Hello, and welcome to the ITAB Shop Concept Audiocast with Teleconference Q1 2022. Throughout the call, all participants will be in a listen-only mode, and afterwards, there will be a question and answer session. I'll now hand the floor over to the ITAB team. Please go ahead.
Thank you very much. This is Andréas Elgaard from ITAB Shop Concept. Together with me today I have-
Ulrika Bergmo Sköld, CFO of ITAB Shop Concept.
Mats Karlqvist, Head of Investor Relations.
Thanks for taking the time. We are today going to go through a little bit, take the opportunity to remind you of who we are and what we're doing, and then we'll of course go into the Q1 results and give you some of the highlights before we take any potential questions and then round this off. By that, I would like to switch to the next picture. Here is just me and Ulrika, so we can take the next one. I will begin by giving a short introduction into ITAB. If we go into the next slide. We usually say that, I mean, sometimes it's a little bit hard to understand who we are and what we're doing. We like to say that we are what we create together with our customers.
Our customers, they range across the entire retail spectrum. Of course, the grocery and do-it-yourself is our main sectors, followed by fashion, I would say consumer electronics, pharmacy, et cetera. Depending on what the need is for the customer, our effort and the outcome of our work looks very, very different. You can see some of the examples here, everything from car showrooms to pharmacies to cafes and of course, grocery situations and do-it-yourself. If we take the next slide, please. Today, ITAB is a leader in Europe, and we have a global reach. We have the capability to help some of our customers over the globe. We have the capability to deliver in South America, in Asia, in North America, as far away as Australia.
We do this when it is required and needed by our customers. Of course, we are mainly focused on Europe. It's where we have the absolute bulk of our activity and our turnover. Our biggest segment, and these figures are a little bit rounded off, and they are the 2021 full year figures. The biggest sector is the grocery sector with almost 60% of our turnover, followed by home improvement with 14% of our turnover, and then comes fashion with 7%. In the other customer segments, I mentioned earlier that consumer electronics and pharmacy are important, but here we also find things like cafes, service stations, et cetera. Next slide, please. ITAB of today, we are a strategic partner. That's our desired state.
Sometimes we have more of a transactional partnership, but we are really a partner to our retail customers. We try to co-create retail experiences that drive results, both when it comes to how consumers experience shopping with a certain brand, but also how we influence the store operations, the efficiency, and drive the important KPIs like higher sales and conversion for the retailer. We have consolidated services that range all from concept creation, where we create retailing concepts to manufacturing, installation, maintenance, aftercare. We do pretty much everything in the service sector. This is an area that we are going to focus even more on in the future. We support, of course, as already said, across the spectrum of retail.
Today, after parts of our strategy execution, we have fewer production facilities than previously, despite that we have added new ones through acquisitions. Today we have 15 production facilities, and we are approximately 2,900 employees with activity in 24 countries. I want to highlight something that we communicated in a press release during March, and that is that we took a decision early on, and then we communicated that a little bit later to discontinue all of our activity in Russia, and we are in the process of that right now. We're doing that with control and with the utmost care in order to respect sanctions, the local legislation in Russia and of course, our customers and the employees in Russia. Next slide, please.
Just to talk about a little bit going into our strategy as a part of the introduction, ITAB before the pandemic, there was a clear need for change. Turnover had been stable, but profit had been in steady decline. The reason for this decline was that ITAB had not made or understood how much consumer behavior has influenced retail. Many retailers have also been struggling with this. Our whole industry and ITAB as well was really geared up to deliver expansion programs, so building a lot of new stores. We were not really efficient when it came to doing more retrofits, rebuilds, maintenance, et cetera. The whole industry changed, and that was challenging to our turnover.
We also tried to counter this movement historically in 2017 and 2018 by putting in more sales efforts, and that only accelerated the decline. It did not help. Our SG&A ratio was historically high. The good thing out of this is that ITAB historically have grown through acquisition. It consists of many individual companies that all are acting with quite big autonomy, and they have very seldom been integrated into the larger ITAB. There's tons of potential in terms of synergies to be realized, and that is what a big part of the One ITAB transformation plan and strategy is all about. That work is ongoing. This led to establishing the One ITAB strategy. If we take the next slide, please. Sorry, that's just an introduction slide.
We can take the next slide, please. The One ITAB strategy is built on consumer and retail insights. Understanding why consumer behavior is changing, what the dynamics behind, and what consumers are looking for in a retail experience, that is key. Expectations today for consumers are not always set by other physical retail experiences. They are often set by social media, by Instagram, by online shopping. You take these expectations further into a brand's physical channels, and you expect to be seen, you expect to be guided, you expect the experience to be smooth or engaging or educating. This poses a number of challenges and questions to retailers, but also tons of opportunities. It means that retailers across the world are being disrupted.
