Good day, and thank you for standing by. Welcome to Alligo Year End Report 2025 Conference Call and Webcast. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Alternatively, you may also submit your questions on the webcast at any time by typing them in the question box and click Submit. Please, please note that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Clein Johansson Ullenvik, CEO. Please go ahead.
Thank you, Raz. Welcome, everybody, to Alligo Year End Report 2025, and thank you for dialing in on a Friday, the thirteenth. Sometimes I reflect on how time flies, especially when we have the quarterly reports, because it feels like we are having more than one every quarter. But this time, I was just reminded that this is my 50th quarterly report, so that is really time to reflect on how time flies. Today, presenters, as always, is, besides myself, CEO, it is also Irene Wisenborn Bellander, our CFO, but also now Deputy CEO. Congratulations, Irene.
Thank you.
That's also, that's a sign of the brilliant job you're doing, but it's also a little sign on that we will stick to the path even after my departure. So that's a good signal. The agenda, as it always is, just some highlights. We're not going to go through the report in its entirety, just some highlights. And we normally bring at least one theme, but today it's not only one theme, it's not two themes, it's actually three themes. One slide each on the renewed effort in TOOLS Finland, own brands, that is, 1832, and one slide on smart services. I hope you will enjoy that.
We normally fly in with a little, a couple of slides on Alligo Group, a little shy of SEK 10 billion in turnover, Sweden-dependent, volume-wise, even more on profit-wise, as you know. 2,500 employees, some around 240 stores. We acquire companies, get stores, and we merge some stores, so then we reduce stores. But as it is today, some 240 stores. And we focus on own brands, as you know, 18% of our sales as it is now. And we focus very much on small and medium-sized customers.
This slide is a bit busy, and it's not very easy to overlook, but it—we are a little bit proud of it because it illustrates the far right, how we managed to run a non-integrated businesses at the side of the integrated business. So we built up a number of groups of businesses where we see growth potential within competence areas and product areas where we have in the integrated businesses. So it's not totally new businesses. It's areas that we do have in integrated business, but we'd like to focus on them a little bit more and keep the specialist competence that exist in those. And one is the Product Media grouping. They are now 17 companies, so around a little plus 600 million SEK in turnover.
Then the welding businesses, six companies with around SEK 400 million in turnover. Then we have a battery with Batterilagret, last year's acquisition, SEK 280 million. And then we have others, and it's a bit of a pity to have that headline of a number of very nice companies, that we feel like to be various, but HTP is one of them, working with the defense sector in Finland, developing very nicely. But then to the left, you have the integrated businesses. As you know, in Sweden, it's called Swedol, and Norway and Finland, it's called, called TOOLS. And that business is, is super integrated logistically, IT, ERP, support functions. So that is, is really, really a true, true Nordic organization, integrated business.
But 20% of the group today is the other, the separate businesses that are not integrated. So in acquisitions, four acquisitions last year, a little less than the year before, but more stores. Batterilagret had some 26, 27 stores, so that added a lot of stores. And the segments were two, battery and product media. And we acquired some annual revenue of around SEK 378 million and 115 employees. I think Batterilagret have some 90 people, so they are the biggest chunk of the acquired businesses. This is something nice. You saw that earlier, perhaps this week in a press release, we were awarded EcoVadis Platinum.
So we are now number top 1% of 50,000 companies around the world, and especially in our industry, we are in a real, real top position. And it's very important to build a profitable and professional organization going forward for defense contracts and for also the public sector and larger customers. It's very, very important that we take sustainability seriously, and this is a signal and a sign that we have been doing that in a very good way. So we are so incredibly proud to be awarded a platinum level for EcoVadis. That's very important for many aspects. Highlights, Q4, it's sky-blue skies, but some clouds. I don't know what it should really signal, but it's a challenging market still. It has not changed dramatically.
We've seen that, said that many times, that we hear signals, and we see signals, and we see some early signals of improving market conditions, but it's not rising up to the sky yet. Recovery in Sweden. Norway ended the year with a little bit of surprisingly weaker oil and gas sector. We haven't really gotten their arms around it, why? But in the Finnish market, the recovery continues. So the market sentiments are stable, the same behavior as before during the year. The customers are cautious, but we see good signs going forward. But we, as management, have been focusing on more or less the same things as we always are focusing, very much on driving sales. That is what is needed to be added to this case when we now built this platform.
