Good morning, everyone. Good morning, and welcome to Embellence Group's first Capital Markets Day. Yes, I'm eager to get started, but there are a few practicalities and formalities we have to go through first. First, I want you to read this notice, if you can, on the back. While you're doing this, I will inform you that exits are right behind you. The presentation that we will share today, it's available on our website since probably a minute ago. My name is Olle Svensk, and I'm the CEO of Embellence Group, and this is the agenda we have today. We will go through, and I will present our business. Then we will look into our strategy and our strategic priorities going forward. Of course, with this audience, we will also share and give you financial update and our financial targets.
We will wrap it up and then have a Q&A at the end. All right. Fasten your seatbelts, and now we will get started. At Embellence Group, we believe that the environment, the rooms, and the spaces we're in, affects everyone's emotion, everyone's feelings. Through the power of our brands and the power of their design, we want to make an impact, too. We have an ambition to be one of the leaders in the interior decoration category, with a focus on premium brands, with a certain focus on premium wallpaper brands, but also on other categories that are driven by patterns and colors, such as rugs and textile. This one. Our corporate focus is to make sure that we have a successful, long-term, good development of all our brands.
And this we do at the same time by respecting their uniqueness and their identity. And as a group, we will achieve this by ensuring that, our brands get the right support, the right to, to develop, to design their products with the highest quality. At the same time, we are utilizing all the synergies that we have by being a group. Let's go through some fast facts about our company. Well, we've been in premium wallpaper for 150 years. So yes, we have, picked up a few things. We have five strong brands, and we do manufacturing at three sites. We have a weaving mill for Pappelina, up north in Dalarna, in Leksand. We do, digital printing for customized wallpaper, in Italy for Wall&decò.
Then we have one manufacturing entity that we actually operate as a separate entity, and that is Borås Tapetfabrik. Head office is in Borås. We have brand offices in Italy, in U.S., and in the U.K. And last year, our products were sold in more than 100 countries, but it's Sweden, U.S., U.K., and Italy are the main ones. Let's have a quick look at our history as a company. Well, back in 1875, Cole & Son started up. 30 years later, Boråstapeter and Borås Tapetfabrik was started up as well. Then, in the late nineteenth and the beginning of 2000, Artscape, Pappelina, and Wall&decò saw the light for the first time, or the sun for the first time.
So these five brands and one manufacturing entity, together with the lean head office of Embellence Group, that is what Embellence is today. We are in a company, and we love brands, so of course, I want to give you an update or presentation of our different brands. Where to start? Of course, with a brand that is the reason that we are here, the root of this company, and that's Boråstapeter. Boråstapeter was started by a person called Waldemar, and he had a vision that he wanted to create wallpapers for all homes, all kinds of different home, but all of them really with a strong connection to the Swedish roots, the Swedish roots with, in terms of colors and patterns, in Sweden as well as around Scandinavia.
Last year, Boråstapeter reached a revenue of SEK 283 million, sold in more than 65 countries, and with Sweden by far being the biggest one. Our second largest wallpaper brand, well, that is Cole & Son. Cole & Son is, I would say, one of the strongest brand in the wallpaper industry. It has a rich history, but it's also very modern and future-looking and setting trends in the industry. It's known for its focus on quality, craftsmanship, artistic excellence, as well as being quirky and having what I would call talkative design, design on the wall that makes people talk, of which you see an example here to the right. Last year, Cole & Son's revenue reached SEK 154 million, and the brand was sold in more than 75 countries, and U.K. and U.S. are the biggest ones.
Our third wallpaper brand, then, well, that's Wall&decò out of Italy, outside Bologna. Wall&decò stands for beautiful design, but also innovation. Innovation in the way to go to market, but more importantly, Wall&decò is a reference brand in the category of customized wallpaper with different technical solutions. The traditional indoor wallpaper, but also our system for facades and wet system for shower rooms or for wet rooms as a beautiful alternative to tiles. Last year, Wall&decò reached revenue of SEK 98 million. It's our most international brand, sold in more than 100 countries, and having Germany and of course, Italy, as the biggest markets. The recent years, we have acquired two companies outside wallpaper: Pappelina in 2021 and then Artscape in 2022.
And the first time we came in contact with Pappelina, we saw that it had the ingredients that we are interested in. It has a distinct design and a distinct positioning. It's playful, it's joyful, clear Scandinavian touch. Pappelina reached last year, SEK 47 million revenue and is sold in more than 50 countries. And the channel that Pappelina is sold in is another thing that attracted us as well. It's sold through interior decorator stores, so we thought—we think it's a good fit. Main countries, it's really Sweden, U.S., and Germany. Then 2022, we did another acquisition, and that's Artscape. And Artscape, for me, that is really wallpaper for furniture or for windows. Sorry, windows. Here is an example. So it's apparently, I'm moving too much, huh?
It's for privacy, but also for decorative solutions, like the example here with New Leaf that is sold a lot in the U.S. and really well appreciated. Artscape sales is very much focused in North America, and this is where we see that we have more potential for the brand. The market for window films has been a little bit challenging over a couple of years, but now it's coming up, and we estimate, and the industry estimates that the market is growing some 5%. North America being really the focus for this brand. So these are our five brands. In 2022, we decided to make a change.
We wanted Boråstapeter to focus on the design, the development, the marketing, communication, and sales of its brand, so we separated Boråstapeter from the manufacturing. That is what is today, Borås Tapetfabrik. Borås Tapetfabrik has a lot of knowledge, deep insight and knowledge of how to produce wallpaper, insights in material, in the inks, in different printing technology, offering everything from classical surface print to high-end, top-notch digital printing. The most part that Borås Tapetfabrik is producing, that's through the Embellence Group brands, but it also has external customers, mainly in the Nordics. Last year, the revenue reached SEK 48 million. Thank you. All right, let's see if this works better.
Yes, so our five brands, our manufacturing entity, and I'm proud to say that with, with all the hard work that we have done, all the passion, engagement, and, and drive we have done as a company over the last years, we stand stronger today than we did some years back. If we look at what kind of company we were in 2020, we focused on wallpaper, only wallpaper. So from a product point of view, from a geographical footprint point of view, it was very much Nordics, complemented by U.K. and Italy. And then our sales channel, that was the traditional physical retailers. Our sales development was weak, gross margin was not strong.
Then, you know, taking a step ahead to where we are today, well, we're still very strong in wallpaper, it's still our primary focus, but we have complemented it with rugs and other interior decoration products. We have a much healthier and more balanced geographical footprint, which is very healthy when markets are, you know, developing in different ways. We have not stopped investing in marketing, in product development, in sales, in fairs during this period. Still, even though the market conditions have been a bit challenging, we have been able to keep our EBITDA margin more or less on the same level. But, you know, enough about history, let's talk about the future, because that's why we're here, right? Let's talk about the market.
What we are dependent of, any company is dependent of, is, of course, the winds of the market. What is happening out there? It's a good day to sail or not. If we look at the rug market, we have to be honest, the rug category, it's big. It's very large, and we are tiny. So to be perfectly honest, that shouldn't not really affect us or shouldn't stop us from growing because we are small. We are strong, but we are quite small. Window films, as I mentioned before, the market, after a couple of tough years, is now coming back with a 5%, so, and we are focusing on the U.S. and North American market.
