Hello and welcome back to ABG Sundal Collier Investor Days. My name is Benjamin Wahlstedt. I am an equity research analyst here at the Stockholm office. With me on stage today, I have Johan Andgren, the CEO of Embellence Group, to talk about what he does during the days. So, without further ado, Johan, please go ahead.
Thank you very much, Benjamin, and thank you all for joining me here today. My name is Johan Andgren and the CEO of Embellence Group. I will today share some information about Embellence Group, about our brands, our strategy, and our plan for how we will continue building a global leader in interior decoration, focusing on premium brands. At Embellence Group, we believe that the environment affects our thoughts and feelings. In those surroundings, whether it's in this room, in your homes, in your houses, in your offices, wherever you are, and we want to impact those surroundings through the power of design. Our ambition is to become a leader in interior decoration with a focus on premium brands within wallpaper, and we want to complement that with other textiles and rugs.
Our corporate focus is to ensure that successful long-term development for each and every one of our brands while still respecting their identity and autonomy. And we do that through a decentralized operating model. If we look at some fast facts about our company, rolling 12, we have a net sales number of SEK 771 million. We have an EBITDA margin of 14.3%, and we employ somewhat 225 people across the globe. Our heritage spans 150 years back when our first brand was founded, Cole & Son, 1875 in London. And we have another brand also reaching over 100 years of heritage, Boråstapeter, which was founded in 1905. And that's basically how we build up our business. We have two different areas.
So we have the brand sector where we have five brands, Boråstapeter, Cole & Son that I just mentioned, and we have three more which are called Wall&decò, Pappelina, and Artscape. We also have a manufacturing unit where we combine internal production and external sourcing. We have production facilities in Borås, Sweden. We have a weaving mill up in Leksand, and we have a production facility in Cervia in Italy. Looking at the sales numbers, we have 100 different countries that we're selling our products to, and our main markets are Sweden, UK, and US, and Italy. Our head office is in Borås, Sweden, and we have brand offices across the globe. So we have one in Chelsea in London, we have one in Cervia in Italy on the East Coast, and we have one in Portland in the West Coast in the United States.
We also do have a good sustainability agenda where we're having good targets reaching efficient use of resources. So we want to have a tight agenda reducing our CO2 emissions and reducing our waste. And of course, working on sustainable organization, stimulating workplaces, and ethical business standards. If we turn and look at the market opportunity for wallpaper mainly, we play in a big market where we gather all interior decorating products. This one is roughly $800 billion and consists of several different categories. If we break that one down and look at the global wallpaper market, this is a market roughly of $10 billion where it's split 60% between residential and 40% going into contracts, our hospitality channel, we call it hotels, etc. In this channel, we have a rising awareness of green solutions which focus more on sustainable materials and reduced carbon footprint.
If we then break that sector down into where we actually are playing, it's in the premium market which we believe is $2 billion. Europe and U.S. are representing 60% of the global market, and here we are focusing on the premium segment in residential and the contract segment. If we then turn and look at our brands and supply chain approach. So starting off with our largest brand in our portfolio, Boråstapeter, founded 1905 by Waldemar Andrén in Borås. Really strong brand when it comes to the Swedish market. We are reaching also better growth internationally. Many of the collections share the same design philosophy with beautiful, functional, and emotional. And many of the designs are inspired by the Swedish and Scandinavian nature around us.
This print here is actually called Rosenvinge, which is the oldest paper printed wallpaper in Sweden reaching back to the 1700s, also found at the Nordiska museet. And we have many of these in our design archive, which are more than 10,000 in our archive. We're selling this brand in more than 65 countries, and we are selling it to direct-to-consumers, distributor agents, and also through retailers. If we look at our second largest brand in our portfolio, Cole & Son, a renowned British wallpaper brand founded in 1875 by John Perry, very much known for its rich heritage and whimsical designs. All the wallpapers in this brand are hand-painted by our artists in our design studio in Chelsea, London. We do have also a good mix between design icons and timely designs, as well as collaboration with different design houses.
