I would like to welcome you all to Brødrene A & O Johansen Q3 2026 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, and 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 and welcome to our third quarter 2026 webcast. This webcast is a special one for AO. JMV Cables and VVSPlus are included in August and September. Elektroimportøren is included in September. These acquisitions strengthen our position across the Scandinavian market and create new opportunities for growth. It is also a special quarter when it comes to understanding the earnings, since this quarter includes 18.5 million DKK in transaction costs. The reported EBT growth, adjusted for transaction costs, increased by 45% compared to last year. Organically, EBT growth, adjusted for transaction cost, came in some 25% higher than last year. Let us look at some of the highlights of the third quarter. We are excited to welcome our new colleagues in Norway, Sweden and Denmark to the AO family. The AO group is growing both in size and in our presence in Norway, Sweden and Denmark.
This quarter, around 500 new employees in Norway, Sweden and Denmark have joined the AO family. I bid a warm welcome to each of you. With JMV Cables, we see opportunities to offer medium-voltage cables to more AO customers and to introduce more of AO product ranges to JMV customers. With Elektroimportøren, we see opportunities to accelerate store expansion in Norway and Sweden. Also, we will explore introducing Namron in Denmark and selected AO products in the stores of Elektroimportøren. With VVSPlus, we want to make it easier for consumers to buy products with installation, creating more business for our professional installer partners. AO saw the highest third-quarter sales ever. We are thrilled about the acquired companies, and we are just as satisfied that our daily business is showing strong development, even stronger than we expected. Organically, we saw a growth of 12.5% in Q3, highest growth of the year.
New companies took the growth up another 10% to 22.9% growth in Q3. B2B grew revenues by 14.4%. B2C saw 16.4% growth, and Elektroimportøren showed sales in September of 119 million Danish crowns. The growth in Q3 exceeded our expectations. Based on the higher than expected growth in Q3, we have revised our guidance. Per will take us through the updated guidance later. Gross margin improved in Q3. Overall margins increased from 23.3% last year to 24.7%. The main reason for the uplift goes to Elektroimportøren showing a margin of 38% in September, equivalent to 0.9 percentage point increase in group margins. B2B margins increased by 0.9 percentage point despite tough competition. We calculate that the one-off gain in prices and margin increase of approximately 0.2 points in Q3, pretty much in line with Q2 impact.
B2C margin decreased 2.0 points to 31.0 due to product mix, still though some 9% points higher than B2B. Overall, I am satisfied with the margin development. By the acquisition of Elektroimportøren, AO has increased the footprint in Norway and Sweden. Let us look at the importance of the shop outlets. The store network is a cornerstone in the AO business model. The 102 shops bring us close to the customers. The stores combine local presence and expertise with digital shopping options. Customer visits in-store increased in Denmark and Norway. Customers are served by skilled employees with years of seniority. In Elektroimportøren, approximately 70% of employees in the shops are certified electrician, which build trust and strong and lasting customer relations. The stores, web shops, and apps complement each other. Customers order online, get advice locally, and choose collection or delivery to suit their individual needs.
Now let us look at the management's observations. Our investment in the business delays operational leverage. Higher volumes require additional capacity. Growth exceeded our expectations, and we added a night shift and more temporary staff at our central warehouse to maintain service levels. This increased the cost of handling the higher volumes and limited the improvement in operating efficiency during the quarter. Increasing energy costs and higher interest rates impact costs. For 2026, we estimate increased fuel cost in logistics amounting to at least DKK 10 million and an increase in interest of 0.25% with an impact of approximately DKK 1 million per quarter. Transaction costs of DKK 18.5 million are included in the numbers. The margin pressure is still intense. B2C margins took a hit.
The primary reason was product mix, as a higher margin assortment in Workwear accounted for a higher share of B2C in Q3 of 2025 than it does this quarter. Negotiating projects remain a battle, and project margins are accepted by wholesalers at prices which do not leave a fair price on the work and risks associated with serving a project. Overall, we are pleased with the quarter. We delivered strong growth in both B2B and B2C, and our acquisitions have strengthened our positions across Scandinavia. Our store network, expertise advice, and digital channels provides a strong platform for serving both professional customers and private consumers. Our focus is on maintaining customer service at a high level, managing costs, and directing these opportunities into profitable growth. Now, Per, please take us through the financial performance.