A category, though, where we are affected by the market conditions and the winds is, of course, wallpaper, because we have a large share of our business there and have a good business there. So let's take a look at the opportunity, market opportunity, wallpaper. First of all, wallpaper sits in the global interior decoration market, and that's a great place to be because it's big, it's large. It's $800 billion, of course, dominated by furniture. Furniture is around 55% but, of that, but it's a good place to be. If we zoom in into to wallpaper, well, the global wallpaper market is $10 billion. 60% is residential to end consumers, to private homes, and 40% is contract, that is hospitality, the hotel sector.
Then zooming in even further into our addressable market, well, our addressable market is $2 billion. Why? Because we focus on the premium segment of this category. We focus on the premium segment. And an important driver or trigger to the demand of wallpaper, that is actually renovation, the intent to renovate your home or your hotel or what is it? And we continuously follow that. And if we look in a little bit more into detail, what has happened over the last years, well, here you see a graph of the homeowner's renovation intention in Sweden, in U.S., and the U.K. And as you can see, all of these market has gone through a quite challenging time, especially post-pandemic. U.S. held up fairly okay, relatively others, but U.K. has been hardly hit. Compared to 2020, it's actually the intentions are down 27%.
The message with this slide is we have performed better. We have performed better in this market. But there are some good news actually as well. Not actually, there are good news. A month ago, I was in Salone del Mobile in Milan. Salone del Mobile, it's one of the the most important fair for furniture and interior decoration, most influential one in the world, I would say. This year, Salone del Mobile reported 20% more visitors than last year. And if that is not a good indication of that things are coming back, I don't know. It was really a positive buzz there, and I bumped into several CEOs and owners of, of, in the industry.
You know, the conclusion here, I would say the view of the industry is that the market this year is likely to be flat, but there are several positive signs that it will come back from 2025 going forward. So let's talk a little bit about the competitors then. The wallpaper category is really fragmented. You have many, many brands out there. The large focus is on volume and lower price points. So 75% of the market is really on the basic level of the market, the entry level. Lots of traditional national heritage brands with their own production, typically focusing on its domestic market, maybe have some sales in the nearby country.
Few large players in the category, very few with a revenue of SEK 1 billion or more, and those who are, who are present there, maybe are mainly focusing on the entry segment, too. But yes, there are new entrants into this category as well, taking the benefit of digital printing and all the speed and the that you get out of that. You have several ones in the market. They are growing, some of them. They are, and they are mainly taking business from traditional retailers, traditional physical retailers. Because the wallpaper market is divided into... You can say that it's divided into two segments. It's the residential part, where it's consumer-driven, you can say, consumer making the decision, representing 60% of the market.
The other part is contract, where hospitality, resort, hotels, restaurants, there, the decision maker is not the consumer. A strong influence there, and many times, the decision maker is actually the architects and designers. So these are the two sub-segments of the market, and there are, there are two things for you to remember here, two very interesting dynamics. First one is what's happening here. Traditional retail, you know, lower footfall in the traffic in the stores, and more and more consumers buying online instead. So there is business going from this area into this area. That has happened for a long time, and it continues now. That's, that's one takeaway. The other takeaway is the notion around hospitality. Hospitality is growing, and there are many reasons for it.
There are large investments into the sector, both building new hotels, new resorts, but also renovating a lot. So that's the first reason why hospitality is growing. The second one is that wallpaper is actually, you know, picking up and becoming more and more a very attractive alternative because so much. It offers a very good alternative to stone and tiles. It's easy to install. It's far more affordable for them to install. It's a more sustainable solution, but then, of course, it's so beautiful compared to stone, right? So there are strong drivers that this, this part of the market is growing. It's growing a lot, and we will take a part of that. All right, it's time to talk about our strategy and our strategic priorities going forward. And this is the way we will create shareholder value.
This is the way we will create shareholder value, and this is the chart I will share with you many times. First of all, we have the foundations. Then we have the three foundations, and then six strategic growth areas. A foundation, that is something every company has. That's kind of the personality or the. That's how a company is. Something that doesn't really change over time. It is there. These are our foundations: entrepreneurial spirit with commitment and engagement, creative spirit to lead, not to follow, and to do things that are not unexpected in the market, to drive the market. The second one, the centralized operating model, so the brands can focus on what they are best at while getting support and coordination from Embellence Group. The third one is strong finances.
Even through this, you know, this period of which has been challenging, we have delivered strong finance. We have strong gross margin. We have good cash flow, and we have a decent EBITDA margin. Another thing that we are really as well, it's a sustainable company, and this is another thing that we have been for many, many years. I mean, Borås Tapetfabrik was the first large manufacturing in wallpaper that moved from solvent-based ink to water-based. So it kind of sits in our DNA, and we are just happy that others are starting to tag along, but that's in our DNA. Our six strategic growth areas, then what we will focus on now, the four or five years ahead of us. Well, the first one, it's to, we will dial up our growth, focus on organic growth.
There has happened many things in our company. We have a different shareholder base than we had before. We have a new chairman. When we first met, pretty quickly, the stars were aligned because we share the same passion for strong brands and organic growth. So to change the strategy became quite evident quickly. But then, more importantly, to have a company that generate organic growth creates energy. It creates a good place for our employees to grow. It creates a winning culture, and then, of course, also, you become really sustainable as a business. So that's a change to, compared to our strategy before. How we will do it then? Well, we have great brands today. We will just, you know, continue to do this, to support them in becoming even stronger and even greater.
We will continue to nurture our design icons, some of them that you saw outside here, but we will also add even more resource in product innovation, in relevant product innovation to the market, focusing making products more durable, sustainable, and as always, when we are around, beautiful. On geography and channels, well, I expect a lot to happen for all brands in the U.S. the coming years. We are still small there. We have huge space to grow there across all brands. From a channel perspective, keeping in mind what I said before, it will be about hospitality. We are making good inroads there now, but also our direct-to-consumer sales. The fifth strategic growth area, well, it's utilizing group synergies. We have five great brands and one manufacturing entity.
All of them are fairly small, and it's by utilizing the fact that we're part of a group, we can help them and support them to elevate even further, and we can get nice economies of scale as well. Then the sixth one here, we are narrowing down our focus on M&A. It's still a component of our strategy, but a much narrower focus. It needs to be premium positioning of the brand, should be wallpaper, should be rugs or pattern-driven textile or textile. So that's the sixth one. So we, we'll continue to look at, companies, but with a narrower focus. And we will, we will deliver on this. We will create great shareholder value. Let's take quick look into the foundations then.
I've been through part of it, but creativity and passion, when you are in the high end of the market, the premium part, quality in all touch point is fundamental, and also the fact that we are committed to make a positive impact, because desirable products can only come from sustainable business. We are running a decentralized operating model and get strength through coordination and taking the benefits of having more brands and offering the right service, not necessarily the same everywhere. But all brands, they should be both autonomous but also responsive. Strong finances, I mentioned that before. EBITDA margin over these challenging times has been above 12%, cash conversion above 70, and cash from operations more than SEK 300 million. So our net debt end of first quarter was SEK 1.6 billion.
