Hello, and welcome back to ABG Sundal Collier's Investor Days. My name is Benjamin Wahlstedt. I am an equity research analyst covering the consumer space here at the Stockholm office. With me today, I have Embellence Group and CEO Johan Andgren to present his company. Johan, without further ado, please go ahead.
Thank you. My name is Johan, presenting Embellence Group. Starting off with us. We believe that the environments that were surrounding us are affecting our thoughts and feelings. If that is in this room with me today, in front of your computers, in your offices, or at your houses. We want to impact those surroundings through the power of design. Our ambition is to be a leader within interior decoration, with a focus on premium brands within wallpaper, complemented with other color and pattern-driven interior decoration products, such as textiles and rugs. We do this by ensuring the long-term successful development of our brands, while still respecting their identity and autonomy through a decentralized operating model. Looking at our business, we have a net sales in 2025 of SEK 765 million. We had a 14.1% EBITDA margin, and we employ around 220 people.
We have a very long history and a heritage stretching over 150 years since our first brand was founded, which was Cole & Son from the U.K. We have another brand in our portfolio, which is Boråstapeter, which also has over 100 years of heritage, founded in 1905. A long history. We divide our business up in basically two areas. We're a house of brands. We have five brands in our portfolio. Cole & Son and Boråstapeter, I mentioned, over 100 years. We have three other brands between 20 and 30 years old, which are Wall&decò, Pappelina, and Artscape. When it comes to our manufacturing, we have a very flexible solution. We do produce in-house, but we also source externally where it makes sense. We run three production facilities. We have the Northern Europe's largest manufacturing unit of wallpaper in Borås, a fantastic factory.
If you're ever around, please come and visit. We also have a weaving mill, also extraordinary, up in Dalarna with 30 looms. Then we run a smaller digital wallpaper manufacturing unit in Cervia in Italy. Our head office is in Borås, where I sit, and we also have brand offices around the globe. We have in Cervia in Italy, we have in London in the U.K., and we have one in Portland in Oregon, U.S., on the West Coast. When it comes to our geographies, we are selling our products in more than 100 countries across the globe. Our main markets is Sweden, U.K., U.S., and Italy, where also our main brands have their home markets.
We have a serious work when it comes to sustainability, with targets of reducing our carbon footprints by 50% by 2030, and we also are working very effectively of reducing our waste by 5% annually. If we move on and look a bit about the market opportunity. We are playing in the interior decoration industry, which is huge, consisting of several different categories. $800 billion. If we break that one down and focus on our main business, which today is wallpaper, that market is estimated to be $10 billion, and we play in the premium segment of this one. We divide it up in residential and hospitality. We are playing in the premium part of it, and we have roughly 60% of that market in Europe and U.S., where we are playing mainly. If we look at our brands and our supply chain approach in the business.
Starting off with our largest brand in our portfolio, which is Boråstapeter, consisting of roughly 38% of our sales in 2025. Founded 1905 in Borås by Waldemar Andrén. Most Swedes probably know about it. It's a market leader in Sweden. Very much inspired by Scandinavia and the Scandinavian nature around us. Sold in more than 65 countries. Here we run a model where we sell both direct to consumer, we sell through retailers, agent, and distributors across the globe, as well as through interior decorators and architects. 95% of the business is within wallpaper. I put two examples to also give some highlights of some fresh news, one from Lisa Larson here on the left, and also one from Alvar Aalto, two designers that is in our latest collection from the Scandinavian design collection we just launched here a few months ago.
Moving on to Cole & Son, our oldest brand, founded 1875 in the U.K. by John Perry. 18% of our net sales comes from this brand, playing in a high premium luxury segment. This brand can be found in many places across the globe that are well-known. You have them in Buckingham Palace, Windsor Castle, The White House, so on and so forth. We're selling to princesses, kings across the globe. We get several requests every year for prestigious projects, which is very nice. Looking at this one, we have U.K. and U.S. are our the biggest markets for Cole & Son. Here you see one of the collaborations we have with Ardmore Design House down in South Africa. We just dropped a new collection a few months ago, with a collaboration with Vivienne Westwood, the iconic British design brand. Moving on to our three smaller brands.
