Dustin Group AB (publ) (DUST) Earnings Call Transcript & Summary

Welcome to the Dustin Group Audiocast Teleconference Q4 2021. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I am pleased to present the CEO, Thomas Ekman; and CFO, Johan Karlsson. Please begin your meeting.

Great. Thank you very much. Thank you. So good morning, and most welcome, everyone, to our fourth quarter presentation and full year presentation and conference call. I hope you're all well despite the world -- turmoil in the world. But here on my side of the call, as I said myself, Thomas Ekman; and Johan Karlsson, CFO; and also Fredrik Satterstrom is also in the room here as well. So today, we present our fourth quarter results and full year results for Great. Thank you very much. Thank you. So good morning, and most welcome, everyone, to our fourth quarter presentation and full year presentation and conference call. We hope you're all well despite the world turmoil in the world. But here on the call is myself, Thomas Ekman; and Johan Karlsson, CFO; and also Fredrik Satterstrom is also in room here as well. So today, we present our fourth quarter results and full year results for fiscal year '21, '22. But before we go into that, just to please start with the other news we also sent out this morning. As you might have seen in the press release, I have today this morning announced my resignation as CEO to the Board with during 2023 take on the position as CEO for Axel Johnson, who is also you might know as Dustin's largest shareholder, holding 29% of the shares. Exciting, of course. But however, here now is the focus on Dustin and I will stay on and secure a thorough handover to the next CEO, where of course, also a recruitment process for that is being initiated as we speak. But without further ado, let's go into our Q4 and full year presentation. And for your reference, as you see on Slide 2, we have Dustin at a glance, but I think we can move directly to Slide 3 for financial highlights. So we see how we are improving and performing now during Q4. We reported strong organic sales growth of 15% for the fourth quarter, mainly driven by strong demand for hardware. Our sites and our active work in purchasing has created a high degree of availability for our customers in a market that has still been affected in various ways by disruption in supply chains and the overall unstable geopolitical environment. Assuming in on our market, the availability for standard hardware, such as PC and mobile phones is continuing to normalize as we also saw in the end of Q3. But the more advanced hardware and in our world, higher-margin products like infrastructure network and equipment, it's still scarce, but it is improving, which is, of course, encouraging to see. Total net sales were SEK 5,743 million or SEK 5.7 billion, up with 18.2% versus last year on a reported level. And the organic growth as that was 15%, of which SMB showed just about flat at 0.2% and LCP had a very good 24.6% and B2C as a negative 20.8%, obviously, has an effect of much less containing, but also less demand in the consumer segment. Given the geopolitical instability with the continued Russian invasion of Ukraine, increased energy price and overall inflation, we can see some -- the same signs as we have seen in previous crisis that our SMB customers are the first one to react and the larger corporates are slower and public sector continued to spend on IT. Our LCP segment largely therefore, also performed strongly in the quarter with a very strong growth, while slightly lower margins compared to last year but sequentially improved margins since Q3, also encouraging. The quarter, I think, clearly shows our capability to actually to find demand, make use of it and deliver. Market share-wise, we have again strengthened our position in our different geographies and continuing on gross profit, it was SEK 818 million compared to last year's SEK 758 million. That gave us the gross margin at 14.2%. The change there versus -- the change versus gross margin versus last year is mainly attributable to an altered mix with higher share of sales within LCP, together with, of course, the high organic growth in LCP as well. Our adjusted EBITDA was SEK 202 million versus last year SEK 229 million, that gave us the adjusted EBITDA margin at 3.5% for the quarter versus last year 4.7%, down versus last year, but slightly up sequentially from Q3, 3.4%, which is in the right direction. Overall, the EBITDA margin was affected by the current customer mix towards LCP and product mix of standard hardware or lower-margin products within LCP. The integration of our acquired operations is proceeding as planned. And short term, obviously, we do carry a bit more cost due to that, also affecting the EBITDA. Items affecting comparability was minus SEK 12 million, consequently then giving us an EBIT at SEK 147 million compared to last year's SEK 157 million (sic) [ SEK 154 million ]. EPS, earnings per share, SEK 0.73 per share, a 12% increase versus last year's SEK 0.65. And cash flow improving from operating activities was SEK 104 million, a good increase versus last year's negative SEK 222 million during the quarter, showing a good positive underlying cash flow generation, which we, of course, also see encouraging in. Our leverage at the end of the quarter was 3.9 versus 3.4 for full last year, increase from currency fluctuations as well as inventory levels versus last year. However, inventory is sequentially down from Q3 -- and given that there are obviously questions in general on inventory levels in the market or in the industry, it is good to remind that the majority of our inventory relates to customer-specific or preordered inventory with very low risk. I'll come back to that also later on. So apart from an intense quarter in general, from an operational perspective, we have continued the integration work with our Benelux companies with very clear steps have been taken. One of those is that we announced a reorganization for the group now valid from October 1, where we merged our SMB segment to one for the full group, is a response for both the Nordics and the Benelux, it's headed by Rebecca Tallmark and the same for Operations now headed by Alexandra Fürst, which is now merged into 1 catering for both Nordics and the Benelux as well. And this will -- will enable us to extract more synergies than we previously expected. So we now have identified an additional SEK 50 million to SEK 70 million annual synergies. And then, obviously, the news from this morning, as mentioned earlier that I will take on the position of CEO for Axel Johnson in September 2023. But now, Johan, you can take us through the financials for different segments and how we have performed in Q4.