Then, what we will focus on now, the coming four or five years, dialing up focus on organic growth, but also develop our strong brands and make them even more, excellent. Our brands we will always have a long-term vision for our brands. It's a matter of combining the roots and the heritage we have, but also be future and forward-looking. And we are a product company, so products will always come first. The products are the carrier of our brand promise, and we will do that by nurturing our design icons, deliver new designs, new materials, and as I said before, always with focus on quality and excellence. And what our brands do then? Well, they, in addition to this, add key marketing and sales ...
to address their products into their core audience, being it consumers or architects and designers. And now, I'm really happy to invite up Marie Karlsson on the stage. She has been running the Cole & Son business for since 2018. Welcome.
Okay, thanks so much. Okay. Hi, everyone. You don't need it. Okay, great. I can change this. Okay. I'm on then. No? Yes, you're on. Okay, great. Hi, everyone. So delighted to be here today, and honored to be here to present for you one of the exciting brands within the group. So I am Marie Karlsson. I'm the creative and managing director of Cole & Son Design House. I'm based in London, in the heart of Chelsea, a fantastic place to be, working in art and craft. At Cole & Son Design House, we cherish one thing together. We are all driven by our passion for art and craft, and this is really what reunite us there. So 1875, this great man called John Perry, fantastic craftsman in London, started this fantastic, prominent brand by being a block carver.
He also was very clever. He bought in loads of extraordinary designs dated back to the 1700s, and by that, he entered the most amazing building in the world, the Houses of Parliament, Buckingham Palace, Windsor Castle. Yes, Cole & Son is part of English heritage and culture. So thanks to John Perry, I think the world of interior would definitely have been a different place without him. And we have continued that legacy and created new, fantastic buildings in the world, and I can stay here maybe for one hour, talk about those super fantastic places in the world that we're decorating every day. Not only those extraordinary heritage building, but also private members clubs, hotel, boutique hotels, just to mention a few of them. In Cole & Son, we say, "Design first." We work with two type of pillars.
We work with living art and living history. It's really set the strategy for us, and it allows us to work in different way when we create the future collections. So in our archive, we always go back. It's a very sustainable way how to work in design. We go back and bring out those beautiful, beautiful, hidden originals from the past. We recolor them, we make them trendy, and we make them relevant for tomorrow, for this today audience. Under our living art, it's slightly different. Here is where we do new designs. We hand-paint in London, 3 Jubilee Place, a fantastic artist team work every single day to paint. We actually do it as we speak. They're sitting there and painting every day.
So if you want to work as an artist in Cole & Son, make sure you're prepared to paint for six to seven months of the year. Here we do the new, beautiful collections, and we want to be the owner of our artwork. That's why we hand-paint them, so nobody can say, "I did that." We will always be cherishing that. Under this type of pillar, we also take the opportunity to play with others, quirky brands who share the same values, who also have an archive, who also hand-paint, but they definitely or potentially are not in a type of wall design. They maybe are working with different type of craft. Here we have the luxury atelier, Italian atelier, Fornasetti. We have Ardmore, come from South Africa. Fantastic luxury, design companies in the world, who definitely bring some strength into the ingredients of a home.
Let me just swipe the surface of one of our pillar. So living history, custodians of 150 years, owner of probably one of the most extraordinary archive in the world, and they are carved. I mean, this is like walking into a wine cellar, but it's filled with blocks, and on top is pear wood, because that was the best and easy wood to carve in and backed with something else, and it was hand-printed at that time. And then you converted that technology into a surface print, which is this. And in this fantastical archive, we go back, and we play, and we bring them relevant, so that's why it's called living history. Just to mention, in 1961, we got awarded by the late Queen Elizabeth II by a royal warrant.
But Cole & Son was there a long time before. In the 1920s, we decorated Queen Victoria's bedroom in the Kensington Palace with our gorgeous Hummingbirds design, which John Perry, very clever man, bought, that design from the 1700s. Fantastic. It contained 24 blocks to create one little bird, and in that room, the artist even went in and hand-painted on the top, 'cause that was a very special place, where you need a special wallpaper. This is Hummingbirds, which we launched this year as well. We went full-on pink. This was launched in Paris, 2024, as a very relevant design, dated back to the 1700s. We have converted it into a surface print today. It's a 12-color surface print, so you need 12 of these cylinders to create this beautiful, pretty little bird.
This is what we do when we live art, so as relevant today as in 300 years back. Obviously, we have put in some other fabulous new designs into collection, but I just wanted to show you this. This is obviously style in a very quirky way. Another design icons, not so old, but very well known. This is actually one of my designs in my home. I love that design, but I have it in a different color. I had a couple of friends of mine come and said: "Wow, Marie, I saw that design on Netflix." I was like: "Okay, which film was that?" Because we are in loads of them, but you don't know we are in those rooms. This design was featured in the Sex and the City, and just like that, where fashion meet interiors and art.
We are there just hiding. We don't say so much, but we are the one who dress the walls. So it doesn't really matter what fashion icon you're wearing, because you will be dressed to the nines if you walk into a room with Cole & Son. Miami, I just had to bring this because one of my favorite, pastel pink. I mean, I think we all in Cole & Son, we have a relationship with Miami. I think you guys, you also have a relationship with Miami. I mean, it's just unbelievable. It's so nice, very Art Deco. It's probably the most used design for a front cover of a magazine. So we're not only just wallpaper, we are everywhere, where you need a special piece of design to create something extra. Let's touch the surface of living art.
So what do we do when we don't work with our archive? We create new icons. So maybe, I don't know, 50 years from now, there will be a new Marie standing here and inspire others, and that design team will go into the drawers and hunt for new icons and make them living history. Being custodians, there comes a lot of responsibility, and we are determined to continue doing that. That's why we hand paint and using modern technology to print, but in some cases, also, a different technology would date back 100, 150 years, just depending on the client. So living art, here is where we also work with our beautiful art ateliers like Ardmore, Fornasetti. Here, gorgeous design. If you saw the newest film of Lindsay Lohan, you maybe saw when she was there in the powder room.
That was that design in a different color. The new Cartier boutiques in the world also uses a lot of these gorgeous designs. So we are where you don't know, and inspire you in your everyday life. But after today, you will definitely go out and say, "Ah, hang on a minute, I think I know that design." PR and marketing is very important for us. So if we work or do a collab, that's extremely important. The values, what type of client segment, where do they operate, and we need to just see that those fits. But the most important, design first. And obviously, selective distribution is a fact. Leopard Walk, a lot in private members club, and yeah, very well used, absolutely amazing.
If you come and visit us in our flagship in London, you can go down in the basement with this guy. Beautiful. And then a very recent collab, something we really want to do. We're a British brand. Why don't work with another quirky brand? So, that one day, Stella McCartney and her team reached out to us and said: "You know what? Do you want to do a cool collection with us?" "Of course, we want." And what we really loved about that is because she had the design, she had a Toile de Jouy that she already done for the fashion industry, and she wanted to develop that. So that's the Fungi Forest, and she really wanted to work with a quirky brand like us.