We have Wall&decò also doing wallpaper. Not only wallpaper as we believe today, because we also have a lot of specialty products within wallpaper, within Wall&decò. We have specifically wallpaper for wet areas, so you can have them in showers, spas, et cetera. We also have specialty products when it comes to sound systems, so we're helping the acoustic surroundings in the rooms. Brand is from Italy. Main market is also Italian. We are selling in the premium retail market with this brand. This is also one of the brands which we're doing many prestigious projects with. You can find them in the Mandarin Hotel, Kempinski Hotel. We've done all the offices for the big tech companies in the U.S. with Google, Netflix, and Microsoft, for example. List can go on with nice places where this brand is located.
Pappelina, a smaller brand from Dalarna in Sweden, where we also have the weaving mill with 30 loom stations. Rugs, mainly, so 97% is rug. We also have a few interior decoration products within this brand. One of the brands that has the highest online share of our brands and also the widest distribution across the globe. On the right you have Artscape, which is our U.S. brand on the West Coast from Portland. Mainly focusing on the North American market with a product called window films. Decorating the windows, both just if you don't want to have see-through, but also specifically products when it comes to sun reflection, so on and so forth. A few examples. Here I have Wall&decò. This one I really love to the left, which is a new one just installed, Villa Del in the Dubai Hills Estate.
Very nice one. Here are some sneak peeks from Pappelina, recently launched here from the new collection, and also some products from Artscape. Moving on to our supply chain approach. We have a very flexible solution where we can decide if we want to produce in-house or if we want to source externally. We tend to do a lot of our production in-house, but when it comes to specific technical products that we don't necessarily find a cost structure to do, or the CapEx investment might be too high to go in there, we then source them externally. Otherwise, we source it in-house in our three production facilities. We operate this in three places, I said before, where majority of the business is done in Borås Tapetfabrik, which is also a standalone from our business, where we also serve a lot of external customers.
This business has been very healthy for us recently. We grew 20% in 2025. We also continue to grow 20% in this business in Q1 2026, and it stands now for 13% of our total business. A few years ago, between 2018 and 2023, we slightly under-invested in the factory, meaning that our investments for the group in CapEx is slightly higher now in 2024-2026 by 2%-3% of net sales. Not too high numbers, we will see them slightly go down in outer years. We are investing in a lot of different things when it comes to technology, new printing techniques. We just installed a new printer for when it comes to digital printing. We have several different lines, we have both traditional digital printing. We invested in a color kitchen about one and a half year ago, and also some facility improvements.
Here we have the majority of our work when it comes to sustainability effect. This is a big focus, specifically when it comes to waste and also the carbon dioxide efficiency. If we move on and look at our strategy and our financial targets. We have a strategy consisting of two different things. If we start off with a foundation at the bottom, here we have three areas. We are very core on delivering on an entrepreneurial creative culture within all our businesses. Since we are a creative companies, this comes for granted, but I think it's very important for us to keep this in all our organizations. We also run a decentralized operating model, meaning that each and every brand, they are running their own business, taking their own decisions when it comes to marketing, commercializations, design, et cetera.
Then we help out from a group level where it makes sense. It could be back-end systems, it could be IT, it could be power in negotiation with shipping companies, et cetera. Then the third part of the foundation is our strong finances. We have a 14.1% EBITDA margin. We have generated SEK 375 million in cash between 2022 and 2025, and we have a net debt in accordance to, versus EBITDA of 0.5x . Strong finances in our foundation. Then on the top part, we have our strategic focus areas, which are six of them. For us, it's very important with organic growth and to continue to build on the old heritage and our strong brands that we have in our portfolio. We have one area which we call product innovation and design innovation.
We have historically been very good at driving design innovation and dropping new collections and new designs, making the world a prettier place. At the same time, we have not been as good as to develop new products to the market, which is a larger focus area as for us now. That could be different materials, it could be different printing techniques, it could be new colorways that we will use. The fourth area in the strategy is to expand across selected regions and channels, and I'll come back to that one later on. We have called out a few areas that we think are more important. We have the D2C channel where we believe 50% of our growth in the coming three years should come from. We have internationalization, and we have the hospitality channel.