They need to change in order to stay relevant, and a lot of this change is ongoing. It was that change that also led to the decline in profit for ITAB, and it's also that change that we can capitalize on when we have realized what it actually means. Because it doesn't mean that there is less to do in the retail space for us, it means that there is much more to do. It means for ITAB then, as a consequence, that we need to be always consumer and retail insight driven. We need to make sure that our offer is based on creating measurable outcomes for the retailers, so they can succeed in their efforts to invest in the retail experience and in the consumer experience and at the same time reduce the cost of operating stores.
They need to invest and at the same time reduce their costs, and we can help them with that. That is what we are doing. We've taken a position and an insight that we need to become much more agile. We need to become much more able to follow the retailers' needs and to, together with the retailers, develop their answers to the challenges that consumers are asking them. Next slide, please. The One ITAB strategy consists of seven strategic priorities, and they're all aimed at helping us become the leading solution provider in our industry. If you look at these strategic priorities, they're a little bit phased into a first phase that is all about stabilizing, and that is for ITAB to rebuild the cost structure and to reengineer the cost structure.
The second phase is all about building and investing in new capabilities that helps us to become one company and to become a solution provider that is driven by knowledge and insight. If we are building this in a scalable way, that is our ambition, it means that when we expand organically or through acquisitions, it will cost us less effort than before. We believe that there's a lot of things to do when it comes to expanding. We will do this through acquisitions, by organic growth, but also by focusing on more partnerships. Next slide, please. Basically, our strategy is really about acknowledging the fact that consumer behavior is driving and challenging retail, that the answers are not found easily, and it is together that you need to figure this out.
It's us together with our customers, it's together with our suppliers, it's together with the insights across ITAB. ITAB, I would say, is already today one of the leading solution providers. We are definitely one of the leaders in our industry. We need to become much better to lead by knowledge and insight and share best practice across our group to the benefit of our suppliers, partners, but mainly to the benefit of our customers. Next slide, please. So far, after having been working and executing on the One ITAB strategy for two years, when it comes to the stabilized phase, we have been very, very busy. We started in 2020. 2021 was a big execution year. Some of that execution spills into this year that we're in now, 2022.
What we have been doing is that we have started to work on consolidating our sourcing volumes. Previously, that was individually sourced by 45 different operational companies. Today, we have started the consolidation. There is considerable synergies to be found there. We have reduced successfully our SG&A in a significant way, and not just in terms of cost cutting, but also then adapting it to a new go-to-market model. We have made significant footprint consolidation. We have either moved or closed production in Sweden, in France, in China, in the Netherlands, et cetera. We have been super busy in optimizing our activity and by doing that, reducing our fixed cost. As a consequence, we have also been able to reduce our net debt, which is very important for us.
We were in a situation where our balance sheet was not as healthy as it is today. We have, of course, then, reduced a lot of the fixed costs. Basically, you can say that a lot of what we're doing is to simplify ITAB's structure. We have reduced the number of legal entities. We're simplifying governance. We're removing clutter, you could say. The second phase that we are executing on in parallel, but of course, it's also a little bit phased. First, we need to make sure that we have a stable foundation to build on is that we have developed and refined our value proposition. We have rolled out our new go-to-market model according to the value proposition, according to the new sales structure. We have invested in sales training.
We have defined how to move forward within our services, how to further expand them, how to move further within retail technology and our solution selling. We are starting up several initiatives to further drive efficiency and cost out in our operations, but not just as a cost-cutting exercise, but mainly as a continuous improvement exercise to drive excellence in operations. We have developed a shared group operating model to guide our investments and our capability building going forward, and that will be based on shared information and shared tools to help us do our job and to help teams and customers to get the full benefit of ITAB's combined strength. You could say that this phase is really about amplifying the efforts and the capability of ITAB. Next slide, please.
The third phase that is about to expand, I just want to say a few words about that. Historically, ITAB has been leading the consolidation of our industry through a number of acquisitions. We believe that we'll continue to do acquisitions, but they need to be a little bit more disciplined, and they need to be strategic, so they really accelerate or strengthen our market position. When it comes to the market expansion, we will focus on European retailers. We will follow them when they want us to across the world, but we are really focused on Europe. We are going to continue to increase our cross-selling and our conversion to existing customers and penetrate. There is so much more to do with the customers we already have.