Thank you, Niels. Number of sales days were the same as Q3 last year. We have included the organic P&L, excluding transaction cost, for you to follow organic to reported numbers and development. Organic growth was 12.5%. The new companies delivered 10.4% additional growth and thus reported growth amounts to 22.9%. Sales in Q3 continued the high activity level we saw in Q2, and as Niels said, the growth was higher than what we had expected. We are satisfied with the quarter and happy to note a strong performance in B2B, ReMoVe activities, and increased customer visits in the shops. Elektroimportøren came in with DKK 119 million sales and a 14% EBITDA margin, the EBT margin being positively impacted by a NOK to USD currency gain. Gross margins improved from 23.3% to 24.7%. Margins appreciated in B2B, whilst B2C margins dipped a bit from 33% to 31%.
Elektroimportøren contributed with a solid 38.1% gross margin. This is on the high side of the normal margin in Elektroimportøren. Approximately 0.2 percentage point of the overall margin increase was caused by price increases from suppliers. Cost of doing business ratio was 17.6%. Organically and excluding transaction cost, the cost of doing business ratio was slightly below last year. In addition to normal cost inflation, the quarter includes approximately DKK 10 million costs related to the impact from investments and growth initiatives and new technology, as well as cost related to us installing night shifts in logistics to maintain high customer service during peak season. EBITDA came in at DKK 126 million, 28% higher than Q3 last year, and EBT came in at DKK 57 million, 10% higher than last year. When adjusting for transaction cost, EBITDA and EBT increased some 45% compared to Q3 last year.
Earnings were slightly higher than expected due to the higher-than-expected growth. Let's turn to margins. Q3 margins improved from 23.3% to 24.7%. Margins appreciated in B2B whilst B2C margins decreased 2 percentage points from 33% to 31%, mainly due to product mix related to Workwear accounting for a lower share of sales than last year. Elektroimportøren increases margins significantly with a September margin of 38%. Normally, the Elektroimportøren gross margins will be approximately 36%-37%. The margin pressure is still intense, especially within projects. Let's leave the margins and turn to the segment info. You will notice that AO now have three segments, B2B, B2C, and Elektroimportøren. The B2B segment accounted for 77% of the Q3 revenue. The B2C segment accounted for 16%, and Elektroimportøren, one month of sales, accounted for 7% of combined sales. We are quite satisfied with the segment performance.
B2B grew 14.4% and margins improved 0.9 percentage point in Q3, and the EBITDA margin amounted 11.6%, up from 10.4% last year. B2C revenues increased 16%. Organically, B2C grew some 10%, while 6% came from VVS-Eksperten's sales. B2C margins decreased by 2% and ended at 31%. The margin decrease mainly relates to product mix. Elektroimportøren contributed with 119 million Danish crowns sales and a 14.2% EBITDA margin. As Niels told, Elektroimportøren is only included for September. Indirect non-allocated cost amounted to 4.5% of revenues, up from 3.9% last year. But when adjusting for the transaction cost, the ratio decreased to 3.5%. Let's turn to the investments, bearing in mind that they are excluding M&A investments. The investments in Q3 2026 amounted to DKK 51 million, at par with last quarter, but some DKK 15 million higher than Q3 last year.
Tangible assets included DKK 28 million, the increase being mainly related to investments in Albertslund. Intangible assets amounted to DKK 23 million, mainly related to investments in IT and digitalization. Full year investments ex M&A is expected to be at the same level as last year. Now, let's look at the net interest-bearing debt. The Q3 cash flow from operations before changes in working capital amount to DKK 127 million, being 28% higher than Q3 last year. Cash tied up in working capital has increased DKK 88 million compared to last quarter, the increase being mainly due to timing of payments of suppliers. Interest-bearing debt has increased significant in the quarter due to the acquisitions of mainly Elektroimportøren. The pro forma gearing, which includes 12 months earnings from acquired companies, is 3.9 times EBITDA.
