Earnings Call: Q4 2017

Feb 6, 2018

To experts' presentation of the Q4 and the full year 2017. Our President and CEO, Claus Balkov, will present the year together with CFO, Anders Lexmann. After the presentation, there will be time for questions from you here in the audience as well as from those of you who are watching us over on the website or over telephone conference. And with this, I hand over to the 1st speaker, Joao Farko. Thank you, Cecilia. And of course, let me also then welcome you to our 4th quarter financial presentation that will also cover up our full fiscal year 2017. Perhaps also I must comment on it's an exciting day, but I was more to relate it's been an exciting year, not only that it's been my 1st full year as CEO of Axford, but also due to all the progress and all the activities that have happened in Axwood in 2017. Our agenda today, we will cover, obviously, the key ratios for the quarter as well as for the full year. As Cecilia said, Mr. Lechtsbon, our CFO, will then go through our financial position. And I will then make a few comments regarding our comment about our outlook going forward. And then obviously, we will have a Q and A session. Before we go into the numbers and into the quarter, let me just give you a quick update about Axwood as it is today. We are a clear house of brand platform. We're in, what I would say, well very well positioned unique concept in the sector in our various segments and also in various strong segments in the low price, in the convenience as well as in online. And in this platform that we have, one of the key ingredients for us that creates success and also profitability is our strong collaboration in the back end mainly relates to the range development, relates to the logistics as well as IT. On a rolling twelve basis, we're now up at SEK 46,000,000,000. We have and we are happy to note that we have over 4,000,000 customers in our sales units every week, and we cover today almost 300 owned stores and have a collaboration over 1100 stores across the Swedish market. Back to the report. If I should comment and make few highlights of the reports that I'm about to present today, it's clearly, 1, a fantastic growth that we've seen in 20 17. We are clearly gaining market shares to market. 2, our profit is very much in line with not only our forecast, it's also in line with last year and also our long term financial target of over 4% EBIT margin. And we have made some historically high into the quarter and into some of our key ratios, and I will then start with a few comments about our 4th quarter. We are reporting another strong sales period with a top line growth of 7.3%. As you can see on the slide, we have a like for like development on a healthy 3.6%. And all segments that we are reporting is also showing a very good growth, even if one must highlight and lift out a fantastic performance made by Villis in this period with an 11% growth in the quarter and obviously supported by the acquisition of Eurocash. But as you can see, the like for like performance that we are now seeing in VILIS is over 4%, which is, as you know, it's very strong. Looking then at our margins in the quarter. We are coming in at the SEK398 1,000,000 profit, which is in line with last year. And as previous quarters, when we reported our profit, we are seeing the benefit of a positive like for like, while the margin is hampered by some of the investments we are doing, particularly then on the online development that we are currently running. And this quarter, we also have a fairly large effect. And as you can see in the various segments, we have large effect on the store expansion in Nelis as well as some restructuring costs compared to what we've done or linked into the changes we've done in the segment as we reported in the Q4. And also for comparison, I must note that we need to highlight that last year, we also had a fairly high one off on the pension refund, the so called FORA money, so which is obviously affecting the comparison between the quarters. By segment, positive to see again. Villis continued to make strong progress. Kempshaft is in line with the trend. Nellis, as pointed out, somewhat sticks out due to some of the changes that we've seen with the one offs in the quarter. And DAGA is also very strong in their performance. So I'll come back a little bit more related to some of the various segments when I covering the full year. So let's now go into the full year for 2017 and our numbers and starting then with the sales performance for 2017. If I summarize it, I must say it's been a successful 2017 with the growth, the top line growth in Axford as a whole of 7%. Again, the like for like, which is healthy and strong at 3.8% for the full year. And also similar to the Q4, for the full year, all segments are showing positive development. As you can see, Hamship is well, I comment with this strong performance. Hemship is also driving good in the market at a 4.6% growth as well as Nelis at 3.5% and DOGA. Then obviously supported by external customers, but also by our strong drive in our various concept is up over 5%. So with that and if we're then looking into our top line sales in our various concept in the store sales, which then include hemp chip franchise, we are actually reporting for 2017 almost an 8 percent growth. And if you look at the overall market that has a growth of little bit more than 2%, it is obviously clear that we are gaining some significant market shares during 2017. When we started this year, we were clear about some of the investments we're about to make and the strategic plan for that. So and that I think is also seen when we're coming in with our profit for the year. We are reporting a profit of SEK 1.8 1,886,000,000,000, which is more or less in line with last year. The segment