So driving sales, we continuously work with cost reductions, try to add acquisitions. I think we've done it quite responsibly. Even in a slower market, we have dared to invest in growth, and we have grown even in tough conditions, even if it hasn't been organic growth, it's been acquired growth. We are working with reducing inventory levels. We have much more to do, but as you know, we merged two recently different companies into one, and trying to agree on one assortment to our customers, and we have more to do on the inventory levels. Price adjustment, the latest price adjustments went out beginning of February, and I think we've got a pretty good process of doing that in a professional way.
Good delivery capacity, and macroeconomic factors, still uncertainty, but for once, actually, we are a little bit benefiting from it. The trade tariffs made the capacity freed up capacity in Far East, which is beneficial for us. We can get the minimum order quantities down, and also the strengthening of the SEK that the dollar has become cheaper is also actually good for us. So for once, there are some microeconomic, macroeconomic factors that is in our favor. So in brief, revenue grew 2.7%, and that we normally do. The top line, we grow, but for the first time in nine, ten quarters, we actually can show organic growth.
It's not gigantic, but we are so happy that we can at least say that we are back on organic growth track. Cash flow good, SEK 100 million up compared to last year, and an adjusted EBITDA margin of 9.0%. So we are reasonably happy with that, and the gross margin continues up. Starting from a very healthy level of 41.1%, we now this quarter are 41.8%. But as you know, this is not a margin-maximizing case. I'd rather trade some tenth of the gross margin to get growth, but we still believe that we do a decent job in knowing which contract, which customers to work with, and keep the gross margins up, but we need some top line to this, and it will be brilliant.
This slide I showed on an internal meeting. We have 600 salespersons in all of the Swedish sales organization, and I wanted a picture that illustrated the sunrise, but this picture was the one I got. It's a dark, total pitch black, but it's our business that shines up the sky. So sales, high focus in all countries, has been for a long time. It is still, and the achievements we have and the organic growth we have is the result of extremely hard work of our dedicated sales organization. We run these growth initiatives like it was a private equity case.
Increase share to own brands, we're focusing a lot on, and but we have a little bit to do on sales efficiency, we think, still, how to put together the customer portfolios and so forth, how to run that more professionally. We have some things to do there, we think. Acquisitions, we are happy that we could make the first acquisition in product media in Norway with Response. We've got a good footprint in Norway now, SEK 81 million turnover, so now we can acquire businesses to that platform, so that journey will continue in Norway. Operations-wise, except for a lot of good financial development in the quarter, we also did a refinancing.
So 3 + 1 + 1 is in place, increased headroom, so it gives us good financial stability and also headroom to do acquisitions and so forth. Margin improvement, as I said, continuous development of sales of assortment, processes and TOOLS in Finland we'll come back to, and always super cost-conscious in whatever we do. So the three themes I promised you. If we take the first one, TOOLS Finland, we started that during 2025, and it's the same activities as we identified them. It's not no new activities, it's the same activities, but we really, really need to ensure that they are being carried out. So to be clear, it's the same evaluation on which shops are profitable or not, which customers are profitable or not, and how do we run the business.
So we have a new country manager in place, a person I've known for 17 years. I brought him with me from my previous job to Swedol, and his name is Håkan, and he will succeed. I have no doubts about that. He knows how to run a sales organization. So Finland, it's a tricky market. There are very few companies who are really profitable. We are in a decent place already as it is, but we are not happy with our profitability level and the structure of the business. So we will drive even harder towards small and medium-sized customers, getting the private label share up, and look over our structure. So that project is already well in motion.
So Finland, we will continue to report on the progress, but we are doing what we've said the whole time. So two more areas, starting from the far right and ending at the far left. So if we take own brands, just a quick on 1832. It's now being launched, it's being sold, and it has its part in our product portfolio. But a number of other things that we perhaps could have predicted, and perhaps not, is that if you have a customer complaining, saying, "Ah, the price level has come up," on the Gesto, and now when we can offer 1832, the customer many times choose to stick with Gesto, because they, but they had the option to take 1832. So 1832 plays different roles in our product portfolio.
It is a lower price, high quality product, but it's also an offer for the customers that at the end choose to actually stick with Gesto, Björnkläder, and Univern, which are our higher positioned brands. So 1832, we are very happy that we launched that so quickly. It plays an important role today, and will play an even more important role going forward. And then Smart Service, you've heard about that before, and we think we have the best solution in the business, and we are now reasonably successful in implementing that. We have 1,300 of these solutions at out in different customers in the Nordics. Some of them are Sandvik, Hitachi, Widerøe. Hitachi, I will visit in a couple of weeks. We have others. I don't know if we are allowed to talk about them.