Okay. Let's move to Slide 4 and the SMB segment in some more detail. So sales for the quarter ended at SEK 1,529 billion, representing an organic growth of 0.2%. Reported sales was down due to the movement of customers between the segments in the Netherlands. In the quarter, we saw that the economic uncertainty is now affecting our smaller SMB customers and the consumers. This effect is similar to the previous economic slowdowns in the last 15 years. However, in the quarter, we also saw better and better supply situations for standard hardware. And the situation for SMB is now close to normalized, especially this affected the larger SMB customers where sales were growing. Overall, from a geographical perspective, Finland, Norway and Sweden showed the best sales performance. The share of software and services is down from 19.2% last year to 13.2%, mainly as a result of the customer moves mentioned above. Segment margin improved from last year's 10.3% to 10.8%. And the improvement was a result of improved availability of advanced hardware, good sales at strong margins in the recurring services and good sales of private label products. This was, to some extent, offset by strong sales of computers and mobile phones. Segment result ended at SEK 166 million compared to last year's SEK 170 million. After the brand change in the Benelux, we are now setting the online -- setting up the online business and the operational processes in the same way in the Netherlands and Belgium as we have in the Nordics. This will increase our possibilities to use the competence we have in the Nordics to further develop the online based business to the SMB segment in the Benelux. And with that, we conclude SMB. And we move to LCP on Slide 5. Sales in LCP was SEK 4.105 billion in the quarter, that was an increase of 33.9%, of which 24.6% was organic. During the quarter, we saw very strong sales in both the public sector customers and the large corporates. As for the SMB segment, availability of standard hardware continued to improve. And in the Nordics, the backlog was down by SEK 300 million. However, in the Benelux, it continues on high levels. This had a positive impact on inventory levels, which we will come back to later in the presentation. Price increase had some effect on sales development, and our estimate is that it impacted around 3%. From a geographical perspective, growth was strongest in Denmark, Netherlands and Belgium. Segment margin at 6.8% was down from 7.5% last year, but up from Q3, 6.4%. Compared to last year, the high share of standard hardware had a negative impact on margin. And also the recent price increases had somewhat a negative impact. However, strong sales of private label products affected margins positively. In the quarter, we also saw strong demand for our circularity offerings such as take-back, and more and more customers see this as an integrated part of the service we provide. And we continue to Slide 6 and B2C. Sales in B2C was down by 18.7% to SEK 110 million. The main reason for the lower sales was the economic instability and continued low level of price campaigns. Segment margin continues to be at high levels at 8.3%, mainly due to the lack of price campaigns affecting margins negatively. Segment result was SEK 9 million, down from SEK 11 million last year. Then moving to Slide 7 and net working capital. Net working capital was SEK 80 million compared to last year's negative SEK 256 million. The higher net working capital continues to mainly be attributed to the Benelux region, where the change to an asset-light business model is continuing. The change in the model will be implemented gradually during financial year '22, '23 as we are changing the IT platform and moving towards a global organization for purchasing. If we look at the net working capital details. Inventories in the quarter was SEK 1.34 billion, down SEK 130 million from the previous quarter, but up compared to last year by SEK 325 million. It's important to remember, as Thomas mentioned, that approximately 2/3 of the inventory or SEK 850 million of the total Dustin inventory is preordered by customers and the way to delivery and is not exposed to price risk. This represents approximately 20 days of sales. The other 1/3 or SEK 450 million is related to our online sales and private label. This part of the inventory remained at same levels as last year. Moving to accounts receivable. That was up SEK 710 million, mainly as a result of higher sales, but also a shift towards more LCP with longer payment terms. Accounts payable was SEK 3.79 billion or SEK 643 million higher than last year. The majority of this comes from higher business volumes. In total, we saw a reduction in the inventory in the quarter -- for the quarter. And it is our view that we will see inventory normalizing back to levels around SEK 1 billion to SEK 1.1 billion in the coming 2 quarters. This makes us continue to believe that our net working capital target range of negative SEK 100 million to SEK 200 million is realistic. To bridge the time it takes to implement the asset-light model in the Benelux, we have initiated a project to sell part of the receivables related to the public sector. We expect this to be implemented during the first half year of FY '22, '23 and have an impact of around SEK 500 million to SEK 800 million. Leverage, that is net debt in relation to the 12-month rolling EBITDA, at the end of Q1 was -- at Q4 was 3.9, where our target is to stay in the range of 2 to 3. The higher net working capital and currency differences affected net debt and leverage upwards. Moving to Slide 8 and cash flow. Cash flow for the quarter was SEK 8 million compared to last year's SEK 130 million. If you look at the parts, we see that cash flow from operating activities before change in net working capital was SEK 212 million compared to SEK 201 million last year, mainly as a result of better operating results. Change in net working capital was negative SEK 108 million compared to negative SEK 423 million last year, where the main difference in last year would come from the acquisition of Centralpoint. Cash flow from investing activities was negative SEK 45 million this year, of which SEK 35 million was related to IT investments, compared to SEK 3.72 billion last year, where the acquisition of Centralpoint affected the numbers. Cash flow from financing activities was negative SEK 51 million compared to SEK 3.424 billion last year, and last year was affected by the refinancing of Centralpoint. Total investments in the quarter amounted to SEK 66 million compared to last year's SEK 55 million. CapEx related to IT development amounted to SEK 34 million. And of these SEK 34 million, SEK 14 million investment in the IT project in Centralpoint where we are moving the ERP system to the cloud. Investment in tangible and intangible assets decreased from SEK 24 million last year to SEK 20 million in Q4 this year. And finally, investment in assets related to services -- service delivery was SEK 11 million, and that was down from SEK 15 million last year. All in all, SEK 45 million out of the SEK 66 million in CapEx was affecting cash flow. The others were changes in lease or rent contracts. And with that, we'll move back to Thomas.