the somewhat then lower margin, again, even if they are supported by the like for like, but the somewhat lower margin is a reflection of the strategic investments we've done, particularly in online, but also we have expanded more stores compared to last year, both in Annalysts and Hampshire as well as we have invested a lot in our with the refurbishment program, particularly in Hampshire. Our operating margin at 4.1%, well in line with our long term target of over 4%. And as you can see, when you're coming into the segments, again, Villis and DAGA continue to have strong performance on actually reporting all time high levels. While HEMT Ship and Narelys is then more affected by some of the strategic steps and the investments we've done. Let me then go through some or comment some of the data each or by each segment, and I start with the largest segment that we have, Viilage. And again, we've commented the sales performance for the year. It's been a positive year with almost 10% growth. Eurocast acquisition has played out well for us in terms of top line growth. But also as you can see, we are really noting a healthy year overall from the Villiers store chain in general, delivered by more customers visiting our stores and online and also higher ticket value. We're able to maintain our profitability during this period. We have a strong investment going on for the online business and actually is doing really good in terms of our online performance. And we continue to drive more customers to be able to meet more customers from an online perspective as we are rolling out our online platform to more and more stores and cities. Hemship is also clearly gaining market shares behind a healthy 4.6 overall top line growth. Our like for like has also been positive at 3.1. We have closed some stores during this period. We've opened up some stores We also converted some stores in the period to franchise. It's been a year with high investments. Regarding particularly into the online segment, as you can see, we already today have onethree of our own stores is now covering online service to our customer. So it's been a year with high investments, but it's also been a year where we've taken some steps in terms of developing our store and our store structure. As you can see, the margin has been hampered somewhat about that. It's been an investment year for us in Hemshad. And if I comment the reason for that, and I will actually cover this in the previous quarters, but let me just remind you of the 3 key areas that has affected Hemship in this year. And it has been the refurbishment of the stores, particularly then even if we have more stores that we have refurbished than ever. One store particularly has been highlighted out, which is Hampshire City that we had to close for 4 months. It was one of our biggest stores that had a bigger impact during the year. We've opened up 5 more stores compared to last year. And as you know, starting new stores, it hampers the margin initially until you're up to full speed. And online, as comment, we have rolled out online fairly aggressive in the program or in the stores or in the network. Let's now go into NALIS, which also is showing a good growth and I would say a solid profit when you look at the full year. As comment on the Q4 was affected of some of the refurbishment, but from a whole year, it's been a solid year. We have some elements in this where the it's been seen a positive sales performance in Snabgos. And so we have a positive drive from that. But also, clearly, we've seen lately then impacts on our margin in terms of restructuring. That's been in the area of around SEK 10,000,000,000. But also store expansion, we have in this year opened up 2 more stores, which relates to almost 10% of all the store networks. So it's obviously from even if 2 stores is not that many, but for Snabnos, it's fairly high portion. We have seen an effect of the slowdown of the dinner bags that has impacted somewhat. We made the reorganization. So we made some structure, and I will come back somewhat to that as well as we are now restructuring NALIS going forward as of 2018. We also rolled out the online platform for Snubgirls, which has been a very positive and obviously a positive way for us to meet our customers in an even better way. And then finally, in terms of going through our various segments, let me just give you some comments about DOGAB. And obviously, in overall top line here, it's a very solid performance that has been reported in our DAGAB operation. But the positive sales, we have improved our efficiency. We have positive effect from the Saab acquisition that we made in the beginning of this year. And I would say we've also been able to maintain our margins in DAGA despite that it also includes the acquisition of MAP. TFE, as you know, was a company that made some losses last year. So that ends my first part in terms of going through some of the numbers. Anders, please join me here on stage and hand over to you to go through our financial position. Thank you very much, Fios. So let me then begin to talk a little bit about the cash flow for the year. We had a strong growth in Axford, and that provided us good operating cash flow during the year that is in the same level with last year. We have increased our investments quite high if you compare to last year, and that is both acquisitions and organic reinvestment in our operation. And I will come back to that later. We have also a positive effect in net working capital during the year, and that is mainly explained by a positive calendar effect in December. And we have also decreased our dividend during the year if you compare to last year. And we ended up with a cash and cash equivalents with approximately NOK 1,400,000,000 at the end of the year. If we take a closer look