One is producing the world's fastest car. I'm going to visit them in a couple of weeks, where we are well integrated into their product production facility with our Smart Service. So we have identified, invested in, and are now launching areas where we take away the product price out of the equation. So we build ourselves much tighter to the customer. So these are really, really clever solution, which brings great benefits for the customers. Financially, our deputy CEO.
Thank you. As Claes mentioned, the Q4 results exceeded last year's, and cash flow improved, leading to reduced leverage. Additionally, stabilized demand in Sweden contributed to organic growth. As you can see in the income statement, the revenue increased by 2.7% in the quarter, driven by a 4.2% growth from acquisitions and organic growth of 0.5%. But this was counteracted by adverse FX effects. We had organic growth in both Sweden and Finland, while the demand was weaker across all customer segments in Norway. Organic growth in Sweden was driven by project orders for the defense industry, while recovery continued among larger industrial customers in Finland. EBITA reached SEK 249 million, representing an improvement of SEK 25 million or 12%.
The increase was due to improved results in Sweden and Norway, driven by stronger growth margins, cost reductions, and contributions from acquired businesses. The improved growth margin is due to positive customer mix effects, better sales and assortment management, and to some extent, reduced purchase costs in U.S. dollars. The impact from stronger margins, cost reductions, and contributions from acquired businesses is illustrated in the EBITA bridge. As you can see, the cost reductions have offset the annual increases and the effect of inflation on other expenses. This is a busy slide, but as you can see, Sweden has the highest share of SMEs and their own brands, followed by Norway, while Finland has the lowest. This directly correlates with profitability in each market. The higher the shares, the greater their profitability.
The lower gray boxes show the share of own brands in the integrated business, and as you can see, this share has increased in Sweden and Norway, which is one reason for the improved gross margin in both countries. Moving on to some highlights of each market's development in Q4, and, as Clein said, the Swedish market remained weak. However, project orders for the defense industry increased, contributing to an organic growth of 1.8%. Additionally, there was acquisition-driven growth of 6.3%, and the improvement in EBITA is due to higher volumes, higher gross margin, cost savings, and contributions from acquired businesses. The market in Norway was weak across all customer segments, and especially in the oil and gas segment, which was slowed down in the second half of 2025.
Despite lower volumes, EBITA improved due to recent cost reductions, higher gross margin, and contributions from recent acquisitions. There was a continued safe recovery in Finland among larger industrial customers. Despite this, the result was weaker due to somewhat lower growth margins, investments in increased production capacity for Patria, and a review of the store network. As Clein mentioned, the new Finnish management places even greater emphasis on ensuring the execution of ongoing activities, while also reviewing the organizational structure. Let me turn to cash flow, and the fourth quarter is seasonally the strongest quarter from a cash flow perspective. Operating cash flow improved from last year, driven by higher EBITDA and lower inventory levels for external brands, while investment in our own brands partially offset this progress.
Even if the capital efficiency project contributed to positive effects in Q4, there is still more work to do. We aim to reduce net working capital as percentage of sales from the current 28% to 24%, which was the level in 2022. Investing activities in the quarter primarily relate to the acquisition of the Product Media in Norway, and the organic investment was slightly higher than last year in the quarter, but still lower for the full year, and the CapEx to depreciation ratio was 0.8. The ratio of net debt to EBITDA decreased as expected from Q3, ending at 2.5. The ratio is slightly higher than last year due to higher net debt, following the acquisition of Batterilagret in 2025, our largest acquisition to date.
Our covenants relate to interest coverage and equity asset ratios, and these are fulfilled at the end of the period, and there is good headroom before reaching the thresholds. Furthermore, we have refinanced the business after year-end and increased the sustainability-linked facility by SEK 500 million to SEK 3.1 billion, and the maturity is three years, with an option to extend it by another 1 + 1 year. So in summary, we maintain a solid financial position and will continue to invest in organic growth and take advantage of M&A opportunities. Due to weak market, organic growth and the EBITDA margins didn't reach target levels. However, a strong focus on maintaining the growth margin, adjusting the cost structure, and consistently acquiring well-run businesses has partially compensated for weaker volumes.
As a result, we ended the year with an EBITDA margin of 6.4%, the same as in 2024, with profitability improving in the second half of 2025. The high acquisition pace has increased leverage, but we still have a solid financial position, and leverage remains within the financial target range. When it comes to dividend, the board of directors is proposing a dividend of SEK 2.20 per share, representing 41% of the net result, up from 36% last year. Throughout the year, we have also made progress in our sustainability efforts and improved on each target compared to last year. For instance, 83% now meet our supplier standards, up from 77% last year. Handing it over to you, Clein, for summary and outlook.