So we have one collaboration with Fornasetti, for example, in Italy, and one with Ardmore in South Africa to really make sure to elevate the brand even further. Rolling 12 months stands for roughly 18% of our business, and we're selling this brand into more than 75 countries where U.K. and U.S. are the biggest market for us. And many of these designs go through interior decorators and architects to end consumers and contractual agreements. This is one of the brands that are found in many historical places. So you can find it in Buckingham Palace, Westminster, White House, and many exclusive areas. Looking at the other three brands in our portfolio, we have Wall&decò, which is also a wallpaper brand, but not as we believe wallpaper for indoors, because this one is also focusing on other outdoor areas and also spas, showers, kitchens, so on and so forth.
We have one product in this portfolio called AQUABOUT Wet System that we have installed in over 25,000 showers and spas across the globe. The brand is sold in more than 100 countries across the globe, and we are focusing on the really premium segment. And much of this is also going into the hospitality channel. Moving on to Pappelina, our Swedish rug brand founded in Leksand in Dalarna in 1999. Playful contemporary designs with a Scandinavian touch. We are selling this brand also in many countries across the globe, and we are focusing on the consumer market both through furniture stores and also direct to consumers. 97% of this brand is selling rugs and some other accessories to elevate the brand. Artscape is our brand in North America, really focusing on a North American business where we're selling window films and privacy films.
Founded in 1995, mainly sold through brick and mortar and D2C in the North American market. If we then turn and look at our supply chain approach and sustainability focus, we really have a flexible approach when it comes to our supply chain. We have both our own manufacturing and we have external manufacturing where we source it. And how we decide on this is basically where we believe that we can find scale and find competitive advantages from a cost structure, lead times, and quality. Then we use our own manufacturing. And for specific niche products and methodologies that require more different production technologies that we don't have and require a larger capital expenditure, then we may choose to source these externally. We do operate three own manufacturing locations today. We have the largest wallpaper manufacturing factory in the Nordics in Borås Tapetfabrik.
Here we source mainly for our internal brands, but we also have external customers linked to this one. We also print digital wallpapers in Wall&decò down in Cervia, and we have our weaving mill up in Leksand where we produce the Pappelina rugs. Looking at our supply chain approach, we are seeing a good growth from the Borås Tapetfabrik. We've grown rolling 12 months to SEK 96 million from 75 a year ago. And here we are focusing really heavy on the different techniques, both in traditional and digital printing with several different production methodologies. Looking at the capital expenditures for Borås Tapetfabrik, we have underinvested slightly between 2018 and 2023. So going forward, we'll see a slightly higher capital expenditures of roughly 2%-3% between 2024 and 2026, which are slightly higher than the expected long-term levels. And here we're invested in different techniques.
We have a new paint mixing technique, for example. We have new digital capabilities and also improving our facility in different areas to improve the quality and speed of production. The whole group has a big sustainability focus. And of course, also when it comes to manufacturing, this is very, very important. We are reducing our CO2 emissions and have a goal of 50% reduction in Scope 1 and Scope 2 by 2030. We also have a goal of reducing our waste annually year on year until 2030 by 5%. We're turning to our strategy, so this is basically how our strategy looks like. It has a setup of two different components. At the bottom, we have our strategic foundation, which is built on strong finances, a decentralized operating model, and entrepreneurial creative culture.
When it comes to the strong finances, we have had an EBITDA margin of 14.4%. We have generated quite good cash, so we have a cash conversion rate of above 70%. And for the past three years, we have generated SEK 285 million in cash. And our current net debt level is 0.7x times EBITDA. We do run a decentralized operating model, meaning that each and every one of our brands, they run autonomous and they have their own unique identity where they take design decisions, commercial decisions out in the different brands. And then we help them out from a group point of view with synergies where it makes sense. It could be IT, it could be HR, it could be D2C capabilities. What is important for us is also to keep the entrepreneurial creative culture in our group.
