Earnings Call: Q2 2018

Nov 8, 2017

Good day, and welcome to the Q2 twenty seventeen-twenty eighteen Report Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Gregers Biedelwiedelsborg, CEO. Please go ahead, sir. Thank you, and good afternoon, everyone. Welcome to our presentation covering the '18 financial year. My name is Gregers Wiedelsborg. This is the first time we meet. I took over as CEO of Matas on Wednesday last week, November 1. With me today on the call, I have Anders Skowles Jansen, our CFO and Elisabeth Tophman Klynton, our Head of Investor Relations and Strategy. I would like to start off by offering a few comments on Matas. Afterwards, Anders will take you through the presentation of our Q2 numbers and the outlook for twenty seventeen-eighteen. And then I will take over again to make some comments on the measures to boost our performance. We have announced those today and on the strategic work that we have ahead of us. We'll end with the usual Q and A session. And the division of labor today is that Anders will take care of the numbers, and I will answer some of the more forward looking questions. Please turn to Slide three. At this early stage of my time with Matas, eight days in, I'd like to start by addressing some of the concerns that have been raised lately and sharing my thinking around Matas, our position and the work we have ahead of us. Firstly, we remain a strong and well run company. We have a solid cash flow. But also, I have to say that we fully recognize the nature and the scale and the urgency of the challenges that we face. We commit to addressing speed, and that's a word you're going to hear many times, and force, and we're going to be as transparent as possible. Secondly, today, we have announced a series of short term actions. The purpose of these actions is to free up resource term. We're not today making a promise that we can reignite short term growth at this stage. That would be, I think, naive and lastly, we have initiated a strategic plan to ensure that our long term plan addresses the ongoing transformation of the retail business. And I would like to impress on you that I think that Matas is uniquely well positioned to emerge stronger from that transformation. There are a few that still cast us as a conventional brick and mortar retailer struggling to defend against disruption. I believe that we are something different and more promising than that. I'll come back to these three points in more detail after Anders has taken us through the financial results. To you, Anders. Thank you, Gregers. Let me begin by giving you some headlines on the financials and the business development in the second quarter of our financial year. In the second quarter, we saw total sales rise 0.8 year on year. Growth except the material area, and the average basket grew by 6.6% a year year on year in the quarter. We did, however, in customer traffic. The development in the gross margin was disappointing with a drop of 2.7 percentage points compared to the same quarter last year. The gross margin stood at 44.2% in the second quarter. If we exclude the nonrecurring DKK 12,700,000.0 that we incurred in the quarter in connection with the change of CEO, total cost in the second quarter declined by around DKK 12,000,000 compared to the same quarter last year. Our EBITDA margin fell to 11.4% in the second quarter, which was 1.2 percentage points lower than in the same quarter last year, where it stood at 12.6. EBITDA for the second quarter was €89,000,000 while adjusted net profit came in at €65,000,000 a drop of 8,500,000.0 and €4,100,000 respectively. Cash from operating activities amounted to €48,000,000 in the quarter, a rise of DKK 46,000,000 compared to the second quarter of last year due to a more positive development in working capital. Now if you could please turn to Slide number five. On Slide five, we dive a little bit more into the growth. As I said, total sales were up by 0.8%, also was the case for the underlying sales. On the positive side, we saw an increase in the average bar. However, also as mentioned before, when we look at our segments, sales in the BT continued to show growth almost 8%, while we continue to have problems in the mass market with Beauty sales in the mass market falling by 2.6%. High end Beauty was supported by a trend towards moving upmarket for some customers, particularly within skincare, but also by the strong performance of some of the new brands we have introduced, in particular MAC and NYX. This, however, was negatively mirrored by a fall in the of products, a higher number of competing stores compared to the second quarter last year. That, however, was expected. On top, we saw competition from supermarkets increasing in the quarter, which negatively affected sales in the mass mass market market beauty category. The Vital business, focusing on dietary supplements, saw sales rise by almost 12%, a strong performance on the back of very strong campaign offers, for example, Get Free for the price of two campaigns. In the Material business, Q2 sales fell 8% due to an increased competition on a number of core products and disappointing sales of some seasonal products. Now please turn to Slide number six. On Slide number six, we look