Thank you, Irene. So in hyperspeed into summary and outlook. And so Q4 and full year, we are happy that we in the Q3 could change the trend and start improving the results, and in Q4, start actually to show organic growth. There was two quarters in a row with a trend shift. We have high sales activities in all markets, that I can promise you. And it's also a bit frustrating, we have done more than ever, worked harder than ever, but in the market conditions, which it has been, getting so little in return, it's extremely frustrating, but it's no alternative than to keep on pushing and have this activity level so high.
We have done whatever we can to adjust to the market conditions, and that you know we've been quite early off doing that with cost adjustments, maintaining the gross margin, and was even strengthened, and focus on acquisitions, even if the market has not been super strong. As I said, increased dividend from to SEK per share to 2.2. I think that is also a sign that we feel confident about the future. Outlook 2026, yeah, we, as we've said quite a while, we are in a very, very good place. It feels stable. All the structural grips are taken. We have some fine-tuning to do, especially on the stock, the warehouse levels, inventory levels.
We can fine-tune a bit, and we can keep on pushing for sales, but there's no any, any structural grips needed to take, as of today. And a very strong financial position, as Irene said, even the refinancing in place, sounds and feels very, very good. So the focus areas for 2026 is to continue push for sales, improve marketing, do responsible acquisitions... and now show you guys that we can really turn around the tools business in Finland, because that is, now it's personal. We are gonna do that. Rest assured. So that was all from us now. So Raz, handing it back to you.
Thank you, sir. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Once again, it's star one one for any question and wait for your name to be announced. To withdraw your question, please press star one one again. You can also submit your questions on the webcast page using the Ask a Question button. Thank you. We are now going to proceed with our first question. And the questions come from the line of Henrik Sæle from ABG Sundal Collier. Please ask your question.
Hi, Clein and Irene, this is Henrik at ABG.
Hi.
I was just wondering if you could, first of all, maybe in any way quantify the gross margin tailwind you expect in the coming quarters, given the current USD exchange rate?
Yeah, and it's also, it's perhaps one of the more difficult questions to answer. Depends a little bit on what we will sell. If it's a high degree of work wear, of course, it's more beneficial because then you get the rotation on the inventory quicker, and we can start buying more. I just checked when we started the call, it was 8.93. So of course, if the dollar is on that level going forward, that is, of course, highly beneficial for us.
Mm.
We saw effects during last quarter.
Yeah
... during 2025, and they will increase throughout the year. But to give you a specific number, it's difficult. And I'd also like to use some better position from that perspective to perhaps drive sales more. We are on a very decent level contribution, margin-wise, gross margin-wise. But the US dollar helps us a lot to bring down the inventory levels, and will also give us a competitive advantage to use that in sales efforts in a more tougher way.
Mm.
It's difficult to give you. I don't know, Irene, if you can give,
No, I don't think so.
We tried to calculate it back and forth, and we have difficulties giving you a... Everything is moving. So.
Yeah. But, of course, the yearly purchases is, are rather high. It's about $80 million.
Yeah.
So, of course, it will have-
Yeah
... a positive impact. But it's a lot of factors that,
Yeah
... affect the growth margin, so it's difficult to say.
We used to say, I mean, SEK 10 million, 10% better dollar would give SEK 80-90 million-
Exactly
... better result. Everything else the same.
Yeah.
So it should have a positive effect to the result, but it also depends a little bit how the product mix is and the customer mix, of course.
Okay, very good. And maybe one more from me. You mentioned that in Finland, two larger customer relationships which are ending. Could you give us any sense of how large these customers are for you as a group, and how quickly you will be able to adjust cost to this?
Mm.
Those two accounts together are around EUR 10 million.
Yeah.
And the bigger one is not yet terminated, even if we now is heading in that direction. But as of before Christmas, we already started the cost reduction activity, so it's well underway.
Yeah.
Finland is quite quick when it comes to adjusting a cost base in relation to people employment. So that process is already well on its way and will be mitigated quickly. And we will keep relationships with both those customers, but more in the on the workwear side, where we see better profitability than in the tools side and industrial component side. But around EUR 10 million, we think.
Okay, very good. That's all from me for now.
Thank you.
Thank you.
We are now going to proceed with our next question. The questions come from the line of Emmanuel Hasbanian from Deutsche Bank. Please ask your question.
Yeah, hi, Clein and Irene. Hope you can hear me.
Very well.
A couple of questions from my side then. It's obviously great to see organic growth turning upward again. I think it was around 10 quarters ago, we saw organic growth on the-
Mm-hmm
... on the top line. I think perhaps, is it possible to maybe give some colors on which customer groups are growing the most right now? And looking ahead, where do you see the biggest potential for 2026 in terms of customer group?
