Alligo AB (publ) (ALLIGOB) Earnings Call Transcript & Summary

Good day, and welcome to the Alligo Second Quarter 2022 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Clein Johansson Ullenvik, CEO. Please go ahead.

Okay, everybody. Welcome to Alligo Q2 presentation. You will not only hear my voice, you will hear the voice also of Irene Wisenborn Bellander, CEO. And as I said, my voice, Clein Ullenvik, CEO. You know how this works. We're not going to report every detail from the actual report. You can read it either afterwards or potentially already have read it. We will highlight a few things we would like to present to you. As you know, we try to bring up a theme each time. Last time, we had logistics, little bit what we're doing and logistics structure. This time, we will talk a little bit more about our integration activities and our assortment. Next quarter report, we intend to present a little bit about our work in sustainability area. I will start with repeating a little bit of what Alligo is, then we come into some highlights, followed by financials, and then we'll try to wrap it up and open up for any potential questions. I hope you'd like that. If we turn to Page 3, Alligo at a glance. Leading player in workwear, personal protection, tool supplies in the Nordic region. We create values for our companies. We have a mission which says we make businesses work. So we provide efficient and sustainable processes on a common platform. And we, as you know, work with several different concept brands; TOOLS, Swedol, Univern, and Grolls, Alligo is our family name. That's where our strategies are, our core values are. So we all belong to the Alligo family even if a customer can meet a sales person from us with Grolls or Swedol or TOOLS on their business cards. If we turn to Page 4. We can see just relative sizes, our dependence on the different countries, Sweden being the biggest, followed by Norway and Finland, and Sweden also being the most profitable country. We take great pride in our own brands, biggest one being AmPro in TOOLS side; Björnkläder, Gesto, and Univern in workwear and protection. We have some 200-plus shops throughout the Nordic region. If we turn to Page 5, we have 8 defined customer segments, the 2 biggest being manufacturing and construction. And those 2 together are some 55%, close to 60% of our turnover. Thanks to the merger between TOOLS and Swedol, we have a very good setup with customers, not only large customers, not only small and medium-sized customers, we have a good mix of customers now with these 2 joint companies. Turn to Page 6. And our desired position, and a very important statement, as you know, at the top and also considering what we've been doing during Q2. We want to be a fully integrated company. For us, that is the basis of everything. That's when we can serve our customers in the best way, being the most efficient company and also the most profitable company. So if you look from a customer perspective, we want to be strong facing the customer. And by that we mean you will not find our own brands at any other company's businesses. So we use our own brands to make ourselves strong, get our competitiveness, increase gross margin and so forth. Our offering. We do not offer generally OEM products. We are in the MRO business. So that's our main focus. And services is an important part and a growing part of our offering. And we have a go-to-market where the customer should have the same look and feel if they want to buy through electronically, meet us, go to the shop or whatever. You should have the same feeling no matter where you want to meet us. If you turn to Page 8 directly, and go into the quarter as such. So a few headlines. As you all know, we've been very busy this second quarter, finalizing all our integration activities in Sweden, implementing a new IT structure and ERP system in the TOOLS business, change to a new common pricing system. We have relocated the logistics center, the former TOOLS Logistics Center in Alingsås to Örebro. And on top of all that, we made a legal merger. So TOOLS is now merged into Swedol. So 4 pretty big activities more or less at exactly the same time. I'll come back to that shortly. We made one acquisition in the south-west corner of Norway in Egersund with Seglem. We have also communicated that we will structure our logistics business in Norway a little bit differently, where we will relocate the Rosenholm and Skedsmokorset, two central warehouses we have today, to a, for us, newly built warehouse in Vestby in the Oslo region. So that will also be an important part for us to build this scalable platform we talk about. Our revenues increased by 5.5%. You know we have a financial target that we should grow by at least 5%. Of course, there's an inflation factor in this. But yes, we are. That's pretty good anyway. EBITDA 5% growth, we ended up at exactly the same EBITDA margin of 7.6% as last year. Cash flow around the same level as last year. If we turn to Page 9, and I'll say a few more words about the historical Monday, the 2nd, which was a busy day when everything started up. And if you look back, you can say a lot about this. But generally, if you talk about the IT system and the ERP system change, that has gone well. Of course, there are some disturbances, which we're taking care of quite quickly. But systems as such have worked as intended. And then the most challenging part was of course the physical move from Alingsås to Örebro, and also there is where we have experienced some difficulties, not only caused by the logistics as such, because it's in the cross-functional area, we together caused disturbances. It has to do with sourcing, it has to do with partly IT, it has to do with the logistics processes as such. But we have some logistics processes where we have experienced disturbances, and we have not been a very good supplier to our customers for a while. The processes and the IT system has worked all the time, but the problems we have encountered have been related to the actual move. So for example, when you stop purchasing to Alingsås and relocate to Örebro, then you should catch up. We flooded the goods receiving area in combination with many new suppliers who doesn't perhaps mark the goods in the way we would like them to be marked. And suddenly, you have a congested area in the goods receiving area in combination with new processes in Örebro, which are new and really, really complicated. That has led to that we've had a period of disturbances and which we have a backlog now that we need to catch up. But as I said, the processes and IT systems has worked all the time. The problems we have faced and partly still now are facing is due to the actual move as such. And that's the paradox of doing these things. We believe in a fully integrated business. That's the best way of running our type of business. It will generate savings. But the paradox is, in the short run, we create disturbances and extra cost. So that's an investment for the future to be able to arrive at those savings. We have communicated roughly SEK 25 million yearly saving by doing this operation, Alingsås to Örebro. So if we turn to Page 10, just to tick off. We've communicated to you all these activities we are doing. And of course, it's not easy for everybody to follow what we've been doing. But if we make a little bit of closing the books of some of them, we have said that we should have a common strategy, common core values throughout the entire company, and that is in place since quite some time, as you know. We have communicated that we as a group have new financial and nonfinancial targets. We have communicated that we're also more or less ready with the store integrations. We have 2 shops, I think, that will be co-located during this year. But from a project perspective, it's ticked off. Legal structure. Now with TOOLS being merged into Swedol in Sweden, we have the legal structure. In our dream scenario, we have one legal operating entity per country. That will be the dream. We will never be there, of course, because if we make acquisitions in other regions, we need to have separate legal entities. But we now have the legal structure we would like to have in all countries actually. Turn to Page 11, and some activities which are not fully done yet then. It's the coordination of logistics. Sweden is done physically. And as I said, we have some backlog we need to catch up with before we can really tick that off. Norway, as we just said, is ongoing. And during 2023, we will have one central warehouse also in Norway. Pricing system is implemented now in all countries, but we need to validate that everything is running as intended. It's just as late as May, June that it was introduced in the TOOLS business in Sweden, for example. So it takes a couple of months for us to really validate that things are running as smoothly as we have planned. ERP system. You know that in Finland, it's in place. In Sweden, now it's in place. And in Norway, it's not yet in place. So that Norway is the country to come. And implementation of Nordic Standard Assortment. As we've communicated, we have defined a Nordic Standard Assortment, but it will take time to convert over to that standard assortment. And as I said, it's a tricky process where you need to stop buying from established suppliers and start buying from others and get the sales force to sell the right products and to do this in a smart way to phase out the old assortment. So we've said before -- we can turn to Page 12, actually. We've said before that we will reduce the number of supplies by 50% and items by 2/3. So it's a gigantic work we are taking on. But if we talk about the standard assortment as such, of course, the objective is to have the best offer in the market where we have our own brands in combination with the strongest external brands available. We, of course, develop the offer we have in the assortment based on the knowledge of what the customer wants in the different customer segments, which could, of course, differ from segment to segment. And that understanding is crucial to have the best offer per customer segment. And we also offer better solutions of products and services. So the standard assortment in combination with the services will make us strong in our offer towards our customers. So 70% of assortment will be true Nordic and 30% of our assortment will be with a country-specific touch. So if we turn to Page 14, and over to you, Irene.