We believe that there's more to do in markets that we're already existing in. That will be our priority before opening up completely new markets. We will leverage our strengths and our cross-sector know-how through solution sales and our delivery capabilities. This is important to say because we are one of the few actors in Europe that actually covers all of Europe and that can bring best practice from Italian grocery industry to U.K . Or to France, or bring best practice from the Norwegian grocery industry and implement that in Germany and vice versa. There's so much richness that we need to be able to bring to the market. When it comes to how we want to expand our offer going forward, it's really to focus on retail technology and to focus on services.
These two are really linked together. There will be, in the future, we believe, much more technology in retail in order to leverage all the data that you can derive out of physical retail, but also to leverage the data and the insight that you have from other online channels. We are going to invest more in our retail technology portfolio, and also we're going to work more with partnerships and bundle our own know-how with others' know-how in order to create the solutions that will help to solve the customer's dilemma. This is all built on our value proposition. I will not go into that, but it's kind of indicated on the slide. The purpose of all of this is to grow contracted recurring revenues.
Technology drives services, data drives insights, and it drives the speed of change in retail technology, and we have a lot to do in this field. If you take the next slide, please. This is kind of showing our ambition in a simplified way. On the left side of this slide shows ITAB of today, and it's not just ITAB of today. I would say it's in many aspects how our industry is supporting retailers. We are today influencing the consumer journey within a brand in their physical space. We are helping to build engaging or smooth, convenient consumer experiences, depending on what it is that you want to have as a consumer.
We are also influencing store operations and the efficiency of the retail store or the efficiency of chain stores. In the future, we believe that we will continue to do that, but we will also add a third influence from our side. That is that we believe it's going to become increasingly difficult for a retailer to operate stores because they need to invest in more service, they need to invest in more technology, they will need to leverage the data from online and physical and bring it together. This will add on to the complexity, and we believe that there is a space there to support the retailers with this dilemma.
We also believe that there's great value to be derived because the insights will not only influence the efficiency of the store or the consumer journey in the store, it will also influence the efficiency in the supply chain or the value chain of entire brand and all of the suppliers to that brand. That is what we are aiming for going forward. Next slide, please. Just to tie up this strategy chapter a little bit because of course, the One ITAB strategy is all about becoming a solution provider, but it's also about then making sure that financially that we are sound.
Just to remind everybody that we gave a guidance in 2020 when we were in the most uncertain period of the pandemic to try to give the market an understanding of what we were all about and what our strategy was all about. We gave a guidance to where we were aiming, how much cost that we would be able to remove, and how we were going to further strengthen our financial position, I would say. This is just showing you that 2020 came out despite a loss of SEK 700 million in turnover. We came out stronger than in 2019 on the adjusted EBITDA. In 2021, we continued to improve.
Now at the end of 2022, we believe we'll be at the full pace that should lead us to deliver on our guidance. It's important to understand that this is compared to 2019. Of course, many things have happened, and right now things are happening in our world that makes it difficult to know exactly how the outcome will be. So far so good. We are delivering according to plan. Next slide, please. This is a slide just to show you kind of a glimpse about the movement. If you compare the full 2019 outcome with the full 2021 outcome, we have strengthened our grocery position. We've gone from half of ITAB's business to 60% of ITAB's business.
We have increased the ratio of retail technology from a fifth to a little bit more than a quarter on our way to a third of ITAB's revenue. We have significantly lowered our net debt, and I think this is very important. We have improved our underlying profitability and our adjusted profit margin before tax. That has been doubled. These are just some signs that we are well on our way. Next slide, please. In February, when we launched our financial report for 2021, we also launched new financial targets for ITAB after the transformation period. These are the targets that we are striving for, and they are set to provide ITAB with sustainable, profitable growth and a more efficient use of our capital.
Of course, right now with inflation, one could question if the growth targets are ambitious or not. Of course, this was set in a different context, and this is set long term. We believe these are the post-inflation figures, and that should be measured over a business cycle. 48% of the annual growth. This is important because historically, ITAB have not grown organically, have mainly grown through acquisitions. Here an ambition is that this is going to be divided between organic growth and acquisitions. Our earnings, the target we have set up is to be between 79% over a business cycle.
We've also set them a target of more than 80% of cash conversion, and we have kept the dividend policy target to give dividend to our shareholders of 30% of our profit after tax. These are our financial targets that were communicated in February. Next slide, please. Now we go into the interim report. We can take for Q1 2022, and we can take the next slide, please. Just some highlights from the report. We've had a healthy demand, and we have results that were in line with previous year for the quarter, despite operational challenges. I would say we had challenges already in 2021.
