Welcome to Brødrene A & O Johansen's Q1 2026 interim financial report. For the first part of this presentation, all participants will be in a listen-only mode, and afterwards there will be a question and answer session. I would now like to hand it over to your speakers, CEO Niels A. Johansen and CFO Per Toelstang. Please go ahead.
Good afternoon, welcome to our first quarter 2026 webcast. Let us look at some of the highlights of the first quarter. AO saw the highest first quarter sales ever. We saw a growth of 6.5% in Q1. B2B increased revenues by 4.5%. B2C saw a 16% growth. Excluding the VVS-Eksperten, the organic growth was 5.3%. I am particularly satisfied to note that the growth made our expectation despite the tough winter that negatively impacted the month of February. Gross margins improved to 24%. Overall margins increased from 23.9% last year to 24%. The pressure on margins is still fierce, the B2B business managed to deliver margins not far from the margins we saw in Q1 last year. B2C margins increased 0.8 percentage points to 32%.
I'm satisfied with the margin development. It is and will be a priority for AO to focus on securing margins and at the same time to grow our projects activities. The number of stores in Sweden is now 10. We have just opened our latest store in Falkenberg, thereby ensuring the full coverage of the West Coast of Sweden. The opening marks the doubling of stores from five to 10 in two years. It is our plan to further expand our network of stores in Sweden. AO will acquire JMV Cables. JMV Cables is a Danish supplier of cables for construction and industrial, as well as the infrastructure market. Yearly revenues amount to approximately DKK 125 million. The acquisition strengthens AO's product assortment primarily within medium voltage cables, and it will strengthen our positioning within the project segment.
The acquisition is subject to approval by the competition authorities. Let us look at the management's observations. The competition remains fierce. Demand remains lower than supply of wholesale capacity in Q1. This causes a somewhat one-sided customer focus on price, especially on project sales. During such times, we observe an increasing tendency for customers in negotiating even smaller orders, as normally done for larger projects. Over time, we expect a more balanced demand-supply situation. By then, we expect a less one-sided price focus and an increased customer focus towards solution sales and other add-ons, such as how the customer is served in the best and most efficient and convenient way. Our investment drive up cost of doing business. As we stated on our outlook for 2026, our investment in business have increased the cost base.
The full year impact from the new shops in Sweden, the investment in additional competencies within project activities, and our focus on strengthening coverage of tooling and fasteners are all investments that will bring future growth. Short-term though, these investments will increase the cost of doing business ratio. Many of the investments in Denmark have the purpose of supporting our everything under 1 roof concept. I'm happy to note that customers appreciate it, which further increased our store visits in Q1. Geopolitical tensions and uncertainty. AO buys 83% of all goods in Europe and the rest in Asia. More than 99% of our sales are within Scandinavia. As we speak, we do not see any signs of geopolitical tensions in our numbers and order backlogs. However, the worrying situation in the Middle East drive up price levels.
A scenario of rising inflation and increasing uncertainty may lead to a lower appetite for investing, which is likely to have an adverse effect on demand and thereby on sales. For the time being, and to the best of our perspective, we do not see this having a material impact on AO in 2026. I do want to stress that the current geopolitical and macroeconomic uncertainty increases uncertainty to current outlooks. Acquisition of JMV Cables. We consider the acquisition of JMV Cables to be a strategic move that will support our strategic focus on serving the global trend of electrification. There is a vast increase in demand for larger and more specialized cable solutions. JMV will help AO address this demand.
We are acquiring a revenue of DKK 125 million. More importantly, we are adding competencies from the JMV management and employees to help us address the needs of the large portfolio of AO customers. The technical advisory and project sales will be supported by a cable assortment of blue-chip brands as well as own brands. In the recent financial year, JMV Cables reported the revenues of approximately DKK 125 million and an EBITDA ratio of approximately 7%. Per, please take us through the financial performance.
Thank you, Niels. Number of sales days were the same as Q1 last year. Q1 sales came in at index 106.5. Organic growth was 5.3% and growth related to VVS-Eksperten amounted to further 1.2%. As Niels said, highest Q1 ever. Sales for the quarter ended higher than what we anticipated late February when we met last time. Back then, weather conditions had been challenging for some weeks and activity was soft. A strong March compensated and brought the quarter back to what we originally expected. Combined margins improved from 23.9% to 24%. B2B margins came in 0.2% below Q1 last year. We are satisfied with the relatively low slippage. B2C margins came in at strong 32%, which is 0.8 percentage point higher than last year.