Thank you. The second quarter has been favored by a more stabilized demand compared to Q1, even if the market conditions still are uncertain and challenging. However, sales to larger industrial customers in Sweden have been negatively affected by disruptions in the logistic processes in connection with the implementation of the common ERP system and coordination of logistics in the quarter. Total revenue increased 5.5% to reach SEK 2,275 million where 1.6% is related to positive currency effects. Organic growth in local currency reached 5.2% driven by positive sales development from larger industrial customers in Finland and Norway, but also small and midsized customers in Sweden. EBITA increased by 5% to SEK 172 million in the quarter, corresponding to an EBITA margin of 7.6%. The improved result is primarily driven by increased volumes in Finland and Norway, but contracted by a negative effect on sales margins and the cost base due to the disruptions in the logistics and sales processes in Sweden. The decreased sales share related to the Swedish business also contributes to a negative country mix since margins are higher in Sweden. The coordination of TOOLS and Swedol, as Clein said, is proceeding according to plan, even if there have been short-term disruptions in the quarter. The proportion of owned brands increased like-for-like from 16.8% to 17.5%, driven by all markets and rollout will continue in Q3. During the quarter, SEK 16 million was utilized from the restructuring results connected to the coordination of TOOLS and Swedol, and the remaining reserves amount to, in total, SEK 124 million, where the main part is related to the warehouse relocation from Alingsås to Örebro. Turning to Slide 15, and let's have a closer look at the development in each market. The market uncertainty because of the war in Ukraine that caused a general restraint among small and midsized companies in Q1 in Sweden has subsided in the second quarter. The development of small and midsized companies in Q2 compensates for decreased sales related to larger industrial customers connected to the historical Monday and organic sales in the total Swedish business reached about 3%. EBITA in Sweden was in line with last year and implemented price increases, except for larger industrial customers that have been delayed, contributed positively together with integration synergies in general, while negative effects from the coordination of logistics contract. The demand in Norway has, to a certain extent, stabilized in the second quarter and volumes are now in line with the pre-corona sales level in local currency even if acquisitions contribute positively. Organic sales reached about 8% in the quarter, and the oil and gas segment has improved. We have a slight positive EBITA development, driven by higher volumes and integration synergies between TOOLS and Swedol. In Finland, we had a positive sales development, and there is a continuous good development in sales related to large industrial customers. The organic sales reached about 8%, and the result was strengthened because of higher volumes, but also improved sales management. However, there is still an unfavorable customer mix in Finland, but we have started to invest in stores in order to attract and increase the portion of small and midsize customers. Please return to cash flow, Slide 16, please. Cash flow from operating activities in the second quarter amounted to SEK 211 million, which is in line with last year. Operating cash flow is negatively affected by decreased accounts payable, prepayments to own brand suppliers, and continued buildup of inventories. Average working capital as a percentage of rolling 12-month sales amounted to 22.6%, which is a higher level than normal and driven by the inventory buildup and the ongoing assortment and merge between TOOLS and Swedol. The right-hand graph shows the development in liquidity for the first half of 2022. We have a starting position of SEK 345 million at the end of Q4 last year and a positive cash flow from operations in total of SEK 188 million, which is in line with the impact of the investing activities. Most of the investments are M&A related, but SEK 76 million related to the store and central warehouse adoptions and IT-related investments. The ratio of CapEx to depreciation amounted to multiple of 1.4, driven by the integration activities between TOOLS and Swedol. Finally, the financing activities are primarily related to the amortization of leasing liabilities of SEK 196 million, but also dividend paid of SEK 88 million, bringing us to the period end of SEK 38 million of liquidity account. Slide 17, please. The group's net debt amounted to SEK 1.5 billion at the end of the quarter and the ratio of net debt-to-EBITDA amounted to a multiple of 2.0, which is an increase compared to year-end, but still within the financial target range. On top of our liquidity at hand, we had unutilized credit facilities at the end of the quarter of SEK 1.1 billion. In summary, our strong financial position means that we can continue to invest in organic growth and take advantage of potentially good M&A opportunities in our markets. Handing it over to you, Clein, for summary and outlook.