The customer group, we are really focusing on the small and medium-sized customers. And by saying that, we're not losing, of course, the large customers. It's all about the mix. And we have had, since the merger, too much tilt towards... In certain parts of our organization, we have tilted far too much towards large customers. And they are also very important in our group, but we need to increase the share of small and medium-sized customers. So that is absolutely the focus going forward.
Mm.
Keep the large ones happy and develop our business with them, but increase the share of small and medium-sized customers. Looking back, as Irene said, it's also the Q4. We got more normal orders from the defense sector, but also we got rid of from, you know, the Q1 to Q3 last year, we had unusually high-
Yeah
Orders being the last budget year for the defense sector. So we had the comparables were terrible, but that, you know, Emmanuel very well. And the comparables were more reasonable. So now we're on a level for the defense sector, but, but we see very good growth potential for the defense sector going forward-
Mm.
in all three countries. And I think we proved time after time that we have a very competitive offer, and I have a long history of working with the defense sector. But besides that, we have our focus sectors as well. We want the industrial sector, where the Smart Service is very important. The ReCare, the wash and laundry service, is very important. And then we have the construction sector, where we have a segment manager who is running that very much. So two large sectors, industry and construction, and a little spiced up with increased activities towards the defense sector should bring us in a better position going forward.
So should we view it that the defense sector is the most stable or positive one sector now, and we should expect maybe the construction sector to improve further in 2026 or all segments or sectors they are still negative?
The construction sector, I mean, we, as I think, all other reporting companies have said the same thing, that it is not much visible yet, but we all predict at least to pick up. But nobody believes it will be in a very near future on the levels of 2022 and 2023. That perhaps was unusually high, and we will not see for a while. But as long as it picks up the slightest, it will be beneficial for us. And we also have a good opportunity. If we run marketing and we run sales the way we have planned to do, to actually take market shares, and we know we have from time to time taken market shares in different sectors. To say that overall is, of course, too bold and dangerous.
But this defense sector is a great potential, and construction should pick up.
Mm
... going forward.
Sounds promising. Just regarding the store channel sales, which is connected to the small medium enterprises.
Mm-hmm.
You mentioned that that is stabilizing, but it still seems a bit slow. How is-
Yeah
... how is the footfall in the stores? Or is it simply that people are still only buying what they absolutely need at the moment?
Unfortunately, the latter. We see that, and that, it is a behavior which is very well known in, when the business is slower, and it's still there, that they, they buy whatever they need. And we talk to a lot of customers, and they confirm, of course, if you, if you used to come into a Swedol shop, wanting a pair of new shoes, and you also bought, a diesel, heating fan, you just buy the shoes these days. So it's, it's, those add-on purchases while you are in our shops, they, they are on much, much lower levels. So as you say, they, they still buy what they need.
Mm.
That behavior is still there.
Obviously, that holds a great potential for 2026 then, in terms of both growth and margins.
Exactly.
Yes.
Exactly.
Just looking into 2026, at least from my point of view, which I also think is also backed up by some, at least, weather data here in Sweden, it's been quite cold so far in start of Q1.
Mm.
I suppose that's not negative for you guys, or can you give me some glimpse on the future?
Well, exactly, and I can connect that to your previous question. So if this weather would have appeared in the market condition as they were in 2022 and 2023, it would have been much better because then you need to go to a Swedol shop to buy a snow shovel or a heater or start batteries, and they do. We sell a lot more of the winter-related products, of course, thanks to the weather, but we don't get the leverage on that sale. If they come in and buy a start battery because they need it, they buy a start battery. They don't buy new gloves and a new pair of boots at the same time. But as you say, of course, the weather, we cannot complain about that.
No.
Mm. Yep, so sounds fair. And just jumping back to Finland then. I mean, it's been tough this quarter in terms of profitability. What's the main reasons behind that drop in profitability, you would say?
Yeah. Some of the decline in profitability could be explained by somewhat weaker margins. And some could be explained of the fact that we have invested in new production facility for Patria, where we produce a lot of
Our components for-
components for Patria
... for military vehicles.
Yeah. And we have also had some effects when it comes to reducing the square meters within the store network. So that has also had a negative impact on the profitability in the quarter.
As you said, as Irene said, the HTP business is a beautiful little diamond in our Finnish business, and it's profitable and has been growing nicely. But since our biggest customer there, Patria, has ordered more and more and more, we have moved to new production facilities, which was done in Q4, and now going forward, their order book is full, and they are chasing us: will you go able to deliver as quickly as we are going to order? So it's been a transition phase that spills over into Q1 before we can ramp up, because it's not actually, which is quite nice to go and visit them. They're actually producing components quite yeah, technically wise, quite challenging parts and being implemented into the vehicles.