at the gross margin development. Gross margin was realized at 44% in the second quarter, down from 46.9% in the same quarter last year. Despite the rise in sales, total gross profit in the quarter amounted to DKK $344,000,000, which was DKK 18,000,000 lower than the same quarter last year. As you know, our gross margin may fluctuate from quarter to quarter depending on the competitive situation, on the exact timing and effect of products on campaign and on several other factors such as swings in the sale of seasonal products. This quarter, we saw, as mentioned, a further increase in competitive pressure, particularly from the supermarket sector. We responded by sharpening the prices of our campaign offers and by increasing the numbers of products on campaign. The result was an increase in the proportion of sales in campaign and thus, a lower gross margin. Generally, we ourselves look most at the last 12 trailing gross margin. And here, we can now see a clear decline from 46.3% at the end of Q1 to 45.7% at the end of Q1. Please turn to Slide seven. On Slide number seven, we look at EBITDA. As mentioned, the EBITDA margin came in at 11.4%, a decline of 1.2 percentage points when compared to last year. Please note that the that EBITDA excludes the nonrecurring costs associated with the CEO change in Q2. Second quarter was DKK 89,000,000, down from DKK 98,000,000 in the second quarter of last year. The drop in EBITDA margin was caused by the reduction in gross margin as costs fell as a percentage of sales in the second quarter compared to the same quarter last year. Staff costs, as you know, the by far the biggest single cost item for us, excluding one off costs, decreased to DKK 169,000,000 from DKK 180,000,000 in the second quarter of last year. Staff costs measured as a percentage of sales stood at 21.7% in the second quarter, down from 23.3% in the second quarter of last year. The decrease was mainly driven by the cost driven program implemented at the end of the last financial year and a continued tight cost management in general. Now please turn to Slide number eight. You can see our net financial costs fell to DKK5.3 million in the second quarter, a drop of DKK3 million from DKK8.4 million in the year earlier period. This, however, does not include the mark to market of the interest rate swap we have in place. The effective tax rate was 22% in the quarter and unchanged from the same quarter last year. The profit for the period after tax was DKK 40,000,000 compared to DKK 55,000,000 in the second quarter of last year. Adjusted profit after tax for the quarter was DKK 68,000,000 second from '20 With that, Slide nine. On Slide nine, we take a short look at inventories. As you can see, inventories increased by DKK 18,000,000 in the quarter due to normal seasonal inventory buildup before the Christmas period. Inventory stood at 22.5 of last twelve months sales at the end of the quarter. Now if you could turn to Slide 10 to talk a little bit about net working capital. As said, Slide number 10 is around net working capital. In the second quarter, we saw a cash outflow of €53,000,000 driven by changes in capital. The outflow was markedly lower than €7,000,000 in the second quarter of last year. This quarter, we saw both a smaller buildup of inventories and less of a reduction in trade payables than we saw in the same quarter of last year, which led to the improvement. Now please turn to Slide 11. You can see cash flow from operating activities in the first quarter of DKK 1 up from just DKK 2,000,000 in the first quarter of last year. With almost unchanged overall CapEx in the quarter, free cash flow rose to DKK 25,000,000 from a negative DKK 22,000,000 in the same quarter of last year. If you look at cash flow from financing activities, they were much lower than last year, but that was just due to the timing of the financing of part of the dividend payment, which was paid out in the beginning of the quarter. Now please go to Slide number 12. Structure. Gross debt stood at DKK 1.75 at the September year, thus within our target range for the gross debt of DKK 1,600,000,000.0 to 1,800,000,000.0. Net interest bearing debt stood at 2.8x last twelve months EBITDA, and that is before one offs, which was the same level as at the September. There is no change to our capital structure, and we still intend to pay out at least 60% of adjusted net profit as a dividend to our shareholders and to distribute excess cash through share buybacks. You will, however, hopefully have noticed that in connection with the announcement of our revised guidance for this financial year in October, we made it clear that the Board to initiate a new buyback program for this year twenty seventeen-twenty eighteen. With that, please turn to Slide 13. We reiterate the guidance for 2017 as it was changed in October. Our guidance for the full year is a decline in underlying like for like sales or revenue of between 02% after the effect from fewer trading days of taking them into account. And EBITDA before exceptional items of between DKK $440,000,000 and DKK $470,000,000 and investments CapEx of around DKK 90,000,000 to 100,000,000, excluding store acquisitions. Please note that EBITA is by definition stated before exceptional