So we said: "Okay, let's us focus on the raw material to create something that fits in the portfolio of sustainability as well," because she's very, you know, she's the rebel in that. So we really started to work on a fiber that we never done before, actually. So it was the best way ever to push the manufacturers to do something. Sometimes you have to do a collab to push that, and we did that. We haven't been so successful with that before, but now we were, so that was good. And, 79% renewable fiber. And here you have the close, Fungi Forest. And, yeah, I mean, super trendy in the world. You can eat mushrooms. It's gonna be coming to leather, so it's just right in time to do this. And we also use same type of distribution. We work with selective distribution.
We also have quite equal marketing mix. So there's a lot of values that goes together with Stella's, with a collab with Stella. So it's really one of a kind. And there we were, at Salone del Mobile, launched these beautiful designs, and we won the best collection of the year, the A' Design Award Elle Decoration International Design Award, and we were so proud. That's a nice fashion walk. I had music on this, but Olle said, "Not today." Oh! Some, yeah. Okay. Oh, that's good. A little bit. So then Fornasetti, Casa Fornasetti. So founded by Piero Fornasetti and, Barnaba Fornasetti, the son. He's the custodian of his father's work, and he loves what he do. He's an art freak, he loves design. Suits perfectly to work with Cole & Son. He's so playful, so fun to work together.
That's why we've been so, so successful in this journey. It actually requires a lot of analysis before launching a collection. It looks very nice, looks very easy. "Oh, that's just something you did in a day." No, it takes a lot of time to select those pieces that are gonna be in the future homes, because we don't look only for tomorrow, we look decades ahead to be trendy. And the Casa Fornasetti obviously only have the most prominent collabs in the world. I mean, just saying, it was fantastic launching a collection together with their launch, with their new collection, with Louis Vuitton. So that was quite nice. Look at that catwalk and then our new collection. So that's fantastic. So again, we feel that this is a long-lasting relationship. We have two amazing collection together.
We launched our recent collection last year. I would say these designs are probably the most used in the world of interior for interior designers. This is where they really love to play. And then, apart from doing all that, we invite people to us because we feel we would like to educate people as well in the world of interior, how fun it is with wallpaper. I was growing up with wallpaper all over the place. I mean, that had a massive impact on me, and therefore, we would like to continue that legacy as well. Here is actually our flagship. Beautiful. We run panel talks there. Lord Ed Vaizey, he's the former Minister of Culture in the United Kingdom. He was our moderator. Did a great job, by the way, managing creative people and people who love this.
This is the elite in the industry. You have everything from all the editors-in-chief of magazine, House and Garden, World of Interior, just to mention a few. And this is how we reach out to our audience. This is how we create communication with them. And then here, we did another event at Ett Hem in Stockholm, which we loved so much. So carefully decorated and taken care of by Jeanette Mix, who have done a great and amazing job there. So it was no better place for us to do a beautiful collection event. Yeah, just a couple of quick slides, recent projects. Shangri-La, Hong Kong, the President's Suite, 222 square meters. Loads of fashion events and other events being held in this beautiful place.
I know my colleague, Gianluca, is gonna talk more about projects, but I just had to show. And then, I don't know, maybe you remember, this is Berkeley Square. Not many people are allowed into this fancy building. Annabel's, the most prominent old private members club in the world. If you walk in those rooms there and in those corridors, you're all filled with Cole & Son, designed by Martin Brudnizki, who recently done the Grand Hôtel here in Stockholm. Fabulous. Being a part of Embellence Group has been so, so important for Cole & Son, 'cause our playground is really to create magic in the world of interior. So we get support and help with our strategy. We share beautiful synergies with our lovely sister brands in the group, and we are very, very determined that this is really a good collaboration for us.
Apart from that, our vision is to continue now, tomorrow, and forever, creating fabulous walls that will surround the world of interior. Thank you. Now, over to you, Olle.
Thank you, Marie. Thank you, Marie, for inspiring presentation. Well, this was about building exciting brands and fantastic design, but we add other ingredients as well to support this, and that is innovation, product innovation, both in materials and, of course, in products. We are doing that to make them even more desirable, but durable and sustainable. Beautiful, we are always beautiful. But it's also due to the fact that 72% of our greenhouse gas emission comes from products, so it's really important. And we have already recently taken some important steps here, and actually being the world's first, both of them. End of 2022, well, Pappelina launched Bio Edition. It's the first, the world's first rug made of biosourced carbon-neutral PVC, a residual from the forest industry. So it's made by the nature.
With those learnings and those insights, and this is where Embellence Group really makes a lot of sense and can support. With the insights we had from Pappelina, we brought that into Wall&decò and start to work on that last year, 2023. In the beginning of this year, Wall&decò launched d.ecodura. It's the world's first bio-based vinyl wallpaper with no compromise in durability, sustainability, or beauty. So we have all the certificates there needed to make inroads in hospitality, but we also offer a product with a 50% lower carbon footprint. And as an acknowledgment of that, last week, Wall&decò and d.ecodura received this prize from the German and received the German Innovation Award 2024 Special, because they were so impressed with the work that we have done to innovate that into the market.
Moving on then to geographies and channels. Well, traditionally, all our brands have been strong in their domestic markets, but then since four or five years, we are growing internationally quite a lot. And as I mentioned, last year, sold into more than 100 markets. Going forward, we will have increased focus on U.S., continental Europe, but then also around the Mediterranean Sea, where there are a lot of hotels and resorts being built. So this, when it comes to geography. Let's move over to the channels, where we need to mitigate the challenges that our traditional, you know, physical retailers, the challenges they are having. It's our direct-to-consumer sales. Our sales from our brands, from our 5 consumer brands into the end market. We are now sold in more than 35 countries.
For us, it makes perfect sense. It's perfectly logical to many other premium brands here. I mean, for us, brand building always comes first, and it's an opportunity for us to showcase our full portfolio. And it also provides for us, internally, fast feedback on products, but more importantly, on designs, on new designs that we bring to the market. Then, of course, we will benefit or we are benefiting from the fact that we, we are selling direct always at full retail price, and we have very healthy gross margins there. Going forward, well, brands, the brand positioning will always come first. Always come first here. But it's also a matter of supporting the customer on their journey. On their journey, in many cases starting online, and then might get, be offline in a store, back online.
We want to be there and give them a, you know, stellar experience across that journey. And the most important thing for us is that it's our brand that is... necessarily that it's directly from us. I'm more than happy if it's bought by one of our partners, but we want to win this business. Another thing worth mentioning is that we are only open up our direct-to-consumer in markets where it makes sense in terms of fact that it's profitable. Sometimes it's difficult to sell into a country. We will not do that just because we want to. So always prioritizing that. The other important channel for us on our future growth journey here is hospitality. And here to tell you a little bit more of that is Gianluca Laganà, responsible for sales and marketing at Wall&decò.
Thank you. I can use mine, right?
Yes.
Great, thank you. Well, first of all, I must say that I was amazed by your presentation, Maria. It was such a colorful and passionate presentation. I could almost smell the roses, you know? And yeah, so after I inhaled your passion, I need to exhale mine now. So my name is Gianluca Laganà. I'm born and raised in Rome, and I recently joined the Wall&decò and the Embellence family, so I get the great opportunity to attend today this event. So I thank Embellence family for having me here. Where I'm coming about, I mean, spent 25 years of my professional life in hospitality.