at the development of our net working capital, we can see over the last years that we have released quite much working capital, both in Kvaerner and as well as in if you compare to net sales. We have improved the most important balance sheet items, for example, accounts receivable, inventories and accounts payable. We have not managed to develop that this year. We have a little increase in working capital and that is mostly explained by our new acquired companies that is that are not that effective in working capital as Exod in total. Coming back to the investments for the year. As Kvaer said, we have historically high investments with approximately a little lower than SEK 2,000,000,000. And if you exclude the acquisitions of SEK1.1 million, we have invested in our operations in wholesale, retail and IT with approximately SEK 828,000,000, which is an increase from last year. And we have increased it in all the segments, both in retail and that is mostly explained by an increase in hemp shop, but also in the Wholesale Business and in IT. If we then take a look at the depreciation levels, that is very stable. And if you compare it to our investments, they are various a little bit more, but the depreciation is a bit lower than the investments if you look back a couple of years. And if you take it in relation to net sales, that is very stable, approximately 1.7% of net sales. And that has decreased a little bit this year, and that is also explained by the acquired companies. Let me then also take a summary of the balance sheet effect of the acquired companies. We have boosted our balance sheet with approximately SEK 500,000,000. And we have increased our goodwill with approximately SEK 800 1,000,000 and that is around 70% of our purchase price for the for companies. We have also acquired, as you can see, other intangible assets, and that is trademarks mostly, but also the customer relations. And we have a minor impact on the P and L with about EUR 4,000,000 euros in amortization yearly. If we then take a look at our development of our net debt, you can see that we have been debt free since 2014. Of course, we have various we have debt in our quarters, mainly in the Q1 due to our dividend, but at year end, we are debt free. And we also see that we have a very stable ratio of a little bit over 40%, and that is well met if you compare to our long term goal over 25%. So to summarize, we have managed to grow and invest with our internal resources. Our capital employed is in the same level as last year. And also the return on capital employed is in the same level as last year. So we have a solid base financial solid base and we are well equipped for future growth. And with that, Claus, I hand over to you again. Thank you. Thank you, Anders. And well, as you can see, we are in a very positive financial position, but also, I would say, on a healthy trend in terms of growth. And if I then move on from here, also it's clear to see that even if you're in this position, we're also now in entering a fast changing market with a lot of opportunities, but also, obviously, some challenges as always. And I'm not going to go through my strategic plan in too much detail. We covered some of this in the Q3, where we also covered some of the trends that we talked about in terms of how consumers is now changing into more service, the digitalization, the sustainability, etcetera. But we cover that in the course in the Q3, but also we cover that on the Capital Market Day. But let me, just for the sake of it, at least make a quick recap in terms of our strategic platform where we outline that from in form of a strategic house, where we are clear about that our direction is to take a leadership in good and sustainable food at great value. We have outlined 5 strategic areas to be able to deliver upon this mission. Growth is on a top priority for us as we have 3 out of these 6 areas will cover growth, 2 will cover efficiency and obviously, 1 will cover our people, their most important asset that we have. And then across the whole areas, across all areas, it relates to an integrated operation in terms of how we drive our sustainability agenda. By as last as we covered on the Capital Market Day in the Q3, let me just outline and remind you of some of the key priorities that we are now focusing on. And I'm not going to go through all the areas. But one of the more important one is obviously our customer offer, where the priority is very much in terms of how are we developing our range to make sure we drive the good and sustainable food that relates to organic, relates to vegetarian, relates to health options, etcetera. We have a very strong platform in terms of our private labels, where we have really strong brands, as you can see at least also behind me here as well in terms of Garant, etcetera. We'll continue to develop our private labels in line with market and market expectation. We're also very much working closely with our suppliers not only to drive the range but also to see how can we take out cost out of the system to secure that we always continue to provide great customer value. And finally, from the customer offer point of view, the change that consumer is now adapting in terms of more prepared dinner solutions, the mix that they want to see, how that they want to see us offering, we'll continue to develop that platform even further that we can do a better job to meet these customer demands for today as well as for the future. Going into the customer meeting, we have also equally 3 clear priorities in that. As you've seen in the for 2017, we've taken some clear steps in terms of how we are updating our store network, where we're focusing particularly on hempship. We'll continue that program. We are around 60%, 65% cover the owned stores in terms of the refurbishment