items. Accordingly, any exceptional items related to the announced measures to improve the profit performance are not included in the EBITDA guidance for twenty seventeeneighteen. However, the nonrecurring costs of 12,700,000.0 incurred in connection with the change of Mesa's CEO, that sum is included in the EBITDA guidance as we put it out in October. With that, I have concluded the run through of the financial figures. Over to Gregers again for comments on the announced measures to enhance Mesa's short term performance strategy. Go to Slide 14. As you've just heard, Matas remains a solid business with a good cash flow. At the same time, we are facing increasing competition from both physical and online retailers. There are no significant tailwinds from consumption growth that will benefit us. And that obviously impacts footfall. And consequently, we offer deeper discounts, and we run more frequent campaigns to maintain top line. Our short term response to the receding revenue and margin pressure is to launch a range of measures to: first, deliver a more attractive value the mass beauty category that troubles us the most to shift resources from low growth, loss and cost consuming activities to more promising growth initiatives. These short term measures include both the customer centric measures and cost reductions. And for the customer centric measures, please turn to Slide 15. We strive to be a first choice for customers seeking a broad range, exclusive brands and second to none service in store. As mentioned earlier, management is a to our countrywide network, our very successful webshop and what I believe is a cutting edge connected retail offering. Due to these strengths, we are growing above the market rate in high end beauty and vital, but we are challenged in mass beauty due to increased price competition. And I want to point out that the Matas concept should remain clearly differentiated and should not try to beat discounters on their own turf. But we will step up investments in campaigns. We will reduce prices on key brands, including our own in order to maintain the Matas formula and customer promise of better quality at fair prices. And we will introduce tangible new benefits and more personalized offerings to our close to 1,800,000 Club Matas members. I think it's a surprise to some actually in the public that Matas DK, our online shop, offers by far the widest range in health and beauty. In the second half of the financial year, we will step up efforts to strengthen our digital position within health and beauty. We today announced that we have hired an e commerce director, a very seasoned one, who will join the executive team and report directly to the CEO. He will be responsible for driving online growth and expanding our position in online. We will allocate more resources to online to make it easier and to build awareness of our online offer. Also, we'll continue to develop Club Matas as well as our touch points on social media and mobile. And I can add that the margin pressure that arises from these initiatives is captured in our full year guidance, as Anders mentioned before. Please turn to Slide 16 for the cost reductions. To free up both the management focus and the funds and the people for customer facing initiatives, we have made three decisions to exit low growth or cost consuming activities. First, Stylebox by Matas will be closed down five stores. Despite a consistent effort, Stylebox has not proven its potential to scale to a national level. And we think that the gains from additional expansion of the chain is very limited. So the stand alone stores would be closed, for some converted into the Matas format in the second half of the financial year. The Stylebox shop in shop in store will stay open, and that will allow us to continue to market the most popular parts of the selective hair care and nail care range online. Second, we will accelerate the consolidation of our store network with particular focus on midsized towns. This will include store mergers, moves, potentially some store closures. And to the extent that we end up closing stores, and we've made no decision to do so yet, we expect a substantial part of the revenue from those store closures to migrate to neighboring Mesa stores. Third, we have initiated a cost cutting program centered on back office and non customer oriented activities. We will continue to take out cost in the stores through implementation of new technology like workforce planning tools. Overall, these cost cutting measures set out above are expected to reduce revenue by between DKK40 million and DKK50 million in the financial year 2018 and 2019. The measures are expected to trigger costs in the form of exceptional items in the amount of 15,000,000 to €25,000,000 in this financial year twenty seventeen-twenty eighteen. And this will include sorry, exclude any goodwill amortization. The positive effect on EBITA is expected to be between DKK30 million and DKK40 million in the financial year 2018 and DKK19. As mentioned, a major share of these gains and this increase will be reinvested in initiatives to boost growth and to remain competitive. And therefore, from these initiatives, we only expect a moderate positive effect