Good. Thank you, Johan, for that run through. And then we proceed to Slide #9. Let me elaborate a bit on our integration and synergy development. As we have previously announced, we believed when we did the acquisition of Centralpoint last year that it would be possible for us to extract synergies that have estimated SEK 150 million annually. They will come from an order that are starting to surface from both revenues and costs. On the revenue side for SMB in Netherlands, the merge to 1 organization for SMBs in the neighbor for that where we will be working in the same way, in the same platform -- or on the same platform with the same offering portfolio and synergies will be realized in full by year 2023, '24. Same for LCP tender where we, given our size, now have a larger portfolio of contracts, and by that being less dependent on certainties, which then incurs that we can choose more thoroughly and with better quality what contracts to hunt for. Turning on to Slide 10 and look where we are now. We have taken good steps in the foundation for the realization of our synergies. We have rebranded to Dustin in the Benelux is finalized. Everything is Dustin now. The integration of Benelux entities is ongoing according to plan. Private label was launched in late Q2 and now starting to show traction with about SEK 10 million of private label sales in the quarter, which is a really good start. And in the reorganization now from October 1, we also established a group-wide procurement and vendor management organization to make use of our pricing tool, further improving our purchasing power, obviously and be an even stronger and better partner to our vendors and the distributors and, of course, also to our customers. Also, launch of our common cloud-based ERP platform in the Benelux is ongoing with completion planned during this fiscal year, during 2023. And so far, we have taken steps of extracting approximately SEK 50 million of the earlier expected SEK 150 million. So we are on schedule there. However, during this work and with the new structure, we have also identified an additional SEK 50 million to SEK 70 million in cost synergies coming from better processes, efficiency gains as well as streamlining of our central functions, and that leads us to quality improvements, hence less costs. And combined with that earlier SEK 150 million, we therefore raised the target to approximately SEK 200 million to SEK 220 million in total. And all that should be fully implemented by the end of our fiscal year 2023, '24. So we're improving there. Continuing then to Slide 11 for an update on our 2030 commitments and the current actions we do towards reaching those. For the full year 2021/22, we increased our circular revenue share to 25%. As you might know, our target is to reach 100% until 2030. So good development there comparing to last year's reported number of 12.4%. Now we also include former Centralpoint numbers in this, so we have grown organically as well as through the acquisition. And the same is valid for take-back. We have taken back 423,000 products this year, which is great, and you can compare that to the 296,000 end of Q3. Our facilities, both in [ Nacka ] in Sweden, covering the Nordics, as well as in [indiscernible] in the Netherlands covering the Benelux, is growing and taking on more volumes. And I think that demand for take-back is increasing among larger corporates and public sector, and we believe that we will soon see a much clearer or a clearer mix of second- and first-line products in larger contracts, which is obviously great for us, but it's also great for the environment, maybe not to say the least. And with that, we also, as mentioned in Q3, we also launched our carbon calculator in the end of the third quarter, help companies to get an overview of their climate footprint of their IT products and how to reduce it. They also can see an increased traction on that. But all in all, we work hard to continue to fulfill our 2030 commitment on that. So