Cost of doing business ratio increased from 17.6%- 17.8%. In addition to normal cost inflation, the quarter includes DKK 6 million costs related to the impact from investments in growth initiatives. EBITDA came in at DKK 99 million, 6% higher than Q1 last year. The EBITDA margin was 6.3% equivalent to Q1 last year. Financials were lower than last year due to exchange rate gains and EBT ended at DKK 54 million, 7.6% higher than last year. Overall, earnings were as expected. Let's turn to the margins. The B2B margin shortfall of 0.2% was due to the continued pressure from the project market. B2C share of sales ended at 18% in Q1, and the margin increased 0.8 percentage point.
Consequently, margins ended at 24%, thus slightly up compared to Q1 last year. Let's leave the margins and turn to the segment info. The B2B segment accounted for 82% of the Q1 revenues, and the B2C segment accounted for 18%. B2B revenues grew 4.5% and margins reduced 0.2% in Q1. Cost increased 6% and consequently, the EBITDA margin in the B2B segment amounted to 10.9% compared to 11.3% last year. B2C revenues increased 16%. Organically, B2C grew 9.2%, while 6.9% came from VVS-Eksperten. B2C margins increased by 0.8 percentage points and ended at 32%. The B2C EBITDA margin increased to 9.4% from 8.6% last year.
Finally, indirect non-allocated cost increased 3% and amounted to 4.4% of revenues, which was at par with last year. Let's turn to the investments. The highlighted band shows the normal level of maintenance investments in AO, estimated to be DKK 60 million-DKK 100 million on a yearly basis. The investments in Q1 2026 amounted to DKK 68.5 million, up from DKK 27.7 million last year. Tangible assets included DKK 12.5 million from establishing new warehouse capacity. Intangible assets included DKK 25 million in acquiring the VVS-Eksperten webshop, and the remainder intangible investments of DKK 17 million were mainly related to investments in IT and digitalization. Full year investments ex M&A is estimated to be slightly lower than last year. Traditionally, Q1 is a cash-negative quarter due to dividends payout and increased cash tied up in working capital.
Q1 this year had a significantly higher sales in March than last year, and consequently, a 10% higher amount of cash tied up in receivables. Due to the risk of price increases, AO has also chosen to add inventories where relevant. Dividend payout in Q1 amounted to DKK 86 million, compared to DKK 66 million last year. Interest by debt over EBITDA was 2.9x, compared to 3.4x EBITDA end of Q1 last year. Finally, let's turn to the guidance for 2026, which is unchanged. The guidance does not include JMV Cables. We expect sales to increase by 5%-8%. Our assumptions behind are a market growth of approximately 1%-3%, 1% from VVS-Eksperten, and the remaining 3%-4% 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 inflation, AO estimate additional cost of approximately DKK 25 million related to full year impact from activities in 2025 and scaling up new investments in 2026. EBT is expected to be negatively impacted by DKK 25 million in additional depreciations in 2026 compared to 2025. As Niels said, we are following the macroeconomic and geopolitical situation closely. We don't see the uncertainty reflected in current numbers, neither in Q1 nor in the order pipelines.
The most significant risks towards our guidance are that the margin pressure will increase instead of gradually reduce during 2026, and that the geopolitical and macroeconomic tension result in lower consumer investment appetite and market activity being more volatile than normal. This concludes the presentation, and we are ready to take your questions.
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 Kristian Tornøe from SEB. Please go ahead. Your line will now be unmuted.
Yes. Thank you. Thank you for taking my questions. Firstly, a clarification question. In the report, you sort of state that Q1 was in line with your original expectations. You mentioned that March turned out better than what you were expecting when you guided in February. I just want to clarify what these original expectations are and whether that's what guidance is built on.
Hi, Kristian. You're absolutely right that when we refer to original expectations, that were the expectations stated in our annual report. When we met up with you guys, 28th of February, we were sitting in midst of a very cold month of February, with soft activity. By then, the 28th of February, we assumed that the cold weather would you could say be dragging down Q1. A strong March compensated for the slow February, and we ended up being in line with our original expectations. Does that answer the question, Kristian?
Your guidance, which we I mean, saw for the first time in connection with your annual report, is that not reflecting the slow February?
Yeah. You're absolutely right.
So I'm struggl-
Yeah, yeah. Basically, you are right, but you also know there is a process by making an annual report and disclosing it. When we make the annual report, and from we make the annual report to you see it, there are two weeks in process work. I understand the question. We saw a stronger March than when we anticipated when we met up with you, and that compensated for a slow February.