on our profit performance in 2019 and 2020. Please turn to Slide 17 for the strategy update. Matas presented its 2020 strategy focusing on customer centricity and digitalization about one years point ago in June 2016. We will continue to pursue those two targets, customer centricity and digitalization. But at the same time, it is clear that we need to adapt to a new reality. And despite whatever competitive pressure we're seeing now, we believe that Matas is very well positioned to navigate this transition and succeed in the future. And I think that is because we are at heart a relationship retailer. And this is what most retailers dream of being. Most in store transactions entail advice and service. It's very hard to copy and it enables upselling. And you all take note of our increase in basket size as evidence of that. Over the years, we have invested in taking that relationship digital as well. Club Matas and our IT platform, our apps and matas. Dk are completely up to date, and they are crucially free of teething problems. And as a result, we can focus most of our resources on having a high technological and commercial innovation rate. For example as one example, we are now in a position where about 20% of our online sales are driven by categories that are only online and not in the stores. And I think that looking and coming from another part of retail and also looking at it international, I think Matas is at the forefront of what we might call the connected retail revolution. We have a number of things in the pipeline, and we look forward to presenting new initiatives on this front. As our current growth rates and the competitive situation will not allow us to reach our 2020 target of 4,000,000,000, we need to review and update our strategy and long term financial targets. Therefore, we have decided to initiate a strategic review process. We will take a look at each of the building blocks in our strategy in order to refocus, reprioritize and add new perspectives. This work will be ongoing to reflect the dynamic environment, and we will update you as soon as we have relevant news to share. Thank you. And with that, we have concluded the presentation of our Q2 twenty seventeen-twenty eighteen financial results. Please turn to Slide 18 for the Q and A. And we are now ready to take your questions, and I'll hand over to you, operator. Thank you, We can take our first question from Claus Allemahr from Nordea. Please go ahead. Your line is open. Thank you. I have a few questions. And first of all, Gregers, congratulations on your job. I guess you will be busy in the start at least. Absolutely. Well, my first question goes to some of these new strategies you're talking about in the report. A little bit unclear, Will you be more price aggressive also in the high end beauty segment? That will be the first question. Mainly in the mass beauty segment, but we continue to offer strong campaigns in the high end beauty as well. Okay. And then will you be fully or partly compensated by the suppliers when you're doing these campaigns? I cannot comment on that at this point. Okay. And then my final question goes to the capital structure, which was also part of the presentation. 2.8x net debt to EBITDA. Do you see any issues with your capital structure to do the strategies you would like to implement? No. At this present time, we don't see that this is a problem vis a vis that we are also, as you know, freeing up resources through the program that we've initiated. So we don't feel that we are stretched. You should also keep in mind that the end of the second quarter is a point where debt is relatively high as the third quarter is a big quarter from a turnover perspective and will entail a significantly positive cash flow. But is there a threshold at 3x, then we'll start to see some changes to your ability to be flexible? Or yes, can you push some more As we've told you earlier, of course, there are covenants in our financial structures, but we are nowhere near them. I think that's as far as I can put it. Okay. And then just my final question, which goes to this wording about next year. This €30,000,000 €40,000,000 positive impact, does that include the negative effect on the top line? Or should we put that together and then get this moderate positive impact on EBITDA line? The 30,000,000 to 40,000,000 on top line is, of course, included in the overall results. I think it's important to say that what we're saying is that we look for a positive impact of EBITDA of these measures be between 30,000,000 and €40,000,000 next year. But that most of that will be flowed back into the business. So we won't actually see a net positive effect of that size. It will be much more because we are sort of we are using that money to fuel the initiatives. Sure. I'll just be 100 sure. The 40,000,000 to €50,000,000 less revenue, as I understand, I mean, with a 45% gross margin will obviously have a material negative impact on the profit line. So is that included in your EBITDA moderate impact comment? Well, we're not guiding for next year yet. I mean we are saying, look, you should take on one on the one hand, there are some negative impacts from the fact that we are not having the turnover from, say, Stylebox. And