before going into Q&A, let me just sum up the full year results for 2021/22 on Slide 12. Net sales grew with 57% to SEK 23.6 billion, where organic growth for the group of 11.4% with SMB at a strong 9.1%, LCP a very strong 15.9% and B2C at minus 23.6%. As you know, our financial target is to be on 8% organic growth, so well on that. Gross profit ended at SEK 3.4 billion versus SEK 2.4 billion last year, and gross margin came in at 14.7% versus 16.5%. Change in sales mix with a higher share of LCP sales and vast deliveries in standard hardware is behind the change in gross margin. And the adjusted EBITA increased 29% and came in at SEK 979 million versus last year's SEK 759 million, giving us an EBITA margin for the full year at 4.1% compared to last year's 5.0%. Margin is affected by lower gross margin coming from customer mix and product mix as well as that we, for the moment, carry more costs due to the integration of former Centralpoint and obviously that year that we have behind us has been continuously affected by higher distribution costs due to overall disruptions in the supply chains. EBIT increased with 31% to SEK 758 million compared to last year's SEK 576 million. And EPS, earnings per share increased by 10% to SEK 4.22 per share versus last year's SEK 3.82 per share. And cash flow from operating activities had a very strong increase at 245% to SEK 584 million versus last year SEK 169 million, a good cash flow generation. And leverage, as Johan was into, ended at 3.9 towards EBITDA. Given it's about our target, as Johan mentioned, for Russian regions though, we are very active in working it down with active working net working capital and continues to focus on cash. So all in all, a good year with robust organic growth with mix effects impacting the margin short term. The pandemic is still present over the world, although we have, during this year, learned how to accept it and how to deal with it. The change among our customers to a new way of working is for sure here to stay, which over time also increases our potential market. The continued escalation of the war in Ukraine also puts pressure on humans, creating worry, and we can see the hope for into that. We see signs over -- as I mentioned earlier, we see signs of a more cautious market in SMB, especially like earlier crisis where the smallest SMBs are the first ones to react but also the first ones to come back. And the market trends, however, continue to accelerate with distinct changes in customer behavior. The IT service demand is there, and there is an increased demand for instant availability online as well as security, mobility and remote management. IT is also, of course, a big enabler for companies to be more efficient or more efficient in their way of working in platforms and the tools they use. So IT is very central for most companies especially when times get tougher. Security is obviously a big topic now and will continue to be given the overall uncertainty in the world. We have extensive experience for that and knowledge and can serve our customers in all our markets. And for these last years has meant that our position is clearly strengthened and shows that our business model is very robust. All in all, we are very well positioned, although obviously affected by the geopolitical instability. And as always, just before we go into queue, I'm always very proud of everyone in Dustin Group for doing their utmost every day to deliver a great customer experience and driving our competitive edge. This year has been extraordinary with a lot of unpredictability. But despite of that, we have continued to deliver and giving our customers a very good experience built on reliability and trust. And with the continued integration work, we have taken clear and important steps to build one Dustin with one brand, one culture, one platform and a unified offering in all our markets. So with that, I think we can conclude our presentation and are happy to take any questions you might have. Operator?