It's not only selling hydraulic hoses or batteries, they're actually doing assembly.
Mm.
So they're very well into the production process. And so HTP, if they don't perform on the level they did last year, of course, that hits the result in Finland-
Mm.
But it will come back because our customers' order books is full.
Yeah.
Interesting. So if I understand it correctly, the underlying margin is probably a bit higher than we are seeing in this quarter then, given that you're-
Yes.
Yeah. Yeah. And also you mentioned that you're, you have hired a new country manager in, into that region. Can you maybe give some more color on what the specific actions are in that?
It's more execution and a lot of good things have happened in Finland, but we felt we needed to up our game a bit in the actual getting things done. We are planning and planning and planning. We need now to implement things. And Hakan, I think you met him, we worked together for 17 years, and he is extremely knowledgeable in running and improving sales business. He's been country manager in Finland some three, four years ago.
Mm-hmm.
He's been country manager in Sweden. He's been assortment and procurement manager. I think he's had most positions in the group soon. So he's the type of guy you send in when you want to make a long-lasting transition. And he is super motivated and flies over every Sunday night and take up the price. And it's a good spirit in the Finnish team. The new name of the project is Sisu, actually, so they want to show that we will dramatically change our development. And with Hakan at the helm, that will happen. I'm very sure of that.
Sounds really promising. And maybe last question from my side, and it's regarding of we saw very strong cash flow, and you see that the balance sheet's down to 2.5x net debt to EBITDA. And since you're still with us here, Clein, in Alligo.
Mm-hmm.
I guess also that perhaps you're staying through Q1 as well. We don't know that yet, of course, but can we expect any new acquisitions before the new CEO is hired, do you think?
My departure and another one coming in, that does not change anything. And we have the pipeline. It's I talked to our M&A team yesterday, and I said, "Let's push a little bit more," but it has to be that the seller is also... Because we can be quick, but the seller needs to bring up the data we need to do a proper due diligence process. So we are ready. We have the balance sheet for it, we have the cases for it, and one should come in the near future, but it's not only up to us. So we go full speed ahead on whatever we can identify, being a very fluffy-
Yeah.
Very fluffy answer to your great question.
No, understood. But with this net to EBITDA 2.5x, you think you will ramp up M&A even further this year or toward 2025?
I would say like this, we don't see our balance sheet as any limiting factor. I mean, the cash generation we have in the group always, and the headroom we have now, it's not a limiting factor. So we are ramped up and have been ramped up even when we was 2.31. So we try to acquire the ones we find. We are very selective in what we want, and then looking at the welding companies we acquired and the product media companies we have bought, we have acted so quickly and picked the best ones. So it's fun to see when our competitors now buy the ones we didn't want to go forward with.
So if you're quick, then you get at a decent price level, and you get the ones you want, especially in the welding sector that has been also in the product media sector, of course. So it's fun to see if you act quickly, how well it can be done.
Mm.
Sounds like a good strategy. Well, I think that was all my questions for now. Congratulations on this trend shift on the organic growth.
Thank you, Emmanuel.
Thank you.
Thanks.
As a final reminder to ask a question on the phone line, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. If you wish to ask a question via the webcast, please type them in the question box and click Submit. We are now going to proceed with our next question. The question comes from the line of Karl-Johan Bonnevier from DNB Carnegie. Please ask your question.
Yes, good morning, Clein and Irene, and congratulations for being back to organic growth again. Good to see you, so.
Thank you.
Also cash flow, I guess, and gross margin. So a lot of nice things there and lots of good color already for a lot of the questions I had. So I think a couple of detailed ones. Looking at depreciation and IFRS 16, what happened in the quarter?
... Yeah, actually, it was a little bit on the low level, but actually it has been somewhat lower, on a higher level, the quarters before, so it was a little bit of an adjustment for the facing to the previous quarter. So you need to look at it on the full year basis to get the right picture on the level.
Excellent. So full year is, if you divide that by four, that's a good quarterly assumption for next year?
Exactly, exactly.
Excellent. And when you discussed the gross margin improvement of 70 basis points, you talked about the mix effect, and it sounded more like you talked about the customer effect than an assortment effect. Just to give a little more color on that. Is that the SMEs at the end of the day coming back slightly more now or maybe breathing slightly more optimism than the larger ones, or?