So I led and grew a business development and a market expansion of two companies, mainly one in which is the largest wellness and fitness manufacturer in the world, always focused on hospitality, and a second in cosmetics. I do see, like, this fil rouge, which it comes, like, to the senses, like, because the wallpaper is about the touch as much as, like, you know, the perfume industry is about the smell. It's something which is stuck in your mind, the tentative senses. As I said, like, my time was all about hospitality, which is an industry I love the most. It's very large, broad line industry. When we...
With the word hospitality, we means like multiple market segment, but here you see listed three, the main ones that we want to focus on. Hotels, of course, which are the right away, typical, like, you know, interpretation of the hospitality segment, but also the restaurants and bar and the leisure side of the business, which is made of spa, gyms, clubhouses, fast-growing everywhere in the world. The overall sector, like, worth $4.5 trillion. To give you some more data, I mean, it's like in 2023, after the pandemic, the luxury market, which the one that we focus because we don't want to swim in a red oceans. I mean, Wall&decò and Cole & Son want to swim in a blue ocean. So the four-star and four and five-stars hotel is the real target we have in our radar.
The market, the luxury market, in 2024 is expected to hit $106 billion with a CAGR, so an average growth over the past three years after the pandemic, close to 8%. A forecasted pipeline, which is due to construction and renovation, to hit a record in the next five years, so $160 billion by the 2029. So is a tremendous opportunity ahead. Of course, the U.S. market is leading by far any pipeline, and it's not just related to the domestic market, because the footprint in the U.S. market is made by the largest hotel chain in the world. Some of the names you're familiar with, the Four Seasons, the Hyatt, the Marriott joined with the Starwood, which is now today the biggest player in the industry.
The InterContinental represent themselves like the largest pipeline construction and the renovation worldwide. So that's extremely important for us to focus and to put our radar, like, in the U.S. because it's where the decision is coming from. No matter, like, you know, they do have regional offices across the world, but the goal ultimately will be what is called a glocal approach, something global going to local. And that's how we, let's say, mirror our organization worldwide. As I say, like, the goal is focused on the four and five stars hotel. The first impact for a client when it comes, like, to a hotel is the interior design. The new generation is, by definition, picking up the hotel based on, like, you know, the interior design. They want something hip, cool, different.
It's no longer a time where people just, like, you know, pick at the same hotel over and over to get an all-inclusive formula. It's more about the overall experience. It's sort of like a home away from home feeling, you know? But at the same time, when I'm going to the hotel, and believe me, I spend average of, like, you know, 150 days a year, like, you know, traveling and staying in hotel, I want to get inspired by, you know, the trend, the hotels, what I can bring as a takeaway home, basically. The great opportunity is not just, like, on the opening, of course. I mean, that's the very fast and immediate situation, scenarios in the market, but it's also about, like, you know, this refreshment, which is not a refurbishment.
The refreshment might come for several reasons, either refurbishing, for instance, like a hotel, or rebranding or a management change. Consider that most of the hotels are not owned by the chains. Like, they are owned by owning companies, so they are either managed or franchised. Or even, like, you know, the ownership change. So every three to five years, on average, there is, like, a little touch and refresh, and that's where we can play a very important role. Because a wallpaper doesn't mean that you need to go, I mean, over a reconstruction of the space. You can easily, like, you know, go for refreshing a room or any other areas in the hotels without shutting down the hotel. 'Cause you might imagine how expensive it will be to shut down a room for a hotel, which is living out of selling rooms. That's fundamental.
So we can pick up, like, you know, the business and make it with a state-of-the-art service, because when it comes to, like, you know, a premium product sold for a premium price, there must be a state-of-the-art service as well. And that's where we're also working to create evangelist, ambassador, like from a service standpoint, certified by Wall&decò, to spread the wings across the market. Wall&decò started 20 years ago, so it's a baby brand compared to Cole & Son, but we're still, like, dance together. As Olle has mentioned, like, our pillars are high about design and innovation.
As a matter of fact, in the last 10 years, Wall&decò has introduced the most innovative solution for the specific environment, such as, like, you know, wet, where the-- what is called a, like, you know, the technical wallpaper for the shower, and also the out, which is like, you know, basically customizes some outdoor spaces, if it's not even wrap the hotel façade in some cases. We got the highest certification, so we are ready to go, I mean, in any different market. You know that this product, of course, depending by which market, they do need, like, you know, specific certification when it comes to fire rating, like, sustainability and so on and so forward. But the most important things about our strategy is the project management, so how we connect the dots.
Basically, in hospitality, you have different decision makers, so it's about to build your ecosystem. I mean, because you have the owner, which is really powerful, especially, like, in some areas of the world, it's all about, like, the owner. It's his last word, such as, like, you know, in the Arabian countries or China. Then you have the architect firm, designer. Since the wallpaper is not a product specified by procurement at corporate level, it's very much up to the interior designer and the architect. The goal is ultimately to enter into specific and selected network that represent the brands, and they do have line of the pipeline. And then, of course, like the interior design team, procurement teams, or purchasing agent, depending, and of course, finally, I mean, everything which is the execution, so contractor and installers.
What is the real plus and why, I mean, this company culture shift is moving ahead in Wall&decò without, I mean, without, of course, losing, the existing DNA of the company? Because we can definitely keep going, on a very marked track, on, retail and residential, but at the same time, I mean, we have, like, a great opportunity to move faster, like, in the hospitality. The main reason is because of, the order size is way bigger than residential. Because we can hit different business areas within the hotel. It's not just limited to the room. We have, like, the lobby, we have the hallway, we have, like, you know, the clubhouse, the gym, the spa, so multiple areas, like...
Of course, the lead time and the decision time is a bit longer, but the return of the investment, so the time invested, is way bigger. It's definitely a great opportunity ahead that we need to catch. I select few picture just to show you, I mean, how the wallpaper is integrated in the environment, and that's the wet solution installed at one of the most iconic hotel in Florence, the Grand Hotel Baglioni. The wet solution is going for its eleventh anniversary, with 28,000 installation performed in over 81 countries in the world. This is a wallpaper installed on a fiberglass support, so that's the way the wet works. That means it's absolutely waterproof.
Water resistance can be installed, like, in wet environment as much as, like, you know, into spas. Wall&decò is a made to measure. It's a sort of couturier of the, you know, the, the wallpaper industry. So we can really work, like, any solution, without any limits in terms of, I mean, height, and customization, and that's a massive installation we made in a suite. So you see, I mean, how predominant is, like, you know, this, wallpaper solution, in a, Juliana Hotel in, in Brussels, Belgium. And more, this is, another example, how can we really attack other business areas within the hotel? We installed three of the hotel boutique in shop of the Bulgari Hotel in Shanghai.
Of course, Bulgari is a well-renowned brand in the luxury industry, which is now quite consolidated also in terms of footprint in the hotel business. So this is one of, like, the massive installations, so you see how, I mean, the wallpaper enhance also something which is, I mean, luxury by itself without any explanation. Sea environment, so different one. This is a resort in the Caribbean island, and is in Saint Martin, and is belongs to the Hyatt Inclusive Collection. I just want to catch your attention, the fact that we replicate these curtain waves, I mean, to match the rest of the interior, so it's really something which is really unique as a feeling. And, last but not the least, an iconic hotel in, Houston, Texas. This is called The Houstonian. The Houstonian's come...
