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

Great. Hello, everyone, and most welcome to our Capital Markets update. We will update on our new financial targets, updated financial targets, and you will also hear a run-through of the segments. But let me just go through for you what -- how the agenda looks today. And let's see, here we have. Yes, our agenda for today is that we start with an introduction, of course, from myself and Johan Karlsson, who's over here and also the incoming CEO. Thank you. Then we run through the updated financial targets. We will go here from Rebecca Tallmark on an update on the SMB segment, small and medium-sized business segment. Then we will also have Michael Haagen here and Angelo Bul talking about the large corporate and public segment. And then we obviously will go through the synergies we have, leverage CO2 emission, which is our uplifted new target and then obviously, I have a summary and Q&A. So it will be a very good afternoon, 1.5 hour, intense. And obviously, we'll have a Q&A in the session afterwards, and then you can post your questions in the chat. You just write your name and your question, and we will respond to the questions afterwards. Great. But let's start off. Now let me just start by introducing somewhat to Dustin for those of you who are new to the company, even though most of you know us very well. But we are -- you can say our history is like a textbook example of how a company has evolved in different ownerships and on the different management. Started in 1984 by a couple, Bo Lundevall and Ulla Lundevall, who started to sell colored floppy disks at the time in the mid '80s; then evolved launching an e-commerce site in 1995, actually, the first one in Sweden; and then start to understand the beauty of a very cost-efficient sales models to the B2B sector. And then it was sold to a Swedish private equity, Altor, in 2006 and where we started to invest a lot, we moved to other countries, Denmark, Norway, Finland; invested in IT systems, warehouses. And so the company was listed in 2015, where the anchor investor was Axel Johnson. We then have moved upwards in their ownership and is now their largest shareholder. And during this time, obviously, we have professionalized ourselves, moved to new countries like Netherlands and Belgium. And 1.5 year ago, we took a step to the European mainland by acquiring the company, Centralpoint, which has given us a very strong position in the Benelux. That is a very short history. And today, we look at a company where we have about 280,000 products, the hardware and software products in our assortment. 60% of our business is done online or through a digital interface, and 40% is off-line, which is typically more relation sales. And then we are now in 6 countries; Sweden, Norway, Denmark, Finland and Netherlands and Belgium. Since the acquisition of Centralpoint in the Benelux, then we have also seen that our main market when it comes to sales is Netherlands nowadays. Netherlands of 35% and Sweden at 25% and Nordic Sweden, Denmark between 10% to 15% and then Belgium, our smallest market so far, but growing rapidly at 3%. And we also have -- we are fully towards B2B. We have, of course, a consumer offering as well. But given what we will announce today, this will be the last time you see the segment as this. We will have an SMB and LCP segment. But there are many orders flowing through our warehouses and our logistics centers every day throughout the year. That's very brief. And also the business model we have had, from the very beginning has been obvious that we see ourselves as an aggregator. There is a large number of suppliers on the left-hand side, who needs an aggregator with a strong position and strong brand to interact with a large number of customers. And the interesting thing with being an aggregator is that the more complex the world or the more complex the IT world becomes, the more need there is for an aggregator, someone who can help both small customers, but also large companies and public sector with the right offer to the right time at the right price. And that is what we do. So our position is strengthening by the day in the value chain. But let's get down to the highlights of today and look at our updated financial targets and what we have seen today. Most of you have probably seen the press release today. But the rationale just quickly on that, is that we have developed, as you have seen, as a company over the years. We have a different segment mix today or different segment split today and the market presence is also different compared to when we did the IPO, when it was actually the time when we set the previous targets. So the purpose of this is obviously to create increased transparency, accountability and obviously, shareholder value who also mirror sort of what company we are today versus what we were before. So, therefore, we have updated our financial targets. We have also, at the same time, now created more clarity by reallocate what we call the central cost to the segments instead, given that the segment has grown and then more self-driving sort of, self-sufficient and then we see that we put the cost where the cost arrives. And you can see how we have developed in the segment splits. And obviously, this has come from both organic growth but, of course, also acquired growth. But -- and now we have the split that we as of today. So what we will do is that we will merge SMB with B2C. So B2C as a segment will disappear. It will be incorporated in SMB. We will update our financial targets, and we will also present how we reallocate the central cost to what we now call corporate functions, which could be more transparent, more clarity and create more value for us. Great. So Johan, would you like to take -- or sorry, I will take these -- sorry -- and here they are. Awesome. But we are on EPS growth. So EPS is our new target for where we have growth. And you all know, EPS as a target, we will grow more than 10% on a 3-year average annual growth rate. We stick with our leverage target, which is to be between 2% and 3% on net debt towards EBITDA. Then we lift up our CO2 emission targets. As you know, we have had commitments since before when we committed to be climate neutral by 2030. But now we also put a target on ourselves to reduce this with 25% or reduce CO2, which will be measured in CO2 equivalents versus SEK 1 million in sales and that we will reduce by 25% in the coming 3-year period. We think it's very good to lift this target up. First of all, that we want to do, but also because we can do it, and we want to drive this development in the right direction. So that we will do. And then we stick with our dividend policy, where we will distribute more than 70% of our net profit to the shareholders, given, of course, that the financial position at the time allows that. But we think it's good to have a dividend target that keeps us and the company on our toes. Good. So let's take a little deep dive into the different parts here. Johan?