program for Hemship. We'll continue to drive that. We have a very strong loyalty programs, both in Village and Hemship. And obviously, this gives a lot of opportunities for us with managing and handling the data that we can have from these programs, but also how we can meet the customers in a better way. We'll continue to develop that. And finally, of course, the omnichannel agenda is clear for us. I don't think that anyone has missed that in terms of how we are driving an omnichannel experience in Hampshire and Deli, but also to continue to add on the benefit of the pure online concept that we have in our House of Brands strategy. From an expansion point of view, last year, we made a lot of expansion in terms of acquisitions. As I said, we still have acquisitions on our radar, but it's not that it's a first priority in terms of doing the same as we've done 20 17. As we are now focusing very much on the 4 acquisitions we've made, but as well as also to develop the pharmacy the online pharmacy start up that we are working together with some entrepreneurs to drive that and to link that as we go along into our network in Oxford in general. We also continue to open up stores. We are now guiding yearly in terms of store openings where we have a span of 4 to 8 stores that we plan to open up in 2018. Majority of these stores is planned at this stage in the village, but we also see opportunities for all our stores, all our change over our concept. And we'll continue to expand the online offer that we have across Swedish across the Swedish market, where, obviously, the more we'll be able to open up stores, the more online reach we will get. And finally, let me comment also on one of the key areas for us being a retailer and to become efficient is to drive the logistical agenda or the supply agenda. We are now taking steps into optimization. We are already today working with to optimize our warehouse in Johanxhopping. So we'll continue that to drive that. We'll have 3 dark stores today. We'll continue to develop these dark stores to link that as we move along into to link that into a more even more efficient operation as well as one of the area that is crucial for us as we go going forward is also the online distribution. I'll stop there in terms of the strategic focus and just end this part of the presentation to make a few comments about the outlook for 2018. And let me just start with what we reported in the Q3 in terms of restructuring of Nelis, which we believe is beneficial for the group in a very positive way, where we are now taking the temp organization and temp structure that will be linked or it will be handling to M Chip. All the external customers that is very much a logistical operation a snub growth as a separate segment in the group. As pointed out then, as well as I'm pointing out today, this will have no impact from a group level, but obviously, it will be some minor changes within the segment, and we'll report that as we come along in the Q1 20 18. We also have adjusted our long term financial targets. And as you know, historically, we have not had any growth target, but we've now added this, which we think reflects our ambition and our goal to gain market share. So we've added a long term target that we will grow more than the market. But all other targets remain. So with this, we are now leaving the yearly forecast and instead is focusing on our goal to every year deliver according to our long term targets, I. E, to grow more than the market and to deliver an operating margin at least 4%. And finally, our dividend policy is, as you know, a dividend of at least 50%. And based on our strong financial position and current outlook, the board has decided to propose to the AGM a dividend of SEK 7 per share, which is seasonal and an increase of the ordinary dividend of last year, which was SEK 6, an increase of 16%. So let me sum up my presentation, then we'll go into the Q and A. We are, from an Axford perspective, leaving 2017 as a successful and expansive year. We have a strong growth, and it's been a year where we made some actually historically large investments. We have a solid profitability, which is in line with forecast and is in line with our long term target. And I must say, we have a lot of energy and I would say a clear agenda for moving forward to drive further profitable growth. With that, I hand over to you Cecilia to lead us, guide us through the Q and A. Well, I'm sure there are lots of questions around here. And let's start with Niklas. Thank you. Niklas Ekman from Carnegie. Can I start with a question on Hemsche? You have been investing quite a bit in recent quarters, as you mentioned, on store refurbishment, on online sales. But still, you've seen that the sales growth of these recent quarters has slowed and it looks like in like for like sales at least you're growing a bit less than the market. Why do you see this? Why are these investments not rewarding you more? Well, I think if I just I'm not correct you, but in terms of when you're mentioning the like for like according to the market, our top line is clearly is we'll continue to gain market shares in handship. So from that perspective, we are growing. We're also meeting some fairly higher numbers last year. And I and it's clearly, we started and we've converted some stores. As you've seen, we have closed some stores. We also converted some stores to franchise. We've opened up new stores. Some of these stores is not up to fully speed yet. We've made some of the refurbishments we've done. It's also taken some time until we're up to full speed, which we think is a normal way. So we have we're putting in a lot of focus right now to drive hempship further. We are in a period where we are adapting and changing and investing, and we'll continue to drive that. So