It is AO's priority to reduce gearing this year. It is also our priority to reduce gearing to below 3 times EBITDA end of next year, 2027. Let's turn to the updated guidance for 2026. We increased revenue guidance due to the higher than expected sales in Q3. The previous range was DKK 7.1 billion-DKK 7.3 billion, and now we expect DKK 7.25 billion-DKK 7.4 billion. The new guidance imply an underlying organic growth of 5%-14% in Q4. The increase is due to the uplift in AO organic revenues in Q3. Furthermore, we increased the EBITDA guidance to DKK 550 million-DKK 580 million from DKK 530 million-DKK 570 million. We narrow the EBT guidance to DKK 290 million-DKK 320 million from DKK 280 million-DKK 320 million.
The changes to earning guidance reflect the increased revenue guidance, but also take into account that we have marginally increased cost in logistics in the last 4 months of the year by adding a night shift and operating 24 hours a day to ensure high customer service. The add-on cost is expected to be between DKK 5 million and DKK 10 million for the period September to December. That depreciation and interest due to mainly IFRS 16 rentals are expected to be approximately DKK 5 million higher than anticipated in the original guidance from August. Summing up, we expect the earning ranges to be DKK 550 million-DKK 580 million EBITDA and DKK 290 million-DKK 320 million EBT, including transaction cost of approximately DKK 20 million. As Niels said, we are following the macroeconomic and geopolitical situation closely.
As for now, we don't see the uncertainty reflected in current market activities, neither in Q3 nor in the order pipelines. The most significant risk towards our guidance are that the margin pressure will increase in Q4, and that the geopolitical and macroeconomic tension and increased interest levels result in lower consumer investment appetite, and market activity being more volatile than normally. This concludes the presentation, and we are ready to take your questions.
Thank you. Before we take the written questions, we will take questions from the telephone conference. If you have a question, please press 5 star on your telephone keypad. To withdraw your question, you will do so by pressing 5 star again. We'll have a brief pause while questions are being registered. At this moment, we do not have questions from the telephone, but we can return to them after some of the written questions. Please go ahead.
Hi. Kristian Tornøe from SEB. Normally he has all questions online. He was not able to attend today, but he has been kind enough to shoot in questions in writing. I will jump right into it. Question number one being the B2C gross margin, which fell 2% from 33% to 31%. Which categories or channels drove the shift, and do you expect the mix to normalize in Q4 or to persist in 2027? Well, as both Niels and I said during the presentation, it mainly relates to Workwear B2C business having an extraordinary Q3 last year. Still showing growth and us being happy with the growth, but lower growth than last year. So that carries a part of the reason or a large part of the reason. So I think that you should expect a B2C margin going forward, kind of the average between 33% and 31%.
33% was a high margin and 31% is lower than what I would expect going forward. Second question from Kristian and Namron in Denmark. What is your timeline for launching Namron products in Denmark, and will that be through AO's B2B stores, the B2C web shops, or both? Well, as we speak, we have examples of Namron in the headquarter in Denmark. Our specialists within sales and category are reviewing the articles. Based on that, we will take a decision on what to launch in Denmark. From taking the decision and ordering time to market, is expected to be around four months. So the products will probably be in Denmark mid-2027, and be launched in the second half of 2027.
We expect, based on the experiences from Norway, where both professional customers and private consumers like the brand, we expect to launch Namron in Denmark, both in B2B shops and in our B2C channels. Then another question related to Elektroimportøren. How large is Elektroimportøren's online share of sales? What initiatives do you see to lift it? For example, to using AO's digital platform and web shops. For the time being, the online sales in Elektroimportøren is below 20%, around 15%. We definitely, together with Elektroimportøren, see opportunities to increase sales through web shops. Elektroimportøren, they are launching an updated front end to their existing B2C platform, and web shops. Obviously this is also an area where AO has a lot of experience. So we hope that we will also be able to discuss a few tips and tricks with the management of Elektroimportøren Workwear to B2B.
Can you update us on the progress of expanding workwear sales to B2B customers? Yes, this is one of the synergies by buying workwear that we want our professional B2B customers to be better equipped when it comes to workwear assortment. We are seeing growth. The growth follows our expectations, but I will also be honest to say that it has been a little bit slower than what we originally expected. It takes time for customers to change habits, but we are seeing solid growth, and we are happy about the growth. Then another question. Earlier in 2026, we talked about the risk of potential price increases from suppliers, something that has materialized, and to what extent has it impacted the results of Q3?