And then if we turn to Page 19. Perhaps obvious, but anyway, 5 reasons why to invest in Alligo. One, we have an attractive market growth and we believe we have customer segments which are reasonably resilient. Two, scalable platform as we've spent most of the minutes here together today talking about our building of the platform. So that is a true cornerstone for us building this case that to grow and grow profitable and to be a good partner to our customers, we need this platform in place. That's the second reason. Third, our own brands and the services we provide gives us a very, very good competitiveness and also a very good healthy contribution margin. So our own brands gives us a good weapon to fit our competitors. Four, sustainability has since many years and still is an integrated part of our business. It's nothing separate. It's something which is integrated in all we do. And we want to be a leader in the consolidation of the Nordic market, and we have been able to make a few acquisitions, even if we spent 110% focusing on achieving our integration objectives. So when we hopefully soon can leave those behind, we can focus more on doing acquisitions and to dock that onto the platform that we have built. So if we turn to Page 20, one last slide before we open up for potential questions. So we can conclude that this was a big milestone. I can't name many companies who have done this many brutal changes at once as we did. Now we've done it and the Swedish integration process is, as such, concluded, even if we now need to work through our backlog and fine-tune things. Focus going forward is just to solve all the open issues, start training our sales force in new assortment in our own brands, pointing our energy outwards again. We have spent quite a lot of time working internally, of course, due to these integration activities. And it will be so much fun this autumn to start really running again and directing our energy outwards, not inwards. And also the implementation of the Nordic assortment will also make us more efficient and better towards our customers. We have uncertainties in the supply chain, but we have, sorry to say, gotten used to it. I think we've managed that nicely during this time. We've managed to get products through in different ways. Of course, it's causing some disturbances and some shortages here and there and some extra costs. But we, as everybody else, are facing challenges. So it's nothing for us specifically. And we have a strong financial position, as just Irene mentioned. We will continue to grow profitably and M&A acquisitions is a part of that, of course. And with our platform in place, that will make it possible for us. So that concludes our presentation part.