These challenges have been accelerated during Q1, not due to pandemic consequences or shortages of supply, but they have been fueled by the energy, the very steep energy increase in cost for energy, et cetera. Our efforts to balance our supply and the increasing inflation have been very high. We have been driving inventory up, both due to, I would say deliberate decision, but also due to the difficulty and as a consequence of very steep increases of some critical raw materials. Also shortages of material is what is behind the steep price increases, so we've been able to secure material in order to be able to deliver to our customers.
During Q1, we also acquired a company on the last day of February, a company called Checkmark in Finland that is strong within retail technology solutions. They do conventional checkouts, self-checkouts, and they do gates and guidance products. They are a company that doesn't add new technology or know-how to ITAB, but they certainly strengthen our position within grocery and do-it-yourself, mainly within the Nordic region. We took then a decision to discontinue our operations in Russia during the quarter. It will have a marginal effect on our turnover and our profitability, but there might be some write-offs. We communicated that earlier. Of course, this is a decision that is not taken.
I think it was a decision that was obvious for us to take, but it's also important to say that we have the utmost respect for all the sanctions. We have the respect for the local legislation that we need to follow, and we are trying to take the best care of our employees, but we are firm in discontinuing our activities, so that work is under execution, as we speak. I just want to highlight that the uncertainty in the world continue to affect our operating environment. I would say in the Q1, we carried a very good trend we had in Q4 2021 with us into Q1. We were, like everybody else, we were taken by surprise by the very quick cost of energy, and that has affected our results in the quarter.
Of course, inflation is everywhere now. It's not just in specific materials, it's all over the place, so it's going to continue to affect us going forward, and it also affected us in the first quarter. By that, I hand over to Ulrika, and we can take the next slide.
Yes. Next slide, please. Looking at the yearly development, we have a big growth in turnover in 2020 related to the pandemic. During 2021, there was a mix of recovery from the pandemic, but also acquisition and during the last six months, driven also by price increases. Comparing the rolling twelve months in Q1, we can see that we have a growth, which is mainly related to currency and price increases during the quarter, and we have delivered an adjusted result in line with last year. Looking at the cash flow, it is an effect of continuous problems with supply chain and increased inventory, we have a negative cash flow, and we also have increased our net debt a bit. Next slide, please.
Looking at our turnover for the first quarter, we ended up in SEK 1.8 billion, which is a currency-adjusted growth with 12%. The organic growth is 11%, and the acquisition, Andréas mentioned, of Checkmark contributed with 1%. The growth drivers, they include price increases, continuous price increases, and also stable demand in most geographic markets. If we look at the development by customer sectors, you can see that we had a big increase in fashion with almost doubling the turnover compared to last year, which is coming back and recovering from really low turnover. We also have increases in do-it-yourself and other customer segments.
If we look at the CAGR growth, you can see that since 2019, grocery is the fastest growing sector for us. Next slide, please. Looking at the adjusted profit, we have a result in line with last year's first quarter, and we have really tried to balance the supply chain disturbances, increased inflation through price increases but also working with reducing costs. We have been seeing a lot of the energy prices going up and also the prices and costs have been going up. We have increased our inventories during the quarter to be able to deliver to our customers, and I will come back to this on a later slide.
As Andréas mentioned, we have decided to discontinue the group's operation in Russia, and there are a lot of uncertainties in the world that is now affecting our operating environment. Next slide, please. We have a positive cash flow from results, but this has been offset by increased working capital during the last three quarters 2021, which also continued in the first quarter 2022. We have a strong sales growth with approximately SEK 250 million, and we also have rising commodity prices and raw material prices and currency affecting our inventory values. What we have seen is that also our finished products and traded goods inventory have increased during the first quarter. This is to secure our service levels and to deliver on our contract during the second and third quarter.
We have seen that our customers have been disturbed with supply chain issues and some delays in some projects. Next slide, please. Zooming out a little bit and looking at our net debt development, you can see that from 2019 we have decreased our net debt with almost SEK 1.5 billion. We were last year in the first quarter after the rights issue on a really low level of SEK 878 million. Of course, the change we have during the last twelve months is mainly affected by the increased inventories and increase of operating capital. By that, I say thank you.
Now we can take the questions.
Thank you. If you do wish to ask a question, please press zero one on your telephone keypad. If you wish to withdraw your question, you may do so by pressing zero two to cancel. Just as a reminder, that was zero one on your telephone keypad. It seems we have no audio questions, so I'll hand it back to the speakers.
Thank you. We haven't received any questions through the web either. If you have any other questions, please feel free to contact us after this presentation. Otherwise, thank you very much for participating and thank you to Andréas and Ulrika.
Thank you, guys.
Thank you.
Bye-bye.
This concludes our conference call. Thank you all for attending. You may now disconnect your lines.