Let's start with the EPS growth then, the more than 10% on a 3-year average on an annual growth rate. To support that, we have defined 2 supporting targets, and that's really to -- to a better way for you all to understand what we are thinking about the development of the segment that in the end, should, of course, generate the EPS growth. But we have set 2 of these supporting targets for each of the segments, it's organic net sales growth and it is segment margin. So if we then look at SMB, where we keep 8% organic growth as a target, while on LCP, we are moving to 5% as a growth target, and we will come back to that a little bit later why and how. On segment margin, you can see that we are aiming for a margin above 6.5% on SMB and above 4.5% on LCP. Some of you will then understand that, that is the new way of explaining the segment margin as the old one was much higher. But let's have a look at the -- what we have actually changed on the redefinition of cost and the merge of the segments. So first, on the top of this slide, you will see the merge of the SMB and B2C that basically forms a segment with SEK 7.6 billion of sales and 11.1% margin in the old way of expressing segment margin. Then on the bottom of this slide, you will see the rare definition or the reallocation of central costs. And as Thomas said before, we had central costs from the start because that was cost that we shared between these segments, and that was really an efficient way of using the resources of Dustin. Now we see more and more -- that the cost base is more and more allocated to one of the segments. And therefore, we believe that the cost calibration are better down close to the business. So what we have done, we have moved SEK 383 million of cost to SMB and SEK 475 million of cost to LCP. The consequence, you see below. Basically, segment margin in SMB goes from 11.1% to 6% and in LCP from 6.7% to 4%. And remember the target is 6.5% on SMB and 4.5% on LCP. Left in them what we now call the corporate functions are basically group management and some HQ functions such as HR, legal and finance. And that in the end will represent something like 0.5% of sales. First, we merged the SMB and B2C. And then we are changing the allocation of costs. That are the -- these are the 2 changes that we are doing to the P&L. If we then use the financial target and look at where would we end up in a more number-driven forecast. These are the projections of taking all the financial targets and looking at where we end up. So EPS, the main target where we will go from 4.2% to 6.5% earnings per share. And that, of course, how will then the business look like if we are at 6.5%? Well, we will have a turnover of about SEK 30 billion from today's SEK 24 billion and we will have an EBITA of SEK 1.4 billion compared to today SEK 978 million, and that represents more a margin of 4.7%. And this is -- important to understand this is that the target for each of the segment basically remains the same, but we are changing the segment split. And that is basically the reason why we are now below the 5% to 6% that we had before and end up with 4.7%. So this is if you project a little bit of the numbers from the financial targets towards the business. If we then split that in the segments, if we move to the next slide. We can see we start with SMB, where the focus will be still on growth but also improving profitability. We are today at SEK 7.6 billion. And with the 8% growth, we will end up at around SEK 10 billion of sales and profit wise, SEK 454 million, to somewhere slightly below SEK 700 million, and that will take us above the 6.5% segment margin. That is our target. On LCP, where I would say more focus is on profitability. We moved from SEK 16 billion of sales to SEK 20 billion and on segment margin and segment result, we moved from SEK 637 million to approximately SEK 900 million, and that will take us to 4.5% or above 4.5% of segment margin as is the target for LCP. With that said, I think we will move on.

Exactly. Let's welcome Rebecca Tallmark, Head of SMB to the stage, and take us through what SMB and how that will look. Welcome, Rebecca.