but then we are saying on the positive side, there are these effects. So we're not giving you a full guidance as such, of course, at this There point in are negatives and positives, you're quite That I understand. I'm not trying to figure out your guidance for next year. I'm just trying to be 100% sure whether your impact on EBITA line is including the lower revenue. That is including. Yes. That is including the lower revenue. Yes. Okay. Thank you. Thank you. We can now take our next question from Frans Hoyer from Deutsche Bank. Please go ahead. Your line is open. Thanks very much. Well, I just wanted to clarify the 15,000,000 to €25,000,000 one off costs in the current year. I didn't I'm not clear whether it is or is not included in your guidance. No, that is not included. What is included is the 12.7% specifically regarding the CEO change. Excellent. Thank you. And then on the issue of goodwill write offs, what are the items that are looking a bit risky there? No, no. We're saying, look, if it ends up and as Greg has mentioned, we haven't taken any decisions on that. But if it ends up that there are some stores that we close, we might be in a situation where there's some goodwill on some of the stores that we have in the portfolio that we need to adjust. These are not big numbers, and these are not cash they don't tie cash out in any way, but there might be some technical adjustments that we have to carry out. Are we talking the Stylebox goodwill? No, not the Stylebox. No, the Stylebox is actually different because in Stylebox, we have to take some write off on what we call key money, but that is part of what we mentioned in the numbers already. Understood. So it's on potentially on Mesa stores. Another line of questioning regarding the margin the gross margin pressure. It feels like the pressure has spread from the low end to higher up the price point, the price ladder. Is that so? And how do you if we look at especially the issue of supermarkets reacting now so forcefully as they are doing quite late, but very forceful. What are the key levers that you put to work to try and defend or counter that forceful reaction? Well, as mentioned today, I think our main issue is in the mass beauty category, and we decided to lower prices on selected items and selected brands in that case. With regards to other categories, we can't really be exact on the margins if they are spreading. We're not seeing it at the current point, except to mention that we need to maintain an overall higher promotion pressure. And I think that's what you're seeing in the numbers. Okay. Thank you. We can now take our next question from Paul Jensen from Danske Bank. Please go ahead. Yes, thank you. A few questions. First, if you could add some text of this change or the current trading update, was just having a thought that normal, now they're going to a much less store openings on a year over year comparison as we've had in the last few years when we look forward. So is it fair to assume that when you see the change here, then it is more or less only related to the supermarkets reacting? Second question, when you talk about store closures, do you have any idea of how much we should look at, five, ten, 20 or how many that you're going to combine or close down? Sorry. Well, let me just take the first one, Paul. In the second quarter, now we're talking is the difference between second and third. In the second quarter, there was still a fair number of new stores in the non mail chain opening up in the second quarter of this year that wasn't opened in the second quarter of last year. So that tail off in the impact from new openings in mail is really first from the really from the third quarter and onwards, just to be precise. Yes, I agree. So what we saw in the second quarter then, we both had the effect of these extra normal stores, and we secondly also had the effect of the supermarkets reacting quite strongly on top of that. So that was just to answer the first question. With regards to My point is if I may add it, my point is that if you in the past have been having flattish growth in a period where normal has, in some quarters, doubled the number of stores or added this in the recent quarter, about twothree more stores. But then when you go forward, then you get down to about five additional stores or some 7%, if we count stores. And then when you guide for the full year, then the majority of that negative impact will be in the second half where the market should ease up on the headwind. Therefore, the headwind must come from somewhere else. So is it only the supermarkets where you see the major headwind now? No. What you're trying to say is that you're discussing whether or not the effects on Q3 and Q4 and the reason why. We are seeing overall a pressure because not only from what NAML is doing, not just from opening stores, but also the way they're acting. And also, as you quite rightly point out, we've also seen a sharp increase in the competitive pressures from the supermarket. And then the overall general development that we see, as you may note, we've seen the falloff in traffic has continued into this quarter that we for a very seldom for very for the very first time, we're actually making a comment on