Okay. obviously what I'm after is whether you're actually tracking your guidance expectations or doing better.
No.
If I understand you correctly.
Right.
Q1 is in line with your guidance expectations.
Correct. Yes, sir.
Right. On the same topic, if we can just maybe dig into this improvement you saw in March. Was this primarily sort of driven by a catch-up due to delays in January, February, or did you also see the increased demand from sort of weather-related damages or the likes?
No, it was mostly a catch-up of the slow February.
The momentum in March, is it fair to assume that continued into April?
Well, we don't disclose that for now, Kristian, but we are not dissatisfied with April.
Fair enough. Moving on to SG&A costs. The last time we spoke on this call, as I noted it at least, you said we should expect SG&A cost up by 5%- 6%. Obviously, I assume that's excluding acquisitions. Just wanted to check whether this 5%- 6% still holds.
Yeah, approximately 6%. Yeah, you're correct.
All right. The almost 7% growth from VVS-Eksperten in Q1, is that also what we should expect for the remainder of the year, or are there any special circumstances or a seasonality to VVS-Eksperten we should be aware of?
VVS-Eksperten had a good start in Q1. I would expect that to continue.
Okay. Great. Last question from my side. Just price increases. If I understand you correctly, you haven't really seen any material supplier price increases yet. If they do come, do you feel confident that you could actually pass this on?
It's a tough one, Kristian, but we will see price increases from primarily from products, plastic products or products containing a significant amount of oil. We will see those price increases. As a rule of thumb, we will pass these increases on to customers. Now, obviously, we are in a competitive situation, and it may not be possible in all 100% to pass price increases on to customers. As a rule of thumb, you should expect us to pass them onto the market, to the customers.
Okay. If I may follow up. You also mentioned an increased inventory to sort of, brace yourself for potential price increases. The products which you sort of increased in your inventory, are they also the oil related products, so to say?
Yeah, that would be a good guess.
Okay. I mean, going a few years back to last time we saw a substantial amount of price increases, you were able to book fairly high margins on some of these. I mean, due to obviously inventory being bought at lower prices. Do you see a scenario where this sort of excess margin could be realized again?
In theory, yes. I think the competitive landscape is different than what it was during the COVID pandemic, where you could say there was a better balance between capacity and or supply and demand. Now the competitive landscape is fierce and that may put a risk at, you would say, in getting the same gain as what we did back in those days.
Okay. Great. Excellent. That was all for me. Thank you very much.
Thank you, Kristian.
As there are no further questions on the phone lines, I will hand it back to the speakers to go through any written questions you might have received. Please go ahead.
Thank you. Yes, we got a couple of questions. We've got two questions relating to the same as Kristian alluded to with regards to the price increases. How those price increases, they are likely to impact our growth and the customer demand. Well, it's still early days, and it's too soon to give a precise answer. If price increases are within normal, you could say, what a project can bear without delays, then we shouldn't see a risk towards our growth and customer demands. If price increases are significant, then you may see investment appetite reduce out there. I think the jury is still out.
It's not a, it's not related to all products. You should basically think the significant price increases mainly to be around plastic pipes, and they are relatively small part of our assortment. We have a question in the same family. If we have to raise prices, can we then guarantee that prices will come down again once market returns to pre-energy crisis levels? Well, as a rule of thumb, yes, when prices reduce, we will also reduce prices. I think the competition is pretty fierce, so for sure, it would not be able to maintain artificially high pre- prices in this competitive landscape. We have a question related to our expansion in Sweden.
If the expansion in Sweden are putting pressure on margins, could you comment on this and perhaps quantify the impact? It's impossible for me to quantify the impact. You are right then, when you open up a store in a new market, you want to make an effective, effectual entrance in that market. Obviously, prices is also a tool in having this effectual launch of a store. You would typically see a lower margin in the beginning of your lifetime as a new shop or site. What impact do you see from the iron wall and the rise of energy prices?
I think we covered that one. As Niels also said, for now, we don't see any signals in our numbers, neither in the Q1 numbers nor in the order backlog numbers. Again, then we have a congrats with the impressive quarter. Keep up the good work. Thanks for that. We will try to. I think that's that was the question we received. Thank you, Kristian, and thank you all of you for putting the relevant questions. See you again mid-August, where we are going to present the result for Q2 and first half of 2026. Bye for now.