The graphic installer you see either, like, on the ceiling and, on the spas, so that comes from a collaboration with one of our 38 designers we have, with over 2,000 graphics developed, plus new additions, so, presented at Salone del Mobile, which makes, like, you know, the spa environment pretty unique. So to summarize, like, you know, in a nutshell, my presentations, there's a large and very fast-growing market, which is led by U.S., but, I mean, is also having opportunity, great opportunity in, in Europe, as I always say, but also, like, you know, in the Middle East, just thinking about, I mean, the pipeline construction in the Saudi market, which is coming very strong. Wallpaper is a winning solution, is a win-win solution for the hotelier, definitely. Of course, luxury hotel wants to deal only with premium brands.
They want always to differentiate themselves, so we don't want to fight in the red oceans, like, with economy or budget or, or let's say, mid-scale hotel. That's not our business. I'm not saying that it's not big market. It is, but it's not our business. Large and well-planned project. A great symbiosis and synergy, I mean, among the brand in our portfolio, specifically with Cole & Son. And of course, as I said, you know, the geographic expansion that we expect coming, like, over the next 12 months. I think we should keep the ball rolling now, and I take you the lead. Thank you.
Thank you, Gianluca. So back to me then. Focus areas, the coming four to five years, hospitality sector growth, take part of the growth in itself, but also take market share there. U.S., a lot about U.S., and then, of course, the direct consumer part. Moving on to the next pillar then, utilizing group synergies. We are already doing that today, the traditional ones, but we will continue now to include more to support our brands so they can do what they are best at, and we can develop synergies and economies of scale as a company. It will be about several areas, but worth mentioning is here, digitalization, the use of artificial intelligence, but also global partnerships, what Gianluca was talking about here before. Then we have the sixth pillar around M&A.
Well, at the IPO, we had a very wide group, what we are looking at. Now, and a long list of more than 200 companies. Now, we are narrowing this down. With our updated strategy focus on dialing up our organic growth focus, this comes natural as well. So a more narrowed target list, focusing on wallpaper companies, rugs, and pattern-based fabrics with a good logical fit, but also brands that are in the premium segment. So our shortlist is now less than 20. Still relevant for us, or still of interest for us, so we will continue to look at this. Now, it's time for me to hand over to another of my very dear colleagues, and that is Karin, who will tell you about finance and sustainability.
Thank you, Olle. I would like to start a bit to talk more about our sustainability. Olle has already mentioned a couple of examples. For example, that Boråstapeter was actually a pioneer when they shifted over to water-based printing instead of solvent-based printing a very long time ago. We are convinced that we benefit from offering high-quality products, which are responsibly produced to reduce our footprint to our customers. We care about the environment, we care about our employees, and of course, we care about our customers. Our sustainability agenda, embellished with excellence, includes three focus areas: a sustainable value chain, a stimulating organization, and a sustainable organization, and a stimulating workplace, and responsible and ethical business.
In a sustainable value chain, we work hard every day to reduce our emissions and reduce the negative impact on the environment and on the climate from all... from our products. We work to optimize and have an efficient handling of our resource and materials management. A sustainable organization and stimulating workplace, we take care of our employees, and we promote openness, diversity, and equality. And of course, finally, a license to operate. We do business with integrity and in an ethical manner. Olle, you shared earlier the example of the Pappelina and Wall&decò collaboration, which we are extremely proud of and also got recognized for last week. Developing the first bio-based vinyl wallpaper in the world, actually, is a very important step for us, and this is what we would like to do more of. This is our priority.
Looking over the next 12-18 months, what will we focus on? Of course, we want to focus on further developing the products. We would like to drive the development in the industry forward. As a market leader, you need to be in the forefront to deliver better solutions for tomorrow. During this period, we will also update our overall sustainability targets, and we will commit to the Science Based Targets initiative. In 2026, we will be ready to report according to CSRD reporting as everyone else. First year of reporting is in 2026 for the year 2025. Being a sustainable companies also means having a solid financial position. We need to have the position to be able to fulfill our commitments.
So now, I will move over to our financial targets, which I know all, all of you in the audience partly have come for. So, very important part of the presentation. But before we go into the details and the weeds, we need to take a step back. Where were we a couple of years ago? What has changed, and what remains? So during the IPO, we were a company very, very focused on M&A. We had a very aggressive growth target, and, a lot of the growth in that growth target came from M&A, from acquisitions. We have done a couple of acquisitions during the years, but now, when we shift our focus to build our fabulous brands even stronger, we focus on organic growth, and that leads us to change the sales target.
The sales target we present today is an organic sales target, and any M&A we do will be added on top. So here they come. We will deliver SEK 1 billion in sales in 2028. We want to become bigger and more relevant, so SEK 1 billion sales in 2028. Everything else remains the same. We keep our profitability target of delivering above 15% EBITDA. We keep our dividend policy of with a target to pay between 30% and 50% in dividend every year, 30%-50% of net income, that is. We maintain our leverage target to stay below 2.5x EBITDA in leverage. I want to go in a bit deeper into the sales target and the reasoning behind it.
So SEK 1 billion by 2028, what that corresponds to around, perhaps a few of you already did the math while I was talking, that it corresponds to around 6% organic growth by every year. And we have done approximately for our legacy brands over the last 4-year period, we have done a CAGR of around 2%. This is a step up, but you need to remember, Olle shared the slide earlier about our core markets. Our core markets have actually declined with high single-digit numbers every year in this period, where we actually maintain growth of our legacy brand. We have, during the last year, added additional efforts in product development and sales and marketing to prepare for when the market comes back, and we will continue to add additional efforts into product development and sales and marketing to drive growth.
Going forward, the EBITDA margin target, and I am convinced, and all of us are, that we believe in delivering EBITDA in real money is more important than delivering an EBITDA margin. We want to become bigger, and we want to deliver an increased sales. That's why we will continue to invest in product innovation and sales and marketing and maintain our profitability target of 15% in EBITDA. We have, we have an organic sales for, sales focus, focusing on high-margin product and high-margin channels. We have pricing strengths, we have opportunities to improve efficiencies in manufacturing and sourcing, and as I've said before, we will continue to add resources into sales and marketing and product development. But we believe, or we are convinced, that we will reach economies of scale as sales grows. So how...
What does all of this that Olle, Marie, and Gianluca has presented today, what does that mean to our financial reporting? Well, I think I will make life a bit easier for you investors and analysts. Going forward, we will report net sales by each brand because we live brand every day, so that is our correct way of reporting. So we will share external revenue per brand in our quarterly report. We will also share the external revenue for manufacturing, because our factory in Borås, Borås Tapetfabrik, also have external customers that impact external sales. We believe this is well aligned with our strategy and the way we run our business operations. All of our other KPIs will be reported on group level.