[Operator Instructions] The first question comes from Emanuel Jansson with Danske Bank.

I have a couple of questions from my side. And as already mentioned, you have seen demand coming back or being less restrained from small and medium enterprises. But I mean, as well, have you experienced any difference in customer behavior at the beginning of the quarter versus the end of the quarter, like have they shown any tendency of caution in the end of the quarter?

When the Ukraine war started, then we saw that the small and medium-sized customers were very hesitant. And during this quarter, we can see that, that has calmed down. On the other hand, of course, we are not naive. We are preparing and we are following the market development closely and what will happen with the market going forward is uncertain for most people, but we, of course, are preparing for potentially slower market, high inflation, high interest rates. We are following closely what's happening in the construction sector, of course, and we follow that closely. But from your question, the small and medium-sized customers have shown a totally different behavior during this quarter compared to last quarter and hopefully, that was, as we said at that time, that they quickly got nervous about this Ukraine war. And we have seen now that, that has stabilized.

Yes, perfect. That makes sense. And just looking at the brutal Monday you recently had in this quarter with the implementation of warehouse and integration and so on. And you also mentioned that you have a plan of saving SEK 25 million in savings per year. But when do you think we will see this implementation to start to be effective in terms of figures? This year or this will be more seen as of next year? How should we view it when estimating forward?

Exactly. Now as I said, the paradox of doing things like this is that in the short run, we add cost and have a worse performance before we get the nose about water again and are a better company and more efficient company. So in Q2, we have been affected by negative impacts. I would imagine that in Q3, we will also have some negative impacts, but, by God, in Q4, then all that must be totally gone. And so run rate from Q4 absolutely must be top.

Perfect. And looking at the region in Finland, you also mentioned upgrading or making the stores more suitable for small and medium enterprises. Can we expect any CapEx investments or how should we view it?

Of course, it will be. We have done it so heavily over time. With the ratio Irene mentioned, we've been not through, but we are at the end in an extremely heavy investment period. And to open a few shops in Finland will not affect the overall group. We decided yesterday that we'll open a new shop in Tammerfors, which, I guess, is the second biggest city in Finland, or relocate a new one, to a better one. And of course, doing that, we need a shop interior and things. So there will be an investment per shop, but not in the magnitude that you will even notice it on a group level.

Okay. Perfect. And also mentioning in Sweden that you had some delayed price increases due to, I guess, negotiation with industrial customers that go slowly. Is this also the case in Finland and Norway?

Yes. More in Finland than anywhere else. Because there, we have the biggest share of large customers that is in Finland. And those have been the toughest ones to negotiate with. They use the existing contract to the fullest to postpone as long as possible. And at the end, it's a power game. But now, I think we wrote it somewhere, we see tendencies that, that is developing in the right direction also in Finland.

And I guess it's also even tougher when you try to sell in private labels instead of the regular brands you have previously sold to, the larger players, right?

Yes. I think it takes a little bit more time. Perhaps you shouldn't mention, but a big customer in Finland were presented with our shoe assortment, the Gesto shoes, and they more or less on that meeting decided that they will change from their existing brand to the Gesto shoes. So I think it takes longer time. Everything takes longer time with the large industrial customers, and they have a very set assortment which we should provide. But this was a nice example on when it actually can go quicker. Normally, it's quicker for us to implement the own brand assortment is through shop sales. When a customer comes in, he/she wants a shoe of that brand. Our brilliant store people convince the customer, why don't you buy this Gesto shoes. It's at least on the same level quality wise, but on a lower price point. So store conversion is the quickest way, and the larger the customer, the slower the process. But we've had a few examples now where the offer we have on own brands is so good, so they more or less on a sitting meeting can say that, let's convert to this instead.

Okay. Yes, good. And how far have you come in the standard assortment?