[Operator Instructions] Our first question comes from the line of Daniel Thorsson of ABG.

Yes. I start off with a question on SMB. Can you give us a feeling on how SMB developed during the quarter? Did you see a slowdown and hence negative organic growth in the end of the quarter, for example? And also, what type of products or services and regions do you see the first signs of slower demand?

We can start off by the SMB demand. Actually, the quarter was -- August was strong. And June, July was a bit more cautious, but August was strong. But in general, I mean, I think we will see the same. As I mentioned before, Daniel, also, we would see the same going forward. But the SMB -- we'll probably be more cautious given how the market develops and how the overall instability in the world. But that -- so that during the quarter, it was a strong August, I can say. And the second question was on -- on different markets, yes, exactly where we see...

And which products -- which products and services.

Exactly. On market I should say, it is rather similar across the board. Across the different markets, we have a similar behavior. And that's obviously also that we see the same customer behavior in our markets. On product-wise, I mean there is a continuously upgrade, that you upgrade to a better PC, a better product, that continues because you use more of the capacity, as we have mentioned before, that you do. Services is typically also going towards more remote management on PC, obviously, given that people work from other places than the office. So the more than market as we call it, which is a PC and remotely supported and managed. That is a good service. And then, of course, also infrastructure and network is the services taking more ground, I can say now.

Okay. And where do you see some weaknesses?

The weaknesses, I think, is in -- you can say -- you can say it is a general weakness in -- or weakness -- yes, it's a general weakness in -- overall. You can say that the companies are more cautious. So it's not so that it's a specific product lines or so, it's more general weakness.

I think what we have seen there is similar to previous, let's say, economic downturns, is that the customers would tend to buy less, let's say, cheaper products of the same category, so less specification. If you buy a mobile phone, you buy one that has less memory or less functionality.

Okay. makes sense. And then a second question, LCP here. Denmark delivered good in LCP, you said. And now it seems like you're not delivering on the DKK 500 million annual contract in Denmark in the coming years. Did you see good growth outside of that contract in Denmark? Or should we expect a pretty meaningful lower growth in Danish LCP in the coming quarters?

I think you will see a lower growth or a decline actually in Denmark having no deliveries on that contract. But as we said before, the situation now is very different to when we won that deal because we have a lot more LCP contracts at the moment compared to what we had at that time. So I think the effect on total LCP will be limited. But of course, in Denmark, it will have an effect, yes.

Okay. Okay. That makes sense. And then the last question for Johan as well, I guess. Good cash flow, SEK 100 million in the quarter. Despite that, the leverage increased to 3.9x given that earnings fell here. So how important is it for you to come down to 3x before doing any meaningful M&A? And also the strategy for delevering ahead, you talked about inventory reductions a bit. And then also related to that, obviously, any reason for Board to await the dividend proposal. Do you have any thoughts on that?

Okay. Let's start with the working capital, then I will give the word to Thomas on the dividend. But I think to start with working capital from a seasonality perspective, is always worse in end of August compared to the other 3 quarters, and that has to do with the relation between accounts payables and accounts receivables that differs a little bit due to the summer holiday, mainly in Sweden in July, which means we are a little bit worse off in Q4. So if you deseasonalize the working capital number in Q4, it would be, give or take, on the same level as we were around Q3. But with a positive effect that inventory went down. So I think from that perspective, we're on the right track. It is -- it takes some time to change the way we have done business and the way we operate in the Benelux in order to achieve the same situation as we have in the Nordics. We're on it, and it is dependent on things like the IT systems and the IT platform which we are changing, as you know. So we are fully -- let's say, we believe clearly that we can run the operations in the Benelux the same way as we do in the Nordics and hence remaining with the target of net working capital. So I think that is clear. But as you also heard, in order to, let's say, bridge the gap when that model is not really in full play, what we are now looking at is to, let's say, finance the receivables from the public side in order to, let's say, improve the financial situation during this period. When it comes to acquisitions, we have said, and I think that's fair to say, we are spending our utmost focus now on integrating Centralpoint and the Vincere entities in the Benelux. I think that is our first priority. If there would come, say, a complementary bolt-on acquisition that had an offering that we are really interested in, I think we would consider it. But given the work that we are at hand, it has to be very good, to put it that way. When it comes to dividends, yes, Thomas.

Yes. I mean what the Board has said so far is that we will announce proposal -- dividend proposals at the same time when we send out invitation to the AGM. So we will come back to that, obviously, giving more time to see how the world develops and how things are developed in general. But still the target for us is, as you know, the financial target is to have a dividend.

Thank you. Our next question comes from the line of Klas Danielsson of Nordea.