So this is not only about the design and creative elements, but also about how we want to execute and really take ownership of everything that we do. If we then look at the top part of the strategy, which is our different focus areas, we have six of them. Starting off from the left, it's really about organic growth and to build exciting brands, and how we do this is really by making sure that we have a strong and robust pipeline when it comes to the design development and also when it comes to product innovation while nurturing still our design icons that we have. We do want to expand our business across selected geographies and channels, and I will come back to that later on, and then, of course, utilize our group synergies where it makes sense.
A sixth focus area for us in the group is to add strategic M&As where it matters and where it can strengthen our group, and by doing this, we will deliver shareholder value. If we then look a bit deeper into selected geographies and channels, we have a few strategic focus areas that we're going extra after. One of them is that we want to accelerate the growth in direct-to-consumer sales, so we have a new team in place, so we have recruited a new head of e-comm for the group starting here in September 2025. We have also done selected initiatives and strategic ones during this year where we have replaced the D2C platforms for three out of our four brands, so we have done Artscape and Pappelina we did earlier this summer, showing promising results.
Then we just recently, a few weeks ago, we launched the new D2C platform for Cole & Son. During the first half year of 2026, we will also update the Boråstapeter site. Here we are really focusing on creating the fundamentals and foundations for making sure that we can then deliver an accelerated growth for the channel. During 2026, we are making sure that we are continuing our growth for all our brands in key geographies, so selecting which ones we're going after. We are elevating all the content that we have in the group to really think D2C first mindset with everything we do. And we're also continuing to build competence and share data within this channel to the other parts of the groups and functions. 2025 is basically about focusing on the fundamentals.
Then we're transforming and accelerating the business in 2026 and further accelerating out in 2027. The second part of our strategic focus area is linked to continued expansion internationally. So our brands are basically very good when it comes to the business in our domestic market. At the same time, we have a lot of white space and we're underdeveloped when it comes to international growth. So here we're making a targeted market expansion. We're updating our go-to-market models with a changed selection where we're changing our distributors and agents' networks to really make sure that we are doing this in the right way. When it comes to key actions for 2026, we are updating the business models. So we have a few different distributors and agents that we'll continue to replace.
We are also looking to strengthen our international sales capabilities, as well as launching new materials and designs that are developed specifically for the international markets. Another growth area for us is the presence that we have in the hospitality channel. So this channel is really growing. The market is growing. A lot of new hotels are built up across the globe. We do see that there are a bit longer development cycles within this channel, and there are also specific needs when it comes to different products and design offerings that suit this channel. We are building a dedicated key account team to focus more heavily on this. We are optimizing our market approach and still developing channel-specific products in order to make sure that we can strengthen our presence in key hotels.
If we then turn and look at the current business landscape, year-to-date performance, we have a net sales number of SEK 569 million versus SEK 576 million a year ago. We have organic growth of 1%. We've had a headwind when it comes to currency affecting us negatively with 2%. We also do have a deflated number here since we had a big order from one of our brands that was pushed from Q1 this year into Q4 last year. That was a big order affecting both Q4 that is coming and also this year-to-date numbers. Gross margin looks steady over 60% for the last five quarters. We can expect this level going forward as well. Good development on that one. We have a stable EBITDA margin of 14.4% versus a year ago.
During the year, we have done strategic selected initiatives in order to strengthen our group. We have updated our consumer platforms, both for Artscape and Pappelina, with positive effects. Cole & Son just launched, and now we're also launching and working on the launch of Boråstapeter in the first half of 2026. We've also selected different areas where we're strengthening our organization, sales, and different platforms. We are launching new collections every single year and new brand initiatives with the aim to really continue building our strong brands. If we look at our long-term financial targets, we have set out a target to reach SEK 1 billion in sales by 2028. Right now, rolling 12, we are at SEK 771 million. We have said that we want to reach an EBITDA level of above 15%. Right now, we are at 14.3%, rolling 12. Dividend level between 30% and 50%.
last dividend last year or this year was SEK 1.25, was 50% relation to our net income. We should have a leverage below 2.5x times EBITDA. Right now, we are at 0.7x times EBITDA. If we're then looking ahead, we are continuing focusing on driving growth by our design collection launches, both design collections and product innovation. I think it's important to divide those two. We've historically been very good at launching new design and new collections year on year. We have not been so good at launching also new product innovations, so new materials, new substrates in different products. This is a good area for us for growth in the future. We are also increasing our efforts on the D2C channels across the group with both systems improvements and new competencies for several different brands.