We will report gross margin on group level, we will report EBITDA margin on group level, and cash flow, as well as all other balance sheet items on group level. When it comes from the geographical perspective, we will follow the standard reporting requirements, which we already follow in the annual report today. That is, we're gonna share our sales number by main geographies. So here's the Q1 numbers restated. In Q1, we had a sales growth of above 8.5%, and these are the sales numbers in the way that we will share them going forward, where we have the group, we have each of our brands, and we have our manufacturing sites. So over back to Olle for a summary of the presentation.
Thank you, Karin. Yes, the summary. To wrap this up, there are two slides I will share with you. First of all, our model of creating great shareholder value. We have the foundation in place with the entrepreneurial, decentralized operating model, strong finance. We have our six growth areas, dialing up organic sales growth, with the help of continue to build exciting brands, product innovation, nurturing our design icons, expanding into hospitality in the US market, utilizing economies of scale for the group, and narrowing down our focus on M&A. This is our model, and this is what we will execute. And I'm absolutely convinced when we do this, we will create great shareholder value. Financial targets, at least SEK 1 billion in 2028, over 15% EBITDA. The two other remain the same.
So this is summing up what we will do and what we are updating now you with our new, updated strategy, our focus, and our financial targets. With this said, I invite you up again, Karin, and we will now start a Q&A. And, Märta will start here. So please raise your hand, tell us which, which company you represent and your name, and, yeah, we get started. I think Benjamin starts off first.
Hello, my name is Benjamin Wahlstedt. I'm from ABG Sundal Collier. I have a couple of questions for you today. Let's see which ones to start with. I can start with this one: What has prevented you from making any acquisitions in the last quarter? It's a big question, I know.
What has prevented us? I mean, first of all, we have focused on how to create organic growth. It has also been the fact that we wanted to take down our leverage, basically. We were at 2.4 a year ago, now we're 1.6. We are in discussions, but we are prioritizing now the focus on organic growth.
We can add another one as a chairman, and none of the companies we're excited with in that shortlist were ready for a deal.
Perfect. Thank you. Perhaps more broadly, could you talk about capital allocation a bit? The headroom to your upper leverage limit is starting to get significant, and the cash flow in the coming years could potentially be quite good.
You're right. It is. I don't know what else there is to say about that. I mean, we You are correct in that observation, and we believe it's helped.
Yep. Perfect. Thank you. And then, perhaps more operationally then, you talk about adding more resources in product innovation. Could you quantify this slightly, please? Is this the way of the margin in the near term? And, perhaps, is there a way to quantify the current share of sales that go to product innovation, please?
I mean, we, Embellence Group today has a lean head office, and we will continue to do that. We have a lot of competence in our different brands and in our manufacturing entities, so we will utilize that. So we will have a team, and or we are having a team of talented people working together on bringing relevant innovation into the market.
... And perhaps, what is the size of that team?
It can always be more, but we have people in every company or every brand contributing to that, and also in our manufacturing entity.
Perfect.
The first time you will see the number on what we spend on product development will be in the annual report for 2024.
Perfect. Thank you very much. And then I was interested as well in the D2C channel. Could we get an update here? Any share of sales figure, for example?
I know, Benjamin, yeah, that you are always interested in that. I can only say that it will continue to contribute more and stronger than our overall growth, and it's doing that right now.
Perfect, and a follow-up. I know you say you get a better gross margin in the D2C channel, when cutting out the middleman. Is it accretive or dilutive for the group's EBITDA margin overall at the current size?
Can you repeat that?
It's accretive.
It's accretive, yes.
That's the whole logic of what Nils said.
Mm.
There are 35 countries we're doing it. There, we can do it accretive.
Mm.
In others, we might not, and then we go to...
Mm. Perfect. Those were all my questions for now.
Mm.
Thank you.
Yes, Chris Sonling. I have a question around dividends. You actually reduced your dividend to nothing this year, and how are you thinking about dividends going forward? I saw the target, but of course, you didn't follow the target this year. So,
No
... can you give some more, color on that?
This year, we had a discussion with the board, and we have some expensive financing in U.S. dollars, where we, together with the board, and then the board suggested to focus on reducing that U.S. dollar debt to reduce interest rate costs. And, our absolute target is to pay a dividend between 30%-50% of net profit going forward.
Okay. Viktor Hansen, Carnegie. So on your new sales target, SEK 1 billion, 6% CAGR at least. And you mentioned a couple of drivers, one being the market recovery, and then you mentioned several company initiatives. I was hoping that maybe you could clarify a bit how much of this growth you expect to be from the market and how much to come from your company initiatives.
As I said before, I mean, in our core category or our largest category, that's premium wallpaper. This year, we expect it, or the industry expect flat, but then coming to a growth of 3%-4% going forward. As Karin explained here, when we look at the target and we do the math that most of you are already done, we're talking about around 6% every year. It doesn't necessarily have to be an even growth every year, but that's how it's connected.
Yeah. Okay. And then the second and final question, I was hoping that you could talk a bit more on your D2C expansion. Maybe how fast can you open new markets? Any initial investments? What's your marketing strategy, et cetera?
Well, now we have direct to consumer with our four consumer, and we have the platforms in place. We have a scalable model now for... I mean, the Boråstapeter did an update end of year, last year. So we... It's scalable, and we can open new markets. But as I said before, as well, we will do it where we see that it's profitable for us. So it's... And we will not, we will only do it selectively where it makes sense for us, and we see it's a profitable way to go to the market, and there is a demand for the brand as well.
Yeah. Hi, guys. Good morning. Johan Fred here from SEB. A few questions from my side. You mentioned that you have outperformed the underlying market, which of course, implies that you have taken market share. Could you elaborate on a bit on this? Is this broad-based, or is it centered to specific categories or geographies, or how should we think about that?
I mean, our strength or our biggest share we have of our business, that's in Europe and the Nordics. And we had, an important area for us is, of course, Sweden, Italy, and, and the U.K. And when we compared with peers in the industry and what some of them are being the public, public, ones, we are performing better than one. So in U.K., for instance, we know that we are performing better, but also in Italy is another, country, and, too.
Why do you think that is?
It's a good question. First of all, we have, as you can see, we have fantastic people in the organization. We have strong brand. We have been focused over a long time to build strong brand and also being selective where we are distributed. But it's a combination also of focusing on the growing segments. We observed already some time ago, a couple of years ago, that the physical retail is losing share, so we need to find other growth avenues, be it hospitality and also direct to consumer. So that has helped us a lot.
The second question here: you mentioned that there's been a lot of technological developments and new market entrants as a result of that. How has this impacted the overall industry profitability?
... Well, first of all, what it's had, the, it's the digital printing has impacted it, and the, you know, barriers are lower. It has impacted the part of the business that is consumer oriented a lot, and the mitigation from physical retail also to direct-to-consumer brands. And the companies who are doing this well, they have a healthy profitability as well. As you have. When you do digital printing, make to order, you don't carry any inventory. You don't need only the direct material, input material, and then you print on demand all the time.
I think it's also important to add that the gross margins remain extremely high for the premium players in the industry. That hasn't moved at all, in fact. While at the lower price points, in the poster level price points of things where you copy anything straight off the net, there the margins have been declining, which you also see by a lot of those producers that play in that field going along the wayside and dying out as competitors. So there is from a very large overcapacity in the industry now becoming less and less players, because nicely enough, some of the less good competitors are slowly moving away.