Yes. And Thomas, congratulations on the new opportunity, I must say. So Daniel did a good work on the questions there. I have a few still. So I'll start up with a follow-up on his first question, I guess. The development during the quarter is, I guess, as you said, but could you maybe kind of give us some flavor on how the trading in September and October has looked as well?

As you know that in the quarter -- But if you look at -- I think we can -- in general, what we can say is that the -- we will see sort of a slowdown. Also the fact that we will meet our own numbers and have a fantastic growth during the last couple of quarters. But we can also see a slowdown further also in SMB. I think that will continue during this quarter as well. Yes, not talking about this quarter, but I think also for maybe 1 or 2 quarters, depending on how the world actually develops. Because now, as we said before, the SMBs are reading what's in the papers and react on to that. But still, they don't have any inventory of their own with the computer. So when if it breaks, then they need a new one, then they buy. So that is -- and there we are having availability for them as well. I think we will -- I think in general, I mean we are a large company now that has the right position. But obviously, we will also be affected by or see that in the SMB market.

Yes. All right. That's good. And then, I mean, as you say, SMB usually kind of quick to withdraw and LCP is usually a bit slower. How do you actually expect LCP to adjust? I mean, are you seeing any signs there? Or is it just [indiscernible]? Or should we expect also a slowdown there in the next kind of coming...

Yes, I think we should be -- logically, we should see a slowdown, especially if you compare it to our own -- I mean, our own comps, we will see a slowdown. Then I think the -- it's still a good market in that. And many companies are still, as I said earlier also, they are still investing a lot in IT because IT is an enabler for saving costs. And so they will continue to spend. And there is a sort of a -- there is a need of upgrade in many large corporates as well in IT equipment and IT services. So that will continuously go on. However, as I said, if you look at our numbers, if we have grown like 20 -- between 20% and 30% now for many quarters, and obviously, we will meet those numbers. And I think from that perspective, we will see a slowdown in our growth rates. And I mean, let's see how the world develops, but it's the same, SMBs react first, LCP is slower. And public sector, given that the tech space, will still be consistent and the same, then the public sector will continue to stand.

Yes. Very, very good. And then just maybe a bit more detail. You mentioned 3% price increases roughly. How much did kind of purchase prices increase? Was that on par? Or were you managed to kind of take out the whole gross margin situation? Or how does that look?

Our ability, I think, to -- our ability to charge on, let's say, higher prices is still good, remains good. And it's -- the only glitch you can get is within a month or within a quarter where some customer contracts you are not allowed to change the prices within a certain time period, maximum 1 month, I would say -- or one quarter, that could have an effect. But apart of that, over time, we still have the same possibilities as before to charge on to customers.

Okay. So price increases on par with purchase prices, I guess?

Yes, exactly. Exactly.

And, again, congratulations, Thomas.

Thank you. Our next question comes from the line of Daniel Djurberg of Handelsbanken.

Thomas, Johan, congrats also on the strong Q4, and also, Thomas, to the exciting career move you do. I would like to start off with the LCP side. And if you can comment a little bit. You saw backlog coming down in the Nordics, less in Benelux, a little bit on why you saw that trend. And also, if you can -- when you look at the backlog, is it -- should we assume a better margin mix and a routing switches and servers in the backlog that could help out in perhaps 2023 or something? And also if you could comment on the supply there on Cisco and other stuff.

Yes. I think let's start with the backlog question. It's an interesting observation that the backlog or the, let's say, the order book is not reducing in the Benelux because the supply situation is very similar in the 2 regions. So we don't -- from our perspective, we don't see a need to have different ways of ordering products in the Benelux compared to the Nordics. But obviously, the customers are behaving different in this respect. So in the vendor, like they keep ordering things for the future because they are uncertain if they would get it or not, which they are not doing in the Nordics. So I'd say it's a difference at the moment in behavior, I would say. Because the supply situation as said, is improving, and it is no difference between Benelux and the Nordics.

Okay. And if you might comment what you see in the mix going forward, if you could expect the margin mix?

I mean as we have said during this year, we have had large rollouts of, let's say, PCs or standard hardware. And that mix should improve as we go along during '22, '23, which would mean improved margins. Yes.

Nice. Nice. perfect. And may I also ask you a little bit on -- you have quite aggressive ESG targets. And what can you say about lessons learned so far? And you still think they are achievable, obviously, since they are still around? But where do you need the toughest [indiscernible]?