this quarter by stating that the drop off in traffic that we saw in the second quarter has continued in the first month of the year of the new quarter. And then about store closures. Is the Okay. Motion? Should we have to look at? To be very clear, we have not decided to close stores. What we indicate is that we think there is a and we have a very, very healthy store network, surprisingly healthy for someone coming from the outside. Very, very few loss making. Talking about is an overall store portfolio review to decide where can we consolidate in Midtown mid sized stores. Are there a few to perform in the future? And also take note, please, that we are actually opening matrices in three of the Stylebox locations. So we're actually adding stores on the short term. But if you consolidate stores and sometimes our cities, then you must close some as well. We do a review. We just want to indicate that we think there is some potential by looking at the store network to do a number of different things, and we just want to say to you that we look at that. But there's a big difference because if we do like we did in Zunerborpal, where we had three stores and amalgamated them into one store, that actually was not negative for the overall meta sales. Yes, we closed down three stores. So net, we closed down two stores, but we moved that straight to the new store, which actually has higher sales numbers than those three old stores added up. So when you talk about the DKK 40,000,000 to 50,000,000 in lower sales next year or the negative impact from these actions, then it's more from the price reductions? Stylebox. No, it's a big part of it is actually Stylebox. Okay. And then back to the question that were before on being more aggressive in the high end. How is the there? Is it possible to go out of B major driven by campaigns, giving them the larger brands are not happy that people are discounting the brands? That's a difficult answer. I mean the brands are not necessarily of course, they don't want their brands to become discount brands. But the fact that we once in a while run cross brand campaigns is nothing quite there's nothing new. You will see all the players do that. You'll see that in magazine, for instance. So it's not I mean, that's not that's a no go in the high end. Okay. Thank you. Thank you. We will now take our next question from Christian Reinhold from SmallCapDanmark. Please go ahead. Yes. Hello. Back to the gross margin, you have taken this hit in the second quarter. I just wonder if you can shed any light on what you expect going forward. Is it enough? Or should we expect a further deterioration of the gross margin in the coming years? Well, first of all, you can read from the fact that we made the downgrade that we did on the expectations that, of course, there is a part of it coming from the sales part, and there's a part of it that has to do with margins. So for this financial year, yes, we do expect margins to be lower. And that is covered by the revised guidance we gave. As to the coming years, I mean, we're not discussing guidance right now. We don't certainly we're not of the opinion, in general that this is just the beginning of a long slide to whatever much, much lower level. But there is definitely a step change in gross margin, and that is what we Yes. But it's very important if it's done with the 2% to 3% we've seen right now or we should expect it to drop further. But that is something that we will also have to revert to when we come back to the more long term strategic outlook that Craig has referred to earlier. Yes. Okay. Fair enough. Then you have had a program where you have upgraded some of the shops. I just wonder if you could give us a status on that. It was 30 to 40 shops that you had in mind originally. Yes. This is yes, we are, I don't know, not quite at the midpoint. We're close to the midpoint. And we can say that, as is always the case with these kind of programs, we have some very successful stores that have done better than expected. We also have some where we have had to scratch our heads and say, what happened here didn't quite perform as expected. But we are on we are in a process where this is ongoing. And as also pointed out from the CapEx numbers that we shared with you, we are working with this process and going on with this process as right now. So there's it's more or less on schedule. Yes. And then when we go to online, you had a nice growth there. But could you give us how much it is of total turnover you take on online these days? We are not we usually give out the numbers on that on a yearly basis, and that's something that we will hold on to right now. So we're saying right now last year, we said about 3% of sales. 