if you adjust for newly opened stores and the ongoing refurbishment, do you see that the underlying trend in MSF is stronger than what's than the reported like for like? Well, I think in terms of the underlying, of course, is like for like numbers is nothing more than the underlying. I cannot argue about that. But if I look at the franchise development that we have and if I look at the top line developments we were making, we are gaining positive share, but we're also meeting very high numbers versus last year. So now can we see more? Of course, we want to do that. We want to drive that. But I'm not saying that the investment we are doing is also clearly some steps that we need to do to further to really adapt ourselves to the next level. You mentioned that the goal for 2018 was to increase your online reach. Do you have a goal here in terms of where you want to be at the end of the year? This year, you've obviously opened a lot of online stores in both Willis and Hampshire. In terms of online Online stores providing online sales. Yes, true. And the focus now is where we are focusing more for Bill is to open up online rather than Hemshares. Hemshares is already today, as I pointed out, covering already onethree of the story is already today covering online. We made some adjustments, as you've seen, in terms of Hemshaft offer. We are now focusing more for Hemshaft on the coverage we have, which is fairly large as it is onethree of the stores. Can I ask about you mentioned some one offs in this quarter with the structural changes in NALIS? Was that the EUR 10,000,000 that you mentioned under the full year impact? That's correct. I'm sorry if I was not clear that. That is the 4th quarter restructuring. Okay, good. And finally, I was curious about the significant increase in dividend with 100 percent payout ratio. I mean, you obviously have the cash for it, but it was still a little surprising given that you're still looking at 2018 as a year of high CapEx and focuses on top line growth, not margins. So just curious on why raising the dividend by so much in a year like this? Well, we have we had a dividend payout of SEK 9 the year before that. So and I think we are in a very last year, it was DKK 6, but also was a year when we made a lot of acquisitions that we are not planning to do this year in the same pace. So when we think we have a strong financial position and a good outlook, so I think it reflects that. Okay. Thank you. Before we hand over to Daniel, I just wanted to talk to the telephone conference and maybe you remind them how to ask a question on the telephone conference. Thank you very much. Okay. Now we'll take a question from Daniela, Sandeep. Yes. Could you say something could you shed some more light on the investments that are sort of in terms of the online business that are impacting the P and L in 2017? And how should we look at that into 2018? And can you also say something about the growth rate of the online business in 2017? And maybe, I don't know, elaborate a little bit about the share of the group in terms of online? Absolutely. I'm not sure you're going to be totally pleased with my answers, but let me start with the first one. The online investment that affects P and L today, if you compare that in 2017, and if you should then compare that in 20 as it is moving forward. Obviously, a large investment for us was the acquisition of Mato Desser, which is, as you know, was losing money last year, and we continue to see that as they are in an investment phase. So that will continue, but it's not going to be that jump as we're not acquiring that or acquiring the same as we did 2017. In terms of Hemshopp and Billings, obviously, we made initially some large investments where you start to depreciate some of the IT investment when you're starting that. That has rolled in. We are obviously seeing when we are getting more and more volume that will support as we move along. The where you have an impact is every time you open up a new store and depends on how fast you open up new stores because that creates some investments and some start up costs for that. So apples to apples in that, it was a large investment year, I would say, 2017. In terms of now, we are obviously seeing that hopefully, with more volume, we'll see that will support us as we move along. When in terms of growth rate, we have a very healthy growth rate on online. We are better than the market, but we are not specifying specifically. But also, it's fair to say, and if we are significantly better than the market, we're also starting from somewhat lower levels, which is fair to say. And can you say anything more specific in terms of the CapEx guidance that you gave? You can see on the chart that it looks like IT was maybe €250,000,000 last year. Is that the part that will be sort of coming up quite a bit in 'eighteen? Or any details? That we can see now is that the IT investments will be in line with 2017 actually. And what's the gap between the €820,000,000 something versus the €9,000,000,000 to €1,000,000,000 that you're guiding for then? I would say it's in all segments, in the stores and, of course, in the wholesale operations and in IT. So Okay. One area where the optimization is one thing, for example, that we are doing in the warehouse. And is it right to believe that the change of sort of guidance that you're sort of abolishing the yearly EBIT guidance and adding the top line guidance. Is that should that be seen as something signaling that there will be some pressure on profitability in 'eighteen, but you hope to compensate to gaining further market shares or Well, I think you should there are nothing to do in terms of what we are trying to guide versus last year that we are changing. My opinion, it's more clear in terms of I want to have a clear long