Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- EBIT margin increased to 9.1% in Q2 2024, with continued strong profitability and sales growth of 12%.
- Operating cash flow is positive, with a cash conversion rolling 12 months of 91%.
- Sales growth driven by higher demand in grocery (13%) and do-it-yourself sectors (28%).
- Increased share of technical solutions contributing positively to sales and margins.
- Strong financial position with low net debt, despite increased capital needs and dividend payments.
Negative Points
- Uncertainty in market trends due to macroeconomic effects and political landscape in Europe.
- Customer spending has not yet normalized, impacting overall sales growth.
- Market remains highly competitive, requiring continuous efficiency improvements.
- Seasonality and project-based nature of the business can lead to fluctuations in quarterly results.
- High dependency on traditional customers for the majority of sales growth.
Q & A Highlights
Q: Congratulations on the solid report. How much of the organic growth is driven by your strategic investments versus a normalizing market?
A: It's a mix. Our margin improvements are driven by technical solutions taking a larger part of our sales mix. We've also optimized capacity utilization and taken costs out, which is crucial given the fierce competition. The efficiency and value-added products for customers are key drivers.
Q: Are you gaining market share, and is this driven by getting a bigger share of the wallet from your main customers?
A: Yes, it's a mix of existing and new customers. The majority of sales come from traditional customers, but we are also seeing growth from new customers.
Q: With the financial resources available, are there opportunities for M&A in the services and data-driven management verticals?
A: We are being very selective with M&A to ensure each acquisition accelerates our strategy. We are looking at traditional companies to cover Europe better and technology/service companies. Valuations have adjusted favorably, and we are making strategic investments, like in Sigma tricks, to enhance our offerings.
Q: Given the current margin trends, is it logical to strive for a higher margin target in the next phase?
A: It's a valid discussion, but we need to see if the positive trend is sustainable. If it continues, we may adjust our targets, but for now, we need to remember our competitive market and project-based business nature.
Q: Where do you see margins in the next 18 months?
A: We don't give forecasts, but we are working on improving margins through efficiency and reducing complexity. The market is dynamic, and political environments add uncertainty, so we focus on continuous improvement without specific margin projections.
Q: Are there interesting business cases for artificial intelligence?
A: Yes, we are integrating AI into our solutions, like self-checkouts and smart gates, to track behaviors and improve efficiency. We are gradually building these capabilities and see many future use cases.
Q: Will you start presenting accounts in euros rather than SEK?
A: It's something we are discussing, but no decision has been made yet. The majority of our sales are in euros, so it could be considered in the future.
Q: Can you provide a breakdown of sales per country?
A: The sales breakdown per region is available in our report. We may consider presenting this verbally in future presentations.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
