some help from the business climate, increased demand, increased basket sizes, and less new regulations will surely be welcome. Per, please take us through the financial performance.
Thank you, Niels. Let's hit the financials. Q4 sales showed an organic growth of 7.9% and continued the strong organic growth throughout the year. As Niels said, highest quarter ever. Growth during first half of the year was heavily fueled by sales from acquired companies, while the growth in second half of the year has been almost exclusively organic. Happy to note, as Niels said, that margins appreciated both in the quarter and full year. Cost of doing business increased in Q4 due to add-on investments related to new activities in both Denmark and Sweden. EBITDA came in at DKK 149 million, against DKK 123 million in Q4 last year. The EBITDA margin was 8.9%, against 7.9% in Q4 last year. As usual, the EBITDA margin was higher during Q4 than for the full year.
This is due to scale from the higher sales and an overproportional B2C sales in this quarter. EBT ended at DKK 106 million, against DKK 80 million last year, and earnings were as expected. Let's turn to the full year performance. Sales came in at almost DKK 700 million, higher than 2024, driven by organic growth of 8.4% and acquisition impact of 4.3%. After years with a declining margin trend, the gross margin for 2025 appreciated from 23.3%- 24.3%. Positive impact from the higher B2C margins had a significant impact, but happy to note that B2B margins increased as well. Salaries and external cost increased by 17%. Most of the increase came from the full year impact from acquired companies.
EBITDA of DKK 434 million and EBT of DKK 260 million were both as expected. Let's turn to margins. As I said, margins improved from 23.3% to 24.3%. 0.5 percentage points was due to the acquisition impact, especially within B2C sales, and 0.3 percentage point from the fact that B2C accounted for a larger part of sales. B2B margin increased 0.3% from higher sales of tooling, brackets, and workwear, whilst project margins depreciated compared to last year. B2C shares of sales ended close to 18% in 2025. Let's leave the margins and turn to the segment info. The B2B segment accounted for 82% of full year revenues, and the B2C segment accounted for 18%.
For the first time ever, B2B broke the DKK 5 billion mark. B2C broke the DKK 1 billion mark. Both segments increased margins, especially in B2C, where margins appreciated and showed an impressive 11% additional margin compared to B2B. The increased scale in the B2C segment resulted in a significantly improved 11.6% EBITDA margin. We are satisfied to conclude that both segments have posted above 11% segment EBITDA margins. Indirect non-allocated cost amounted to 4.3% of revenue, which was at par with last year. 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. The investments in 2025 amounted to DKK 200 million, which was as expected.
Digital investments account for one third of the investments, while more than one third related to investments in the central warehouse to expand capacity and efficiency. For the past years, a large part of the investments has been investments related to the significant growth. We expect this to continue in 2026. Let's look at the cash flow and the debt. Cash flow from operations amounted to 5.1 percentage point of revenue, up from 3.7% of revenue last year. As Niels said, working capital at year-end was 7.6% of revenue against 7.1% last year. Increased assortment and increased credit demand from customers challenged the net working capital management. AO had large investments of DKK 200 million in 2025, and the net interest-bearing debt ended at DKK 1.049 billion, which is DKK 56 million above last year.
The interest-bearing debt over EBITDA amounted to 2.4x, compared to 2.7x last year. Let's turn to guidance for 2026. We expect sales to increase by 5%-8%. Our assumptions behind are a market growth of approximately 1%-3%, 1% from new business acquired first of January, and the remaining 3%-4% growth from AO utilizing our momentum and win market share. We expect an EBITDA in the range of DKK 460 million-DKK 500 million, up from DKK 434 million in 2025. We expect an EBT in the range of DKK 260 million-DKK 300 million, up from DKK 260 million in 2025.
Earnings are impacted from the following: On top of salary and cost inflations, AO estimate additional cost of approximately DKK 25 million related to full year impact from activities in 2025 and scaling up new investments and activities in 2026. SG&A is therefore expected to increase approximately 5%-6% in 2026. EBT is expected to be negatively impacted by DKK 25 million in additional depreciations in 2026 compared to 2025. Let's turn to how we bridge EBITDA from 2025 to the mid outlook, 2026. We expect the market growth of 5%-8%. The revenue impact is estimated to bring another DKK 92 million to EBITDA. Margins are estimated to be a notch higher than 2025 in 2026, which is expected to bring DKK 12 million to EBITDA. Salary and cost inflation of 3% will reduce EBITDA by DKK 32 million. Additional DKK 25 million cost increase is expected to –
Is expected related to the full year impact from 2025 initiatives and new initiatives in 2026. This leaves us with a mid-guidance EBITDA of DKK 480 million, which represents an increase of DKK 46 million compared to 2025, and an EBITDA margin of approximately 7.4%. As I said, EBT will be negatively impacted from additional DKK 25 million in depreciations. Finally, I want to add that activity in Q1 until now has been lower than expected due to the climate, especially in February. We do expect that this will impact Q1, but for now, we do not expect that this will impact our full year guidance. 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. The first question is from the line of Christian Tørner from SEB. Please go ahead. Your line will now be unmuted.