term target both on growth and on the margin, and that's how we are driving it. Obviously, if you're seeing it, we are at 4.1% operating margin. We're seeing that we are going to continue to drive growth, and we want to secure that. We're also delivering on our margin target as well. And I think that gives you a clear direction on where we're heading. Thank you. Okay. Let us take one question from the conference call. Operator? Thank you. Our first question comes from the line of Stellan Hellstrom of Nordea. Please go ahead. Your line is now open. Thank you. Yes, I would like to ask about Nelis. Did you have positive like for like sales in your stores in Q4? And is there anything to comment on recent development in the market? Anything you see that is changing? Hi, Stefan. Our development on Snavgos was positive in the 4th quarter. And we see that, as we pointed out, that there is a market that is, for us at least, very positive in terms of how we are reaching out to the segment in terms of cafe and restaurant that Saks Dunkirk is covering. So we are positive about that and we'll cover continue to drive that agenda. That's why also we have opened up more stores, which short term has some negative impact. But long term, we believe it's right to do to further cover the market. All right. If I may, I just also ask about the why you removed the guidance for the current year here. Is there anything in particular that makes it more difficult to predict development profitability development going forward? No. It's just when I look at the guidance we've done and if I look at the comparison what we are driving and how we are guiding now, I think that it's equally clear. So for us, it's more in terms of how we want to lay out the long term target in terms of growth. We are clear about how we are seeing the growth. We're also clear about what we want to do from an EBIT margin. There's no other signals in that. All right. Finally, just on the reorganization here of Nelift, is there any tangible cost savings that you see from this? From the reorganization, I mean? Yes. Not tangible. There are, of course, some we believe that we can be somewhat more efficient as we are combining some of the operations in Daghav as an example, but also in Hampshire. But also they're also very much aimed to support our business even further. There are some, but there is not significant for you in terms of how you calculate on it. All right. Thank you. And before we take the next question on the phone, we go over to Andreas from ABG. Thank you, Andreas. And on the ABG, to continue on the dividend question, but maybe the opposite question, why are you not hiking the dividend given you have a very high equity ratio given targets, free cash flow is clearly above 100% of net profits? No. I'm not smiling because there's always 2 various opinions apparently even out here in the audience. We've made a judgment in terms of how we look at it from our financial position and also from in terms of how the outlook we are moving forward. I think this is a balanced way. Okay. And within topic, this European Union law by 2020, you say that you cannot have refrigerators affecting the environment, right? So what's the status there on Axo and what's the CapEx need basically? I'm not sure, Rune, you want to comment that in more detail on those? We have already begin to convert it, of course, and we are doing it all the time. So we don't have any more specific detail than that. I think we are in well in line with the plans. We worked on this for some time. So and we'll continue to drive that. That's also part of the refurbishment program as well. So we're changing refrigerators and so far in this program. So that we are in line with what we know we need to have handled by 2020. Okay. Thank you. And on Klimschat, given the refurbishments and the other things you have touched upon here during 20 17. What's the status there? Should we expect continued margin pressure? Or are you done with what you would like to show? I don't think we should expect another Hampshire city effect, which was fairly significant, as you know, and we talked about in particularly the Q1 and Q2. We still want to refurbish continue that refurbishment program. As I said, we are slightly above 60% in terms of the number of stores that we have refurbished. We'll continue to do that. So that program will continue as well as obviously online is also continuing in Hampshire. But we made also some measures on online. And as I pointed out, we're not planning to open up too many store more stores in Hampshire at this stage. We also have adjusted some of the models that we have for online and also to drive we have a very positive growth for Hemshut, but we're also now looking into how we can become more efficient from an operational point of view. Could you please remind me of the update or changed modeling in M chip Online? We changed the fees. We had a SEK 20 fee historically, and now we've added a fixed cost if you're purchasing less than SEK 700. Okay. Got you. Have you seen any differences in online pickup between wheels and handshaft given that you have different fee structures in 2020? I think that's the beauty of the house of brand strategy that we actually are able to meet different models. And Villez is very clear in terms of they have the value and great prices, but also very clear on their fees in terms of both for click and collect and from online. And it's been received very positive from the customers. We have a click and collect share that is above 50%, which is if you compare that to Hemship, that the majority of Hemship is home delivery. So we see various behaviors and also, of course, with model tests where we can even be more innovative. So we're taking learnings all the time, but we're also making sure that we