3%. Yes. But as you're quite right, it's growing much faster than the rest. So of course, it is increasing its share. And is it margin diluting if you get the turnover from We've the stated yes. No, it's a fair point. We've stated before that, look, we make money on our online, and I will attest to that, we do. But of course, we've also made it clear that the margin from online is not as high as it is from the store level. So yes, there is some small margin dilutive effect from it. And do you think you can do something about that in going forward? Or should we just accept that? I think what you should look at is that we have a decent track record on having a web only range as well. And we see further potential in that also to positively affect the margins on the online business. No promises, but we think there are opportunities. Okay. My last question is your own product, Streibande. Is it all included in mass beauty? Not all. There's actually striped products outside the beauty area, but there's nothing in the high end. But there are also striped products in material, and there are also striped products in Vital, for instance. We have our own cod liver oil pills and our own vitamin pills and so forth and so on. So it's across all of the segments except high end. I think the bulk of it is in the mass market beauty. Yes. And how much is it these days of this total turnover? What was the last number we've given on that? That's is it 16%? Stripes? Private labels in total are perhaps about 18%, but that includes other private labels than the stripes. Yes. Okay. That's all for me. Thank you. Thank you. We will take a follow-up question from Frans Hoyer. Please go ahead. Yes. I just wondered about the other external cost, the net figure there, which you didn't comment on. I wondered whether there's been any change in your share of voice in the market. Are you as visible to the consumers as you have been? Or has there been any reduction or increase in that? And also a question about whether suppliers are likely or what is their willingness nowadays to contribute towards your external communication costs and so on? Do you see any risk in that or opportunity for that matter in that aspect? I think we've discussed earlier that some of the measures we did last year was that we were running the way we do the Matas leaflet, the way that it's produced and organized and so forth, has been tightened up and has been done more efficiently. There has been a small reduction in the number of pages. I would say that the Danish population as such would not have considered that there is a drop in the share of voice. That is very, very marginal. And as to the willingness of our suppliers, we have a very close connection with our suppliers, and we still feel that they are very much on our they're very much willing to play with us in this, and they consider Matas to be an extremely important channel to which to bring their message up to the Danish public. So there's always a risk, of course. But right now, we don't see that as being sort of a huge thing. And then you will notice that if you open up the Danish float TV, if any of you still watch the float TV, we are actually running TV campaigns more aggressively this year than we've done for the last at least many years as I can remember, and that is going on ten years now. We will take another follow-up question from Claus Allemier. Thank you. Yes. It was just, Anders, your comment about the gross margin, just to be 100% sure I understood. Did you say that we should expect a further deterioration this year on the gross margin? Or is Q2 the new level? No. I'm saying that if you look at the guidance that we gave out and you look at the numbers compared to the old guidance, in order to make those numbers stack up and of course, there's a range here. But nonetheless, you see those numbers stack up. Some of it is, of course, because we're guiding on lower sales, but some of it is also necessarily to make the numbers stack up given that costs are not running ahead of what they should be. Then of course, there's also in that guidance an implicit drop in overall gross margin from twenty sixteen-seventeen to twenty seventeen-eighteen. Yes. Okay. So it was compared to last year. So this absolute level we saw in Q2 is more the new norm, so to speak. That's of course, it's very difficult to say exactly what number you're going to end up with. But implicitly, through the guidance, you can see that there's a drop off. Yes. So the full deterioration was seen in the full quarter, more or less. So there's no read over into the Q3 from that perspective? Can't comment on that. Okay. Fair enough. Thanks. Thank you. And we will take a further follow-up question from Paul Jessen. Please go ahead. Thank you. That was just on the savings of the 30,000,000 to €40,000,000 which then will be partly or mainly reinvested next year. Is that in lower prices? Or is it more cost on the OpEx side? It's a combination. It's to strengthen our in store offers in the meta store, but it's also to add resources, especially to our digital branch. And do you have any indication if it's fifty-fifty or Not of current these early actions serve mainly to give us a reserve be able to invest in future growth. We have not pinpointed exactly how we're going to spend it. Okay. Thank you. Thank you. There are no further questions in the phone queue at this time. So I will hand back to our hosts for any additional or closing remarks. You so much from me, first time. I don't think there's anything more to add. If there are no will be on the phones if you have a wish to follow-up or Thank for dialing in. Thank you, ladies and gentlemen. That will conclude today's call. Thank you for your participation. You may now disconnect.