Yes, thank you. A couple of questions from my side. First one, the implementation of workwear sales into your B2B channel, can you give us an update on where you are and I guess also sort of your assumptions for 2026 on this?
Hi, Christian. Well, as you heard from the presentation, AO Workwear had a pretty good year. We don't disclose the sale of separate category groups, but we do estimate that workwear in B2B shall grow double digit in 2026. I think this is as much as I can disclose for now.
Okay. I was not expecting you to give me numbers here, but my thinking was just as much to get a sense of whether you're satisfied with the sales-
[crosstalk] Sales.
In your B2B channel.
Well, we are extremely happy about the performance from Workwear overall. Also we're happy about the uptake from B2B customers. It takes time, Christian, and I believe that we have discussed it earlier. It's not, it's not a one-month fix. It takes time to change habits. Customers are learning the broad assortment that we are able to bring to them, and new sales are kicking in week by week. It's not, it's not a short journey, but it will be a good journey for us.
Great. Also, on the acquisition of the VVS-eksperten.dk domain, I guess you are almost two months in now, so just curious on a few comments on how that has started out.
It has been a good, a promising start. We are following. We are actually slightly ahead of own plans. These are, again, plans that I don't disclose. We are happy with the first two months in VVS-eksperten.dk.
Okay. Sounds good. Then just focusing a bit on some of the numbers. You've touched upon gross margins certifications, highlighting the pressure and the project segment. Your assumptions here going forward, is that for the project segment to continue to be under pressure on the gross margin level, and can you mitigate by improvement in any of the other segments?
We do expect. You know, project is an area where we want to increase share. We also, as we said in the presentation, remain selective in the current trading. We see a somewhat unchanged picture during 2026. In our opinion, the pressure will stay as tough as it is for now, and as it has been in 2025.
Where can we compensate? Well, both in, you know, B2C brings quite strong margins. Growing in B2C is benefiting the group margins for sure. Pushing sales of higher margin articles like tooling, workwear, brackets is good for us. Basically, it's also good for the customer. You know, everything under one roof is good for us, and it save times and create a more efficient day for our customers. Gradually going from focusing on selling SKUs to selling solution sales. It's also a win-win. It will benefit customers. They will save time, they will save troubles.
For us, we also recognize and appreciate that the customers are probably valuing a solution, slightly differently, than when they just pressure prices on the SKU. That, that, is also good for margins.
If we move to SG&A cost, I appreciate your very detailed guidance here. Just sort of digging into the B2C segment, where we now have clean numbers or organic development is probably the right word. In Q4, direct expenses are up 14% year-on-year in B2C. Can you elaborate why the growth in cost is so high in the core?
Well, probably a bit. I'm missing a few nuances. If you look at the B2C, SG&A, P&L, it consists of salaries and Google. The Google is almost, you could say a same size of sales, no matter what you sell. It's basically higher Google and marketing cost.
Okay. Makes sense. Just a clarification, you highlighted that you had an investment level around DKK 200 million in 2025. Is that the similar level we should expect for 2026 then?
Yes. You should expect. It's not part of our guidance, but you should expect roughly the same the same number. Again, it will be much higher than our maintenance CapEx due to us investing in increasing capacity and efficiency at the warehouse. We also expect high investments within software digitalization in 2026. A bit less in with regards to the stores. Approximately DKK 200 million again, Christian.
Okay. My last question. As you clearly highlight, your recent acquisitions have been quite successful, it seems so. I was just curious whether you have advertised them all, and when?
You should expect us to be actively monitoring the market for targets that would fit into our strategy and that would benefit the everything under one roof strategy. You will be among the first to know when things happens, but you should expect us to be actively monitoring.
Understood. Excellent. That was all for me. Thank you very much.
Christian.
Let me just remind you, if you do wish to ask a question on the telephone, please press five star on your telephone keypad. In the meantime, let's go back and hear if there are any written questions. Please go ahead.
Yes, we have had a number of questions. First one: You have previously stated on several occasions that the maintenance investment level is approximately 60-90 annually. However, this level has not been observed since 2020. What should we expect in terms of investment level for 2026? I think I have answered that already. You are right that we have been significantly above the maintenance investments during the past years. We have also been growing quite a bit during these five years. We have another question: Is current net working capital as percent of sales a new normal, or should one expect lower levels going forward? I touched upon the strategy under one roof.