Generally, we are very cautious. Perhaps, we discuss in the management team quite often if we are too cautious, but we said, let's not go for growth and risk anything on the contribution margin or gross margin. But, we made jokes yesterday in the board meeting that we so for so long have been talking about negative mix effects. The larger customers is growing more than the smaller customers, and they... We've sold more of the assortments that has been the lower gross margins. But actually, now we do have positive mix effects, which is nice to see.
But it's difficult to give you a very clear answer, but we look at customer category by customer category and product area and by product area, and closely follow the gross margin development. And what we're also doing, which is a bit risky and potentially could have costed us, but it hasn't, is that we're actually reducing gross prices to increase our competitiveness, and by that also reducing the discounts to the customers.
So that is, of course, a risky thing to do, but we're doing it very baby steps, step by step by step, and ensuring that if you take an assortment, like stock batteries actually this year, bring down the gross prices, and the perceived price level is now improved, but you also bring down the discount level, so the price for the customer is actually the same. So we managed to decrease prices on a lot of assortments and gross prices and kept the margins. That's something we are very proud of, because it's a risky maneuver to do.
It's a big game, it's a big game to be played, no doubt on that. Looking at the acquisitions and the impact they've had on this year, obviously very good profitability coming out of that segment. Do you feel that there is any normalization there down towards your corporate target? Or do you see the potential that you continue to find these kind of targets and the targets you already have continue to deliver towards that higher level?
You're touching on something very important. If I interpret you the way I think, that is also why we don't integrate certain businesses, because if they are well run, high profitability level, if you... Exactly what you're describing could potentially happen. You integrate them, and they start moving in the direction of the integrated business, i.e. lower profitability levels. So that is one element why we'd like to keep them separate, and in some cases, don't touch them much. They develop nicely, cheer them on and try to find some synergies, but don't do any radical grips. Don't change what's not broken.
Sounds good. Looking at Sweden, just to help me bridge the growth you saw that you report 12% growth. You said 6% was coming from acquisition, little less than 2% from organic.
Mm-hmm.
What was the last 4%?
Yes, it's actually due to the increase of internal sales, because when we look at it on a country level, we include internal sales, and actually that has increased during the quarter because we had some disturbances in Vestby, so we actually sourced from Sweden. So that is driving some of the growth in the Swedish business in the quarter. A little bit strange, but that was-
Yeah
... the way it was in this quarter.
And does that, if you look at that item on the growth level, then that basically has adjusted away?
Yes, exactly. Exactly.
Ah, perfect. And one final question for me. Looking at getting the working capital to sales down to 24% from the current 28, is that mainly an inventory thing, or is there a potential in receivables payables as well as you see it?
Mainly-
Mainly inventory
... Mainly inventories. I mean, the payables, some potential, and we have moved in the right direction. Receivables is in tough competition with our competitors, so that is a tougher thing to change. But payables, yes, to a certain extent, and the inventory levels, yes, to a much higher extent.
Excellent. When you look at inventory, it's more of a question that you have the inventory to be able to drive growth, or is that a lot of, you still have a lot of shelf warmers that you need to sort out or?
We work closely, sales and procurement work closely together. They try to estimate the market some nine months to a year ahead, because that's what it takes when you buy things from China or Far East. And two years in a row, we have perhaps been a bit too hopeful that the market will pick up. We did not want to end up in a situation which we did in Swedol in 2015, where we pushed for own brands, and it sold out directly. That then it took us two years to regain the confidence from the sales organization, because they said: "Oh, no, we're not going to sell our own brands.
It's out of stock anyway." So we said early on, it's not gonna be any, any big stock outs. We need to have product at home, but then the market did not develop as we predicted, and then it's difficult. You get stuck with the product. They don't get old. It's not like milk, where you have to scrap it, but it gets stuck in the stock longer than we had hoped. So now we're gonna sell it out, and we reduce and revise sales forecasts going forward. So that, that is the main thing. I mean, external brands, it's easier. You can send it back in certain cases, you can quicker stop the deliveries.
What you order today, you get delivered on Monday, but own brands, it's a much longer process and difficult to adjust to the changing markets.
Excellent. And now looking at the cold winter weather we have faced in the Nordics here, at least in the first quarter, so to say, as you didn't get much of it in Q4. Have you had a lot of sellouts of your own products, or have you had the stock levels so you have been able to meet the demand that hopefully has been there?
I keep close contact with many shops, as we say, clothing departments, and none have said anything about that they don't have products. There was one winter boot that sold out, but then we have four other winter boots with exactly, more or less the same functionality. So we have had products at home, absolutely, and it's a good opportunity, exactly as you say. Normally, we try to sell out winter gears in late March, but I've been pushing to start doing that now, because you also have a tendency, a customer, you buy one winter jacket, you don't buy two just because it's cold for a longer period. So we sold now the winter gears most customers need, if they don't tear it up or burn it up or whatever they do.