also have different models because I don't think that we are really sure of yet in terms of how exactly this will model out as we move along. The share on mine on food is still fairly small. And how far are we from the fact that maybe not Mark Tucacortorgab will handle the deliveries for Hemshopp or will For Hemshopp, well, I think we are looking into various steps here. We have the dark stores today where we're looking into how can we collaborate that with also particularly where we are existing in where we have the dock store Stockholm at Borre Malne. We're already today starting to work with the transports so we can use the same transports for the group. So it's a progress that we're working on more. We're clear about that ongoing development. Long term, as we talked about on the Capital Market Day, of course, we need this requires higher volumes. It requires also different kind of warehouses where we can also add optimization into this program as well to be able to meet as you know the margins are low. We need to handle it differently when volume comes up. And last one. I don't think you mentioned food inflation. What did you see for 2018? No, I did not. And obviously, as we've seen some of the Horace numbers that we believe maybe look a bit high, we are in more of the 1% to 2% range at this stage. But obviously, it's difficult in the early stage to predict, but that's in the range we are into in our mindset at this stage. Thank you, Andreas. And we hand over to the conference call and take questions from there. Operator, I hand over to you. Thank you questions from there. Operator, I hand over to you. Thank you very much. And our next question comes from the line of Christoph Sandstrom of SAB. Please go ahead. Your line is open. Thank you, operator, and thank you for taking my questions. Regarding online again, you are again the report that online growth was strong, but also affecting margins negatively. Obviously, it's a new business for you and you have start up costs and so forth. But going into 2018, online share of sales, of course, for the group should be higher compared to 2017. And then perhaps you would enjoy some advantages of scale in that business. So net net, assuming a market growth for online in the tune of 30% for 2018, are we looking at online being less or more of a drag on margins compared to 2017? Thanks. Our aim is to have a less margin drain, if that makes a quick answer to your Obviously, with volumes and with investment we have done, it obviously depends on how many more, as I pointed out, how many more cities and how many stores we roll out. But compared to the base that we have today, we will see that depending on, as you're pointing out, we're getting the growth. Of course, that will support that we will not see even further margin deterioration even if online still compared to the group is less profitable. Right. And a follow-up. At this stage, have any of your franchisees within the hemp shop business signed up for selling online? And would you prepare to incentivize this group further if there is continued low demand to sell through online? Thanks. So far, it's more from Hemshaft. It's a group owned stores that have started to roll out online. Our franchise partners is looking into this, but we are still at this stage as a group owned. Again, even no matter franchise or group owned, what we are working on that will support everyone as we move along, that is more to drive the back end in more efficient way. That will also include the hemp sharp as we go along. So just to be clear, no franchisees as of yet. We shouldn't expect any franchisees to sort of hook onto this platform within the next few months at least. In terms of what you should expect, of course, that is dependent on the franchises. But at this stage, no franchises is rolled out. And we are but also, of course, they are following this and they're looking into this and following it closely. Thank you. Thank you. Our next question comes from the line of Frederik Evason of Kepler Cheuvreux. Please go ahead. Your line is open. Thank you. Yet another online question and more specifically comparing Willis to Hampshire, we saw you planning on opening up in 10 new cities in villas, whereas no new cities planned for Hampshire. How should we sort of read that? Does it mean that Beelis is performing better than Hampshire when it comes to online? And if yes, what sort of mistakes did you do in Hampshire and planning to improve in 2018? Thanks. You should read that as I pointed out. We already have onethree of the stores in Henshoop is offering online, which is we don't have in Villis. So and for us, we see an opportunity to open up in more cities, more stores in Villis. Also, as I pointed out, the Villis concept and the customer acceptance today in terms of a high click and collect click and collect share is obviously also something that we think is positive and we are driving. Thanks, Akhir. And a follow-up on the CapEx guidance as well, more looking into 2019 and onwards. Is this should we see this as more of a normal level going forward? Or is it more hike due to the optimization of gun trapping in the dark stores, etcetera? Well, we are guiding yearly now 2018, and I'm sure we'll come back to 2019. But if I just come back to the Capital Market Day, if you look further on, of course, we're also seeing opportunities from line. Fair enough. Thank you. That's all for me. Thanks. Okay. I don't think we have any more questions from this telephone conference. Do we have any questions in the audience? If not, I would like to thank you for your attendance. And if you have any further questions, don't hesitate to contact us. Otherwise, we wish you a good day. Thank you. Bye bye. Thank you. This now concludes our call. Thank you for attending participants. You may