This will mean a broader assortment, in order for our customers to able to finalize their needs, when they are visiting AO. A broader assortment would be a higher tied-up capital at inventories. We should not expect cash tied up at accounts receivables to lower. I think that this is in the new normal. Obviously, from a B2C point of view, we are happy to note that this business consists of cash-paying customers. If we manage to grow faster in B2C than in B2B, then this will have a beneficial impact in working capital. I think you should expect this to be a new normal. We have another question.
Despite the current geopolitical instability, you expect to grow at least 2 percentage points above market growth. What gives you the confidence that you can and will outperform the market under these conditions? Well, it's a good and a relevant question. In one aspect, we are not that impacted by the geopolitical instability. We source most of our articles from stable countries within Europe, and we sell 99%+ in Scandinavia. From that aspect, we are kind of a, you could almost say, a safe harbor. Now, when you have uncertainty, that may impact people's appetite for making larger investments, and that's a tricky one, obviously. We feel that we are in a good place to grab the growth opportunities.
We have hired people during times where many in our line of business has said goodbye to good competencies. We have hired additional competencies, we feel that we are in a good place to grab growth opportunities. Hope not to disappoint you there. Higher level of depreciations, I am asked. Should we expect that there will be a new hire as guided within +25 and additional DKK 25 million in 2026? Could you elaborate on progress in Sweden? More locations in 2026. In 2025, you also had extraordinary update on IT competencies. Should we expect similar in 2027? Three questions. If you look at the depreciations, you are right. The depreciations was DKK 120 million in 2024.
It was DKK 140 million in 2025. We expect it to be DKK 165 million in 2026. The short answer to why it's increasing is obviously that the yearly investments during the past five years has been significantly higher than the yearly depreciations. The more detailed answer is that an increased part of our investments have a shorter economic lifetime, such as software, which we depreciate on a 3- 5 years period. As you heard from our investment, our presentation, the investments in software and our digital investments are increasing. They will be increasing going forward also. In fact, I dare to say that if we were not increasing our IT cost, I would be a bit worried.
This is an essential area for us in order to stay ready for the future. You ask about Sweden. Yes, you're right that we opened three new sites in 2026. We will open in Falkenberg in a couple of months. It's probably not the last site in 2026. We don't have any new sites planned in detail, but we have appetite for more sites, especially in the Stockholm greater area. Are further acquisitions in Denmark and the Nordic region a part of your plans for 2026? You should in the longer run, I think you should expect us to gradually become a more Scandinavian player.
I believe that I answered that question earlier when Christian asked, you should expect us to be actively monitoring the options out and the opportunities out there, both within B2C and B2B, and both within Denmark and in Sweden. How much are you affected by the general economic climate in Denmark, given the weak development from major employers like Novo Nordisk, etc. ? Do you see this affecting you, particularly in relation to the slower growth you commented on in February? Of course, we are affected by the economic climate. The maintenance, as you might know, approximately 70% of our business is maintenance business. One of the characteristics about maintenance business is that we are less affected by the general economic climate.
Then 30% is within projects. Projects are more impacted or affected by climate or by general economic changes. We don't expect us to be overly impacted by the changes in economic climate. I don't even think that it's, well, I think what we hear is both pluses and minuses when it comes to economic climate. Actually, most households in Denmark are in a pretty good situation, it seems. We had a bit of tax reliefs at beginning of 2026. Not much, but it matters. We appreciate the larger disposal incomes because some of it will go our way, we hope.
I think the answer is that we are not that affected. We had a question about AI, internal investments and savings. You are absolutely right that AI investments are indeed our priority. We are working hard with AI implementations as we speak. It will probably lead to savings. I'm pretty sure it will lead to savings, actually, we are as eager to make AI bringing us or bringing us in a situation where we can add value to our customers. AI investments will be part of the larger investments in 2026.
Also savings hardly in 2026, I think. Probably on the longer run. If we say savings, It's probably not cost cutting. We are a growth company. What I expect is that AI can give us the leverage to serve a much larger revenue with, somewhat the same cost base. When do you expect a more normal year in terms of cost and margins, where we can see the scalability on previous years' investments? If you, by that question, means when I am foreseeing more normal growth, then I hope that will be in many years. We hope to grow in the coming years.
I'm sure that that will take further investments in our cost base also. Okay. For now, I don't think we have more questions. I think we will close the presentation for today. Thank you for participating. Thank you for putting a very relevant tables or questions on the table. Looking forward to see you during the Q1 webcast, first of May. Thank you. Bye.