Those three are our core focus areas when it comes to geographies and channels for us. Utilizing group synergies speaks for itself. I just mentioned a bit about it before, we have our sixth focus area, which is adding strategic M&As to the group to strengthen us. By doing this, we will deliver shareholder value. Looking at the focus areas a bit more in depth. We have the biggest growth should come from the D2C channel. Today, it is 8% of our branded sales, so we exclude the manufacturing sales that we have there. We only have 8% of our sales coming from D2C. We see big opportunities here. For the last call it year or nine-12 months, we have been focusing on setting the foundation in this area.
We have started this journey quite late, so when I came in roughly a year ago, we started this journey by implementing new platforms for all our brands. We started off with Pappelina and Artscape during the summer. In Q3, basically, we added on Cole & Son in Q4. Now we launched Boråstapeter's new platform here roughly a month ago as well. Things are working well for us. The first two brands that went live on the platform increased by 40% in Q1. We also see that the growth is accelerating in Q1. Great development. We are also focusing a lot on strengthening the organization and building the capabilities. We're doing massive work here to make sure that the organization is ready for this. We're also leaning in more products to fit the channel.
There are different needs for different channels when it comes to our products. The second area is to expand internationally. Our brands has historically been very strong in their home markets. Now, when it comes to Boråstapeter, for example, we are 10 million people in Sweden, and in the world are 10 billion, so there is a lot of opportunity out there. We have beautiful designs. We have all the things that we basically need, but we need to shift a bit of focus, which means that the growth should more come from the international side, and it will come from the home markets. Here we're doing a lot of efforts, both when it comes to products, so there are different needs in different geographies.
We are strengthening the international sales teams, and we're also putting new materials and substrates to the market to strengthen this even further. Also a lot, of course, in our communication. Roughly nine months ago, before I started, we communicated in Swedish, and if you want to grow internationally, of course, that's not an easy thing to do. It's easy to change. We changed that one quite rapidly. Third area is the hospitality channel. Think about this as contracts, hotels, offices, restaurants, et cetera. This is mainly linked to Wall&decò and Cole & Son. We do sell a bit also from Pappelina and Borås Tapet, but majority of the hospitality sales come from Cole & Son and Wall&decò, where we focus on the suites in the hotels, like the really luxury areas, not really the corridors of the business.
Here we have put extra focus when it comes to organization. We have dedicated key accounts. We have replaced different agent structures, distributors that are working with this, and also tailored new products to the market with the window films now. We also have a few other ones that we have launched recently to work more and be more relevant in the channel. If you think about an ordinary house, you just want something that is pretty. When it comes to a hotel, there is lots of different certifications that you have, and it's different certifications in the U.S. versus Europe, et cetera. Those three are our strategic focus areas. Looking at our long-term financial targets, SEK 1 billion by 2028. We should have an EBITDA margin surpassing 15%.
The dividend should be between 30% and 50% in relation to our net income. We should have a leverage that is below 2.5x EBITDA. As I said before, 765, 14.1. Past two years, we have just had 50% or 51% in dividend. Roughly 4.2% with today's course. Our net debt has been lowered from 2.1 down to 0.5 over the last three years. If we turn and look a bit on the current business update, looking at the Q1 results, we deliver an organic growth of 3% in a quarter. We have had currency headwinds over the past four quarters, basically, which has affected our business between 3% and 4%. In Q1, it affected it 4% down. We have an exposure towards the USD and the GBP by roughly 20% of our business in both currencies.
We're neutral in euro since we are buying a lot of our raw material for the factory in euro. We are seeing that this effect will, if things stabilize in the world and nothing happens extraordinary with the currencies, which we don't know, but according to today's numbers, it's not affecting us as much going forward versus the last four quarters. We improved our margin to 62.8% by 0.8 percentage points. We did this through a successful shift in the channel approach, so selling more D2C has a higher gross margin. We also worked a lot on our product mix in the quarter, which tended to lean the results towards this. In the quarter, we continued our strategic investments in our three focus areas, D2C channel, internationalization, and hospitality. We also did a shift in one of our brands.