In January, yes, we believe in our targets. We do that. And we see strong improvements also in circular revenue and reduction of CO2 emissions. I think that the biggest challenge we knew when we set the target was, of course, that we are part of a very big value chain. And there are a lot of different players in the value chain that has to deliver in order for all of us to reach the targets we want to do, but also for us. And we're working very closely with the different manufacturers. And on that, it is to do sort of the full, what you call it, due diligence on what all the components, where they come from, sustainable working conditions, et cetera, with all the vendors. We know what to do, but it's a lot of hard work to get there and to also see sort of how can we make it even more easy for the customers to choose the right products. For example, have a CO2 label on it, how much emissions certain computers sort of emit. So there -- I think there's -- in general, we knew where the hard times would be, and that is working with the full value chain from the sort of the component digged up somewhere to produce a computer in a factory that should be -- have a healthy working conditions to the transport and to the -- to ourselves and to the customer. So there are a lot of issues here. But still, we think is we have the possibility and we have the -- we can and we want to drive this because we see that with the size we can really -- we can really make an impact there. And that's why we continue to strive to do this. And another thing, I think is more from another perspective is that the offsetting, that will be probably done by many companies in the end. I mean today, it's CO2, it's too cheap. So many companies will buy themselves out of this, and that will not help us. So there, but I think we -- in general, we need to see an increase on the prices so it will not be too easy for companies to escape from these targets that they've set up. But that's maybe for another quarter.

It's very important, of course. And then my last question. You have this new group-wide organization formed to facilitate further synergies in the group. Can you just comment a little bit on the structure and how to secure that this group is not expanding and so it will be very cost efficient.

Yes, yes. No, we have a very tight and both Johan and myself are very eager to keep -- have a small or actually a small central functions as possible because that is the most efficient way. And so that is what we are driving for. And have a very efficient, clear group functions or group operations that run and do over time. I think more and more will sort of be pushed out towards the segment, so we can even more streamline the central functions, depending on the growth. And that, of course, you come to a certain point in the company in the growth when you can do that. And we are not fully there yet, but now we see when we enable the same platform work on IT, for example, the same IT platform, which is a really strong enabler for us and for other companies to have more efficient ways of working, that we would do during next year. And that would also incur that we have the possibility to be even more efficient on [indiscernible].

And I think the change in organization is driven on the areas where we see that we could scale from more volume. So SMB is typically scalable and the operational side is clearly scalable, while LCP is slightly more, let's say, locally driven. And therefore, we remain with 2 regions there. So it's focused on where we can find scale, yes.

And we currently have 1 further question in the queue. That's from the line of Mikael Laséen of Carnegie.

I have a few questions as well. First of all, the LCP segment grew strongly in the quarter. Can you tell us something about the growth in the Nordic region and how much you grew in the Benelux?

On LCP, right?

Yes. I mean, in general, we don't comment on the regions, but we had better growth in Benelux this quarter than in the Nordics. But we were good on both.

Yes.

Okay. So the difference is not that significant.

No, no.

It's really good actually in both, but it's slightly better in a percentage way in the Benelux, okay.

Okay. So I thought that comparisons were quite good in the Benelux. Last year was a bit slow, I think.

Q4 in the Benelux was [indiscernible] Q4.

Okay. Perfect. Okay. Then on SMB, the margin improved quarter-on-quarter, so that was good. Can you just remind us the reasons behind this sequential increase and how we should think about the SMB margin going forward? It's 10.8%, 11%, more where you are in terms of mix and efficiency and scale.

I think we are in the range of 10% to 11%, depending a little bit on where we are in the season and where we are in, let's say, hardware mix. So this quarter probably, we went -- or we have slightly less of Apple products, for example, which improves a couple of digits on the margin. I would say more normal mix this quarter on -- when it comes to vendors, which is, I think, the sequential change. Compared to last year, again, the factors improving is really private label, a good margin in services and that takes us a long way. In general, it would be good also to get even better supply of advanced hardware, where we are still lacking supply in many areas, particularly on AV and network.

Okay. Yes. So if we have even better or even more normal mix, how could that impact the margins? Will it be 11.5%? Is that where you could be?

It all depends on the time frame for that question. But I think as we are running the business now, it's probably at 11%, which is good. But then obviously, we are every day increasing the share of the standard services and we're also managing to sell more private label. So all of these factors actually should contribute to the better margin going forward. I don't think we have changed our view there. We can also, I think, over time, as you've seen in the synergy case, we can improve the margins on SMB Benelux, where we are currently, say, below the Nordics.