The standard assortment, as such, is set then to various degree. I mean in Sweden, it's just since this brutal Monday we can really work with it, because all our within the concept brand TOOLS has had no possibility to get hold of products, which has been stocked in Örebro. So it's just since the month of May in Sweden, we for real can start working with the Nordic assortment. So it's difficult to give a percentage, but it's being rolled out now. And if we push too much, I'm a little bit afraid that, that will also urge people to kill assortment quickly and not to do their phasing out process in a proper way. That will only cost us. So we'll do it as quick as possible, but also as cost efficient as possible to really phase out the old assortments.

Perfect. And last question from my side. You slightly improved also the operating cash flow in the quarter. And I'm just curious on how we should view the inventory levels going forward. I mean, you had this brutal Monday and also starting to implement the Nordic Standard Assortment. But I guess also customers might become a little bit more cautious over time. Should we expect you maybe to decrease safe inventory levels a bit going forward or...

Over time, they need to come down, of course. And the relocation of Alingsås to Örebro should be on the positive side. On the other hand, now phasing in new suppliers and not fully having phased out the old ones is on the negative side that will build inventory. And as you also know, the more successful we are in our own brands, of course, that also builds inventory. But the bigger we get -- I mean, when we started out, then you had to purchase a 6-month need per time. But now the bigger you get, the less the inventory build should need to be, even in the own brands. But generally, it needs to come down over time. Absolutely.

The next question comes from Karl-Johan Bonnevier with DNB Markets.

Yes. I'll follow on the question on basically the same passion that we already got started. But it would be interesting to learn a little more about how you see the short-term impact of this historic Monday and the delayed pricing? Because I must say I was surprised to see that you came through with the kind of margin levels and the kind of operating cash flow you did in this quarter. It seems like you have handled it well, but you still indicate that there has been quite a severe headwind for you. So some quantification of that would be lovely.

We can say this much. I mean, we have a very clear picture where we have the challenges, which is always good, of course. And the more it's related to direct sales to customers that the more we've had problems. So the normal shop sales has run smoothly, margin increase and sales increase. But of course, those areas where we've had challenges with the transit of goods or direct delivery to goods, of course, we have had customers that has, hopefully, just for the time, left us. And we also had some challenges on the gross margin side. But as we said in the Board meeting last night, it will take a month at least more to really get our arms around it. And of course, we are stupid enough. We don't plan for any disturbances, which is just crazy. Of course, there will be disturbances when you do this many activities at once. But it's difficult to quantify. We have a pretty good idea internally of what it is, but it's all related to direct sales, so to speak, direct deliveries to customers.

So when I look at it from, say, your Q3 perspective, should I assume that there is a bigger financial risk in Q3 than we saw in Q2? Or do you feel that you can normalize it in the same good way as you did in Q2?

I wish I knew the answer to this question. But of course, we will need -- as I said, the processes works, the IT systems works, we are adding a lot of people to solving these backlog issues. So that needs to be sold within a month. So no, I hope, by God, we should not have a bigger impact. But what we do not really know yet is how much have we upset our customers. So now it's time for our local sales force and sales managers on different levels to show good leadership and get in contact with customers who has been suffering for a while and get them back on track as soon as possible. So it's difficult to say, but by God, we can limit it within a few weeks now.

Excellent. I know it sounds -- I understand the complication, and looking from outside, when companies start to talk about the ERP system change, as you know, they normally closed down for 6 to 12 months, but it seems like you have handled that quite well.

Yes, we have good self-confidence, perhaps too good, sometimes doing too many things at one time. But we've survived and it's good to see. I mean, we've done processes like this before, and we have had major disturbances in the history going back where we didn't know where the problem was. In this case, we always know exactly what the problem is and had a solution, then it needed manpower to come through it. But at no point we had any process or any IT-related issues, which we didn't know what it was. So that gives us hope that we will wobble by this quickly.

But if you look at it from a more general level, as you pointed out as well, there's obviously supply chain problems out there still in a more general theme. Do you think that might have helped you in this situation, that maybe clients were overstocked on things, trying to have, say, higher inventories themselves. So maybe you've been able to, say, balance it better? And the back end of that story, obviously, is if we are getting into a market where demand is coming back again and maybe getting into a recession environment, do you feel there's an over inventory in the value chain that needs to be balanced out, not just on your side?