As we say in the report and in the presentation, these one-off gains that we have from supplier-driven price increases has amounted to approximately 0.2 percentage point this quarter, being approximately DKK 3.5 million. Pretty much the same impact as we had in Q2. Could you comment on expected number of new openings in Sweden for 2027? New shops in Sweden in 2027, combined numbers for Elektroimportøren and AO. Well, I would expect us to open 2 to 4, 2 to 5 new shops. Often we see that it's a bit out of our control, because it takes time to find the right spot. But we are looking to open new shops in 2027, both in Elbutik and also in AO Sweden.
Regarding the change in payout ratio, the dividend for 2026, do you expect this as a one-off situation, the 33% dividend, or is step ratios likely to be on the high side also next couple of years? According to our capital allocation policy, the dividend ratio will normally be between 33% and 50%, taking into consideration our financial leverage. Due to our acquisition of Elektroimportøren and the size of the net interest-bearing debt, the payout ratio will not be 50% this year, but the board, they plan to or they expect to propose a dividend of 33% of result after tax at 2026. We expect the leverage to go from the existing 3.9 to a lower leverage in end of 2026 and to be below 3 in end of 2027.
If it is below 3 in 2027, I would expect us to get a 50% comeback in payout dividend. But bear in mind that it's not my decision, the board proposes to the annual general meeting, of course. Another question, why lower Workwear sales in Q3? Actually, they were extraordinarily high in Q3 last year, and they show a pretty good growth also in Q3. Do you see any progress when it comes to sales to industry or to the defense sector? Well, we are selling to industry, but you are right that we are not as exposed to industry than other players in the wholesaler business in Denmark. And we are, in fact, having orders to the defense industry. But neither are both the main reason for our growth in Q3, and both industry and our sales to the defense sector are, I would say, limited.
How is Elektroimportøren performing year to date on sales and EBIT versus last year? Can you elaborate on the growth plans for the business in 2027? We included the segment note, and Elektroimportøren is its own segment. So we are pretty transparent with the performance of Elektroimportøren. They had a pretty good September. High gross margin, high profitability ratio, 14% EBITDA ratio, 38% gross margin, very solid. The sales were slightly lower than what management and Elektroimportøren expected. And if you look at the Norwegian market, the market is quite solid if you include sale to data centers. But if you exclude sale to data centers, it's a soft market. Building of new houses, residentials, is approximately 14,000 as we speak, and normally it would be the double. So quite a soft market. In this market, I think Elektroimportøren, they have performed quite well in September.
Bear in mind that Elektroimportøren has a higher seasonality than what we have in AO. The month of September, October, November, and partly December are quite high compared to the first eight months of the year. Elektroimportøren will introduce a new seasonality to AO's numbers. When it comes to our guidance for 2027, which we will share with you in February, we will also bring you some guidance on how Elektroimportøren's quarters are normally performing, because Q1, Q2, and part of Q3 are, you could say low season, where you don't get the full value of scale. So, lower performance than in Q4. In Q4, you have quite a high profitability in Elektroimportøren. Our plans for the business in 2027, we will share with you in February.
As you know, Elektroimportøren, they have a growth strategy, and we are supporting this growth strategy 100% and are excited to see Elektroimportøren in the future. How much impact do you anticipate from the new acquisition, VVSPlus? VVSPlus is a new activity in AO, related to solution selling. Obviously, AO will not be installers. That is for our customers to install. So what we do in AO is that we pair products and installation, so the B2C customer do not have the boundaries. So they buy a solution, we will sell the products, and our customers, our installers, they will do the installation. We don't expect the numbers to be big, but we expect that this is a business that is going to grow in the future. AO didn't invent solution selling. So we address a need which is already out there in the market.
The Namron, could you guide on your initial thoughts versus the Shelly products, the smart home products you have in the inventory right now? Well, definitely Namron will bring us a good complementary series of articles when it comes to the Shelly products or the smart home products. And we'll be excited to launch it when time is. I think that concludes the questions. Many questions today. Very relevant questions. Thanks for that, and looking forward to see you when we present our full year 2026 and our guidance for 2027. That will be in February 2027. See you there. Bye for now.