But I also said that let's bring these slow movers closer to the cashier, so when you're on your way out, you don't buy a new winter jacket for 3,000 SEK, but perhaps you buy a new winter jacket for 800 SEK that we want to get rid of. So that is what's starting now. And for the coming 10 days, it's still gonna be cold. We're gonna push for getting the slow movers down, but they're not getting... We don't need to scrap them. They're not getting old, but we need to bring down the levels.
Just to get a feel for it, I remember when, when you discussed the, the weak Q4 2024, that I was, say, a negative snow shovel effect, as you talked to me, meeting up a, a very strong, say, Q4, Q4 2023.
Exactly.
As you talked about snow shovels being down 60%-70% at the time. What kind of snow shovel effect have you seen in Q1?
Up a lot. But as I said earlier, if it would have been this weather in 2022 or 2023-
Yeah
... the one, the ones coming in and buying those snow shovels, they would have bought many other things back in the days, but they, today, they buy the snow shovels. I can share one little, I mean, if you take start batteries, of course, as for one example, that particular, don't interpret me that it is across the line, but the start batteries, when it was cold, is up 40%-50%.
Yeah.
But only the batteries. They, the ones buying the batteries, they don't buy no new boots or gloves or heaters. So, so the winter-related products, yes, they, they sell a lot more-
Yeah
... thanks to the weather. Otherwise, it would have been strange, but we don't get this nice effect. We're getting a good effect, I shouldn't say anything else, but we, we don't get this really nice effect as we normally should have done in a weather condition like this.
Sounds very nice, though still, somebody's getting some extra out of this cold weather.
Yeah.
All the best, and thank you for all the extra color.
Thank you.
Thank you.
Take care. One more here.
Thank you. We have no further questions on the phone line, so I'll hand back to you, Mr. Ullenvik, for the webcast question.
Thank you. Most of them have been touched upon. I've tried to read at the same time as I talk. Could you give some color on the average ticket price for the store channels during the year and during Q4? Do you notice a positive trend? Do you notice a growth in the number of customers? Okay, no, that's a very good question, and we measure in all our shops how many visitors we have per day, and that is stable, as I've said, I've answered many questions on the same theme. So the customers are there to the same extent, but what they buy is less. They buy exactly what they need. So the average ticket size came down. It has stabilized, but the average ticket size has come down.
So in a market condition, as we have been through, and we are hopefully at the end of, there's a lot of inefficiencies that happens in organization like ours. If you take tendering process in a good financial climate, you don't—customers don't ask for tenders, but in tough conditions, they ask for tenders for down to SEK 10,000, and they ask us, and they ask two different competitors, we need to tender. Even customers we have contracts with, and we think we are the sole supplier, and still the customers ask for tenders to test the price levels. And also in the shops, there, there's a lot of haggling about prices, and they buy exactly what they need. So in the market conditions, as we've been through, trying to reduce cost and get rid of
people, it that happens at the same time as inefficiencies increase. So the same number of people in the shops, but lower ticket sizes. Let's see, there was another one at the number of visitors, 2024 to 2023. That I got the question, if the number of visitors in 2024 compared to 2023, but I would have guessed it was a little bit lower in 2024 than 2023 because the market conditions was worse in 2024 than 2023. Without being 100% sure, I would imagine that the visitors in the shops were lower in 2023 than 2024. Very good. Very good questions from everybody as usual. And no other, Raf? No other from the line?
No, we have no further questions on the phone line, sir, so I'll hand back to you for closing remarks.
Thank you. Then I'd like to say thank you very much for dialing in. We are reasonably happy for a decent ending of 2024, increased gross margin, sales up, even a little bit organic growth, cash flow, okay, increased dividend from 2 to 2.2 SEK, debt leverage from 3.1 to 2.5. Refinancing again, well, negotiated with the banks, very good conditions and a 3 + 1 + 1. EcoVadis, platinum level. So I, I think we can look back and say we are reasonably happy, with the last quarter and a few weeks into 2026. But the market, is more or less the same, but it feels like we are getting a little bit in return for the struggles we do.
So even if the market continues on this level, we think we can develop okay, and if we get a little bit help from the market, we can develop better than okay. The focus areas are the same, focus on sales, getting the inventory levels down, structural grips are taken. The journey continues, as I always end, stay safe this Friday, the thirteenth, and thank you for listening in.
Thank you. This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you, and have a good rest of your day.