I understand what you mean, and it's an interesting thought. Unfortunately, I don't think so because we've been very much into the details in all these activities we've been doing. And I've been a little bit surprised by how low inventory levels our customer has for process crucial products. We have products we sell to customers which is specifically made for the customer, and a week delay can risk to stop their production. So on the contrary, that is an example of the exact opposite. I'm surprised. I would be far too nervous if I was on the customer's situation to have such low levels of inventories. So I could run short with just a few weeks. On the other hand, perhaps it's a sign that they really have trusted our ability to deliver. So we know that we have customers who have said that we don't want to wait anymore, we have to get supply from other sites. But we know what the problem has been and we are addressing it and the processes are working smoothly now. So any customers today who are ordering, it will run smoothly through the Örebro operation.

Excellent. Excellent. And when you look at the store network now being close to 200 across Nordic, you pointed out that's 1 or 2 units being opened up in Finland and so on. If you look, and I can raise the view, so to say, after coming through this internal kind of phase of the integration, what would the natural store network across the Nordic be? Is there a lot of white spots for you or is it just a question of still maybe building bigger units in bigger cities, as you indicated for the Finnish sites?

That's a very good question. We are constantly revising our store strategy and its fun. The acquisition in Seglem in Egersund in Norway. That was an area we needed to get stronger and we could make an acquisition. In Finland, we have a lot to do from a store network perspective, and we always come back to can we open more shops with an express approach, smaller shops, more limited assortment. And that we are constantly revising. But I don't foresee any massive new shop openings around our countries. I think we're quite happy with the footprint we have today with the exception of some cities here and there and the Finnish rollout.

And just interesting to hear your thoughts as well on the 10% margin target. Now obviously, I've put most of the, as I understand it, the internal kind of things in place for being able to deliver on that in midterm coming the, say, the assortment kind of consolidation and redirection as well. But if we now get into a recessionary environment, and given the kind of gross margin contribution you had from those extra volumes, how deep of a recessionary market can we get into and you still being able to deliver on that 10% margin target, you believe?

Yes. We're working with scenarios. If we lose 5% top line, what the impact should that have. We try to work with the cost base in preparation for a slower market or just to generally improve our efficiency. We have run so many projects that, of course, has led to that. We potentially haven't -- there must be an upside now going forward, headcount wise, when we are in the same system. We have now really merged the companies. So there is an upside. And of course, it will be really, really challenging. If we have a really tough market situation, it will be challenging. But on the other hand, as we communicate internally, we have good opportunities to grow even in slower markets. And if we take the part of our organization, the historic outlook is that in slower times, an established customer-supplier relationship is being challenged. If a potential customer of us is very happy with the present supplier, in tougher times, they look over their cost base. If we can come in and offer our own brands, historically, that has been a time when we can actually improve our position. But if it's a market recession or decline on a broad front, of course, we will be affected as well.

But you would say that reaching the 10% margin target is not really relying on that you have volume growth as such and maybe more of that mix component that you're indicating?

We need to play on all the keys on this piano. We need to improve our margins, we need to grow, we need to reduce our cost. But yes, we need to grow. But then if we focus on that component, how much can we regain potentially lost market shares, or how much can we grow in other areas? It's a very, very complex question. But in short, I see growth potential for large parts of our organization even in tougher times. With our high degree of owned brands, that is a very, very strong offer I see potentially even in slower times.

That sounds promising. And Irene, just one final question for me. Looking at the integration reserve, what kind of quarterly kind of markdown would you expect from that one?

So once again, what kind of...

The integration reserve, what kind of usage would you expect, say, on a quarterly basis going forward given that it's now just Alingsås that is going to be balanced out over time?

We had this rental agreement and the remaining restructuring reserve is related -- the main part is related to that rental agreement and that rental agreement ends in 2028, I think. So I think it will be divided between the quarters up to the end of 2028, more or less.

This concludes our question-and-answer session. I would like to turn the conference back over to Clein Johanssson Ullenvik, CEO, for any closing remarks.

We got one question by mail. Perhaps we should respond to that quickly. How do you see the percent of own branded products developing going forward? Yes, that is, of course, a key part for us to increase the percentage of our sales within own branded products. That is a key component. That's really, really important. And a follow-up question from this listener is, are you reiterating the 10% margin target? Is there a delay expected? And that was on the same note as you were on Karl-Johan. And we don't -- depending on the market, absolutely not. The 10% target for next year is there. We have good potential of reaching it as long as there's a market to fight for. Very good. Thank you, everybody. Thank you for good questions. That shows great interest and good insight to our business. And from our side, we just want to wish all of you a very nice summer. Thank you very much.

Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you.