We are taking a heavy focus on international expansion across brands in selected geographies. The broadening of our product portfolio offering within Wallpaper Solutions in terms of materials and printing techniques is very important for us in order to capture unique market opportunities for us. I also want to make a quick reminder of what I just mentioned before with Artscape. Looking into Q4 now this year, last year in Q4, they had a large order that was pushed in. They grew last year 51% in Q4. We're meeting very strong comparison numbers for that brand in Q4 coming up. That was it for me.
Perfect. Thank you very much.
Thank you.
You talk about investing into the D2C offering currently, meaning online, basically upgrading platforms, recruiting new key personnel.
I was wondering if you could speak about when you hope or expect to see the results or the first results from these initiatives?
I think the first, so in Q2, we shared that 8% of our brand sales, so not the total group sales, but the brand sales comes from D2C. We've also said that we believe that more than 50% of the growth in the coming three years will come from D2C. Of course, everything that we do, we need to make sure that we build a foundation first so that we have started to do both when it comes to content creation, competences, and then systems. We have launched the Pappelina and Artscape new platforms already now, and they are showing promising results already now. Then we'll see with Cole & Son that we just recently launched, and then we're launching Boråstapeter first half year of 2026.
Perfect. And then just for reference, half the growth from D2C, that adds up to something like a 30% growth CAGR for the D2C business. That's not something that worries you?
No, absolutely. At the same time, I think we are underdeveloped as it is right now. So we should always be careful looking at the market, but we are underdeveloped. Some of our brands, I mean, some of our brands have done a quite poor job in making sure that we have good platforms. So at some brands, we really had to fight in order to put a single wallpaper in your basket. And I think that we're taking out now and making sure that we're building them up from the ground. So I think it's always harder to grow on the D2C level when you are at higher levels.
Right now, we're quite low when it comes to many of our different brands. So there's lots of room for growth in the channel.
And turning maybe to hospitality, another one of your focus areas. I was wondering if you could give us any color on what share of sales is to hospitality clients right now and how much do you expect that to be, say, five years out from now or in 2028?
Yeah, I think the hospitality channel is a bit more tricky because some of the hotel chains, we have direct contact with. Other ones go through architects. Other ones actually go also through retailers in some areas. So it's a bit harder to just say that this is exactly how much is coming from the hospitality channel. What is also a bit tricky with the channel is that the lead times are a bit longer.
We can also see that by closing a deal, it's also harder because you don't really know exactly who's taking the decision. Is it the architect? Is it a designer? Is it the hotel owner? Is it the one who's sitting with the investment firm? Or is it actually the hotel owner's wife? I mean, you can see all the different variants out in the market. So it's a bit harder to say. What we do know is that we have a good offering. We are having a lot of different designs that suit well within this channel, both when it comes to products, but also when it comes to specific designs. And we are also now putting a lot of resources into producing more different materials that are more fit for the channel.
There is different certification that different hotels need in order to put the wallpaper in a hotel versus in a residential area.
One final question, maybe. You mentioned yourself that Embellence Group is highly cash generative and you don't really have any issues with your current leverage level either. I was wondering if you could talk a bit more about what you see here in the next few years in terms of M&A, for example. What would you buy if you were to announce M&A in the next week, for example? Targeting products, customers, or what are you after, basically?
We are a company that we're a brand company. So we're definitely looking into different brands. If we are looking into buying a certain brand, of course, it needs to make part and strengthen our group. It needs to fit our strategy.
We're not going to go out and just buy something just because we have a lot of cash. I think the idea here is really to make sure that it fits with our portfolio and we want to have premium brands in our group. We are constantly looking at the market. It's not that there are hundreds of these companies out there, but we are, of course, engaging with different actors in this.
Perfect. Thank you very much, Johan. And thank you to those listening in. That's all for now. Thank you.
Thank you.