Thank you. And on your financial targets and your strategy segment, you mentioned creating shareholder value several times in the presentation. Yet you talked mostly about organic growth, and your financial targets have no KPIs relating to returns. How do you think about capital allocation and creating shareholder value in relation to returns, basically?
You take that.
We are a very cash-generative business, and we have been also during this last few years. We continue to pay down our debt to be ready when we see an alternative that fits us. And we will also keep our dividend target of 30%-50%. But you are correct, we are generating cash.
It's a great problem to have with this, how we choose to allocate it.
But why don't you have a target relating to returns?
For a very logical reason, the board sets the targets for the management to operate with. We are very comfortable that many, many companies that have been extremely successful in driving shareholder value haven't presented a specific return on capital goal, and we don't consider that to be key. What we consider key is how we actually deliver every year to it.
Okay, great. Thank you, Magnus. I think this is building on Benjamin's question here, but how should we think about capital allocation in terms of M&A, organic growth, and in the context of maximizing shareholder value?
We will, as I've mentioned several times, continue to invest into our brands, into our marketing of our brands. Then with the level of cash flow we have, we are creating cash, so we can do different things. There might be a company that we think there is a good fit, and we acquire that with a more narrow focus, or there can be, of course, also dividends we will pay every year, and we will continue to pay down our debt. So we get much more freedom with this going forward here now. Now we have a net debt that is going to be on healthy levels.
The question on gross margins. You mentioned that you have high pricing power and strength in manufacturing, and with scale, of course, this should be supportive for gross margins. What do you project in terms of gross margin development in the coming years?
We don't share outlooks on gross margin, but of course, with our, it's above 58% today, and, of course, when we focus on premium products with profitability, profitable channels and growing economies of scale, we believe that it's going to increase, but I will not give you a percentage.
But it's clear that both the board and management agrees that the biggest driver for quickly going above 15% will be a gross margin improvement that you will see, because we will keep investing heavily in driving sales and marketing efforts and product developments. So it's not by being shady with our SG&A, it is the gross margin that will contribute to the EBITDA margin.
Makes sense. Thank you. And you briefly touched on M&A, of course, as a strategic focus area, although a bit narrower. Where do you see the current greatest white spots in your organization in terms of M&A, and what would make most strategic sense?
I mean, I would. The three categories we look, first of all, it needs to have a brand, have a premium positioning, and then whether it's in wallpaper, in rugs, or in textile, all of them would make sense. And many of the companies that are doing this well, they are present in all these categories, actually.
... And, a follow-up then. What, how would you describe your ideal acquisition currently?
First, you need to have a cultural fit with us, believing in the decentralized operating model, believing in, you know, have a passion around brands and the kind of business model that we are doing. So that needs to be there first. Then you have the other parts here, where with the category mentioned, the positioning in premium as well. But the cultural fit and the belief in our operating model is, of course, critical. 'Cause we are not, we're not big company. We are 230 employees, so every company or every brand, and every is really important. Henrik?
Hi, Henrik Scharp . I might have a combo question, but first, thanks very much for very inspiring presentations on Cole & Son and Wall&decò. Coming back a little bit to Borås. You didn't mention so much about Boråstapeter. The way I've seen it, I really like the collections there as well, and I think they are also inspiring. But what is your view on the positioning of that brand in view of going for the premium segment? There's a lot of bulk wallpaper being made in this brand as well.
And following to that, what is your view on the production site in Borås and the importance of having your own production going forward, especially if you're going for more high-end products, I guess, meaning lower volumes, and also the switch to digital print? So if you could mention something both about the production strategy in the Borås, and also on the Boråstapeter positioning.
Boråstapeter, under the leadership of Lars-Erik, sitting here somewhere, has done a fantastic job over the last 3 or 4 years here, or to really elevate the brand, clarifying the brand, and also internationalize the brand. And also in terms of design, positioning, and distribution, it's very different today than it used to be several years ago. And I totally agree with you. There are a lot of beautiful designs there. Some of them you see here outside. And it's also those designs that fueling the growth of Boråstapeter internationally. Boråstapeter has a good traction since a couple of years outside of the Nordics, and it exactly these designs taking the ownership of the Scandinavian position, if you like, in wallpaper. Then moving on to your question regarding manufacturing.
Lotta and Dennis, and the team are doing a great job there. They are doing a great job, both in making the production more efficient, as well as finding external companies to supply, wallpaper to, because there is a consolidation and even some manufacturing disappearing in the industry, and they could go anywhere, but many of them go comes to us because we have the competence, and they are doing a great job there. But we, we don't... We offer different kinds of production technologies there. So we do have, you know, updated state-of-the-art digital printing here. And you are correct that there might be or there is a tendency of shorter batch sizes, and this is where digital printing fits so well because you carry only the input material, and then you print on demand what you do.
Boråstapeter, again, has much more digital printed product today than they had four years ago or three years ago. Wall&decò, it's all digital printed. Cole & Son also has digital print selectively. So, they are doing a great job. It's a core asset for us, and, I'm very happy with the performance.
So to strengthen the message from our point of view, we are very committed to holding on to... I am good? Very committed to driving the Boråstapeter way, to take it to by far best wallpaper factory in the world. It is not there today. They are aware of it. There will be steps to be made, but it's already today an efficient factory. There will be significant investments, part of the capital allocation, to bring it to that position. And the reason why we're not showing Boråstapeter is not that we're not proud of it, it's the one you, as mostly Swedish investors, know the best. And I'm sure you saw some great news for all of you about Cole & Son and Wall&decò. And there will be the chance to see a lot more about Boråstapeter out there after this.
Daniel Schmidt from Danske. Maybe on that topic, you mentioned international sales, sorry, sort of stepping up when it comes to Boråstapeter in the last couple of years. You also mentioned the U.S. in the presentation earlier as a sort of a strategic market for you. Are you feeling in any way that U.S. consumers are embracing Scandinavian design in a better way now than a couple of years ago? What's happening there?
The short answer is yes, they are. It's the—for Boråstapeter, it's the best performing market of the last years. Combination of, of great, you know, commercial leadership from, from Boråstapeter, but also that we have very relevant design that, you know, hits the market perfectly. So it's a, it's a good fit, and, and again, repeating that Boråstapeter is really taking the position in the category of being the kind of Scandinavian position and, and, and alternative.
Thank you.
You're mentioning organic growth as the main focus right now. However, you don't mention how you're supposed to achieve it. Are you going to do more of the same? Earlier or before you had, you mentioned product expansion as a part of that growth strategy. In this presentation, we see less of product expansion. Do you expect again to do more of the same, or will you leverage your brands and create new products within the brands, you think?
I mean, the way for us to grow, as I said, geographically, U.S. inroads in new channels, then product innovation to bring new products into the market. Investing, developing new substrates or materials, this is, you know, the road going forward, and that is prioritized. Prioritized, it's the categories we're in today.
Thank you.
Welcome.
As there seem to be no more questions, we invite you to see the cool brands out there and have some quick lunch with us if you can. Thank you, Olle and everybody.