Okay. And when it comes to [ managed services ], your service part and software also, how should we look at that in terms of margin driver over the medium term? Or is it just that you want to improve the Benelux SMB situation and that increase scale and service offering in that -- those countries will take the margin higher for the SMB segment.

I think it's both. I think first is to improve the SMB business in the Benelux, but that is primarily online hardware where we can improve. And then we are, of course, converting these, say, customized servicing companies that we have acquired into more standardized services. And we see that the margin in standardized services is really good, but obviously, it is -- how do you say -- it costs a little bit to convert them from the customized offerings to a more standardized offering. And we are in that process now. So it's really hard to see on the total number that we are improving. But actually, if you look at only the standardized services, which is the end goal, let's say, these are clearly complementing on margin. So it will improve over time. It is -- we know the journey. We have done part of it in the Nordics. We will now copy that work in the Benelux. And it will contribute to the total margin in SMB going forward.

Okay. So can you say something about the stability for the SMB side in the Benelux. Is it possible to isolate that a bit to understand where you are now in terms of burden on the margin maybe and where it could be as you're fully up and running.

Well, I think we are maybe in the range of 2% to 3% below average in the Benelux, and that comes a little bit from actually relatively poor margin on the hardware online sales, but complemented with relatively high share of relation sales on SMB plus services, that is better margins in the Benelux. So we can improve the online part there. That's the key thing at the moment to do actually. And we are spending quite some efforts actually to set up the system in the Benelux exactly as a copy of the Nordics. And that work is ongoing at the moment. And we are -- the change of brand is an important part of that. We are also moving all the SMB customers to the same IT platform and web platform as we have in the Nordics. That we're doing as we speak, basically. And that will help us using the same operational processes in the 2 regions. And that is also part of the organizational change that we did or announced recently.

Okay. And can you also say, you discussed this a bit, but can you say how this migration will be done? Because you are using Microsoft dynamics right now. And now you have -- I mean, you're moving from on-prem to the cloud. So what is the difference there in terms of efficiency and the customer experience and so on?

Well, the first move is actually taking the former Centralpoint business into a more standardized ERP. They have a very old and custom-made ERP at the moment, which doesn't allow them to do certain things that they would like to do. This day, we've worked on or actually Centralpoint have worked on it for 3 years, and the launch is expected during the calendar year '23. That will take us quite some quite a long way when it comes to, let's say, LCP business in the Benelux, improving efficiency. Second step of that is actually taking that platform and introducing that to the SMB business, both in the Benelux, but also then obviously in the Nordics. And having the same platform, there we can extract, let's say, the scale and the synergies that we see in the 2 regions, primarily in operations.

Okay. Interesting. And I was thinking about your central functions' cost going forward, how we should think about that, SEK 251 million level where you are today, how much is project-related and how much is temporary or will sort of fade away and what is the underlying recurring cost that you will have regardless of these projects in the Benelux?

Think we are -- the level we are on now is obviously an effect of what we are trying to achieve. And part of that is, as you see in the cost synergies, we have, at the moment, somewhere in the range of SEK 60 million to SEK 90 million of cost synergies. A lot of these will, of course, come in the central cost or, let's say, in the associated segment cost area. These are the savings that will come there. So they will help compensating for -- over the next period would help to compensate for the project-related costs that is in the central costs. But as we have said before, I think the level of, let's say, 4% is something that we are trying to aim for. And we still believe that, that's in that range where we should be.

Okay. So we should, I mean, think around the 4%, not below. I was thinking about maybe scaling the functions to decrease it a bit below 4%, I mean to achieve your long-term target.

It all depends on what is the time frame. But if you say in the next 2 years, I think that's -- I think I will be rather closer to my number than yours.

Okay. Good. And final one, if I may, about the cash flow. Can you just remind us here and tell us something about the receivables, how much you have sold in Q4, if any -- anything? And repeat again what you expect to do in the Benelux in terms of receivables sold?

Yes. Receivables, we haven't sold anything yet. It will start, I would say, commencing a couple of weeks from now. Total potential is somewhere in the range of SEK 800 million. I think realistically, SEK 500 million to start with would be a good expectation for, let's say, end of Q2 and the working capital in the Benelux. Was it last question?

Yes, that was specifically my question, yes.

Thank you. And as there are no further questions from the lines at this time, I'll hand back to our speakers for the closing comments.

Good. Thank you very much, everyone, for tuning in and all the questions. And just reach out if any more questions, and we're happy to answer anything on that. So thank you very much, and have a continued great day. Thank you. Bye-bye.