Cole & Son, we've not been satisfied with the development in the past, we made a change on the Managing Director position in January. We just had the new Managing Director starting three weeks ago, Yelena Ford. I was actually down with her in Italy yesterday, having a full-day meeting down there, which was very good, and she performed super well. It's a very solid start in the first three weeks for her. In the interim period between her and our old MD, I was acting as interim Managing Director, and during this quarter, I also took a few decisions that is affecting the business short-term, but it's right for the brand in the long-term development.
We ended a few volume-driven activities, which I think is not good for us, which is affecting the sales a bit in the short-term, but long-term, it is absolutely the right thing to do. With those two, we had a bit of a down in our EBITDA, SEK 28 million versus SEK 32 million, so 14% EBITDA level in Q1, although cash flow improved slightly to SEK 14 million versus SEK 8 million one year ago. Of course, we launched a lot of new products and collections in the quarter. Q1 is a heavy quarter with a lot of different launches with New Year, so all our brands launched the new collections. We just saw some highlights of them before. This is something that is continuously happening over the quarters. Looking ahead a bit, we are continuing our work on the D2C channel. Boråstapeter just launched here in April.
It takes a bit of time in order to get the new algorithms to work and get up to speed. Far so good on that. We are improving a lot of our content also linked to our brands. There is a lot to do there. We have so many great stories and such a long heritage, that we just need to transfer out to consumers, which is a work that we are seriously investing in and making sure that we are doing and committing a better job at going forward. We're also broadening our product portfolio, launching new materials, new substrates, and new design, you'll see some really cool products coming out here in the future. Keep your eyes open for those. We are increasingly focusing on both the internationalization and the hospitality channel. That was my 21 minutes, one minute past the 20.
Thank you for that, leaving to some questions.
Yes, exactly. I thought I'd focus on your growth and growth capabilities here. First of all, and you mentioned this as well, you own a significant share of the total production capacity in the Nordics for traditional wallpaper. First question, how large can you get in the current setup in Borås?
We have different lines. We usually divide them up in traditional and digital printing, which is not fair to the production facility because there are lots of different techniques and lots of different lines that we do. Those two, there is a lot of capacity. We are running two shifts at a time, so plenty of capacity linked to that. It's more in terms of reaching external customers too, and which customers we want to work with. Our number one focus for our in-house manufacturing is to produce good products for our own brands to make sure that they can grow and they can have the best capabilities. We are having lots of different printing techniques. We have super good service. The knowledge is absolutely top class.
We celebrated a guy who was 40 years in the company some weeks ago, and there's so much competence within the factory, and I think that's also why a lot more customers are coming to us, and also the ones that we are working with are growing in the market. We are gaining market share within this field, both with more and more customers joining us and also increasing our business with the current customer base.
Turning to M&A, maybe in, or at least that's my perception. In Q1, you were more explicit about talking about M&A than you've been in the previous eight quarters or so. Could you talk a bit about the size of potential M&A targets? What type of companies are you evaluating, and so on, please?
Yeah, no, I think why I mentioned it last quarter is I've been in the business now for one year. I think it takes a bit of time, and I don't want to do any quick things before I have made up my mind on what's right for us. Of course, we have constantly, during this year that I've been in the business, we've been looking at different targets. At the same time, we believe now that we are in a better position when it comes to where the organization is at. We've got in our new head of e-com, we have new IT competence, and I am more used to the business now as well. It's a natural move to say that we're more ready from an organizational standpoint. Of course, our finances is strong. We have a low net debt.
If there is a target that is available, which we think will mix very good within our business, then we're ready to move. With that said, it's not like there are hundreds of these companies out there that would fit in this, and it's very important for us that it's a premium brand position playing within the categories that we want to play in. Premium brand wallpaper complemented by other color and pattern-driven interior decorations, could be textiles, could be fabrics, could be rugs. I think it's important that if we move, we make a correct one.
Perfect. I think with that, our time is up. Stay tuned, more presentations will follow.
Thank you.
Thank you.