Well, thank you. Thank you. If we start by looking at the current demand of SMB, we know that demand peaked during COVID, the work from home boosted demand and the shortages was favorable for us because we could procure to our own stock and use our pricing excellence. During the fall, we did see decreased demand for basic hardware. And I would say, as usual, it started with the smaller SMBs and then moved up to the larger and larger ones. And we are most impacted in Sweden by this, but it is a general trend across all markets. And historically, demand has come back after 2 to 4 quarters. And I would say that we are now at a stable, however, lower demand than we are used to. At the same time, as this happened with the demand in the market, there was higher availability of almost all products which has led to an intensified campaign focus, especially comparing against last year, where campaigns were few since it was such a shortage. We also see that our competitors really compete for the demand that is available and cost for paid traffic, the cost per click has increased during the fall. On a positive note in this short-term perspective, there is a continued good for Managed Services. It is a more strategic decision and the sales cycles are longer. So currently, the market conditions are not -- are a little bit challenging, but the long-term trends for SMB, they are positive. And it's primarily driven by the fact that IT is becoming more complex and the SMBs need advice. There is growth of mobility, digitalization and quite a big move from on-prem to cloud. And with these trends comes a request to have focus on both security and integrity, 2 questions that have not really been on the SMB agenda. And many of our SMBs, they do not have a big IT department. The questions that are on the table are many at the moment, and they come for us a much more strategic dialogue than we saw a few years back, which is positive. This complexity in IT is also driving requests for a more predictable IT. Customers want to fix monthly costs and an uptime that is secured by a partner. We can also see that standardized managed services are accepted. A few years back, customers wanted services to be customized. That is not at all the same trend anymore. And it's because standardized managed services are a signal of quality and efficiency. And 80% of our installed base in the Nordics is now on standard. Customers want to have some free experience, and the expectations on what that means are increasing all the time. With that comes general growth of online sales, but also self-service. The customers find that efficient for them, and it's also efficient for us. From the consumer market, we get trends like personalization and guidance that is also coming into the SMB space. Our SMB customers do not rank sustainability that high when choosing a reseller, but they still expect us to take full responsibility for that. And of course, we want to do that. All of these trends are what will drive our long-term growth. And historically, we have been growing at around 6.5% and including B2C, and we intend to grow at around 8%. And we will continue to grow at 7%, 7.5% in the core markets, B2B hardware, Nordics, but have a target of growing 20% by scaling our SMB model in the Benelux market, where we see lots of opportunity to combine e-com and our sales force. And maybe stating the obvious how we intend to deliver this is to grow our customer base and to sell more to each customer. And starting with the growth of customer base, it is very much about the new customer intake, where strong focus will be on Netherlands and Belgium but also in the Nordic countries, increasing the overall attractiveness of what we offer, our brand and the experience and working with that online excellence where we can optimize our site for traffic. Growing the customer base by new customer intake, we will, of course, also focus on loyalization because we want a stable customer base. And this target has increased a little bit, including now Netherlands and Belgium. So it is a higher ambition than we have had in the Nordics, and that is the Netherlands and Belgium standing for majority of that. Turning more to each customer. We intend to grow by 5% to 6%. And here, we have been successful in the past, very much supported by the trends and the complexity of IT that is increasing. Here, we work with increasing share of wallet and the order value moving well beyond client sales and product and price to adding more value. And we do this both online in the customer journey and with our sales force. This is what the task of our sales force in SMB is. Entire customer intake is driven online, but selling more to each customer, that's really the role of the sales force. And while we grow, we will also scale and have synergies to support our margin increase. And the normalized segment margin for us is 6% and we intend to grow that with a target of above 6.5% in the year, '25, '26. And we have 3 levers that increases the margin and one that has a negative impact on the margin journey. But if I start with the first one is general scalability and efficiency. So we can really scale from growth. We are working across all countries at the moment. And we can leverage automation and self-service, promoting that to the customers. We also increased efficiency in our managed service operations when we are moving more and more to standardized services that are scalable and remotely managed. The second lever is strengthening the sales mix. And here, we leverage the share of wallet potential that I talked about in growing the sales. It's also good for the margin. We will continue the expansion of private label and take back and other product mix services. The third lever is pricing and procurement as a reseller, obviously, at our core, and our proprietary pricing has good opportunities to develop the margin further. And last but not least, I said we had a slight negative impact and its investment in growth because it does require some investment to get traction in both Netherlands and Belgium, and that will decrease the margin slightly, reaching the target segment margin of 6.5%.

Great. Thank you very much, Rebecca.

Thank you.

Thank you very much for that. And let's now continue and welcome up LCP, here is Michael Haagen, responsible for the Nordics; and Angelo Bul responsible for the Benelux. Welcome, so please take the stage.

Thank you, sir. So let's start in the LCP section with a little short-term demand trends. Currently, we are then seeing that our supply chain is going to normalize to pre-pandemic levels. That means that we will have shorter times to deliver on our customer-specific builds, usually with a higher margin, very good for us. Also that we have less buffer stock necessary to meet our customer and contract SLAs which also will influence our net working capital positive. Secondly, we see a stable demand right now. Demand during COVID was really driven by the implementation of a lock-up home offices. And currently, we're seeing financial turmoil that we are creating hesitation in the market versus investments. But we see a stable demand, primarily for our public sector that is 70% of all LCP business while corporate is starting to slow down, but we are mitigating that with corporate actually taking market share at the moment. Thirdly, we would like to put our attention on the fact that the customer wants a tailor purchase experience and like in SMB, we are using stabilized blocks to tailor those digital experience. And you can see that we are taking their stabilized blocks and putting them in customer-specific stacks in order to give more and more self-service for the customer and more control. Fourth is the sustainability. Here, the customer ranking of sustainability is very important when selecting a reseller and all of our customers or most of our customers really have 2030 commitments to sustainability, and we are even seeing that up to 30% of all tenders right now is evaluating bidders based on our ability to perform sustainability. That was on short term, but Angelo, let's also hear some long term.

On the long term, we expect some tailwinds from the following 4 long-term trends. Demand for hybrid workspace is still growing. So we had -- on the COVID, we had a lot of growth there, but we see that is actually here to stay because people work remotely in different places. The journey towards security and cloud is still here, and we're actually growing for the coming years. The highly use of data, not only by the workforce, but all kinds of IoT departments will drive data center at computing as well. And as a service model, when IT will become more and more coming in the coming years and not only on the sort of workspace, but also on the data center and the data storage.

Thank you, and let's take us to the growth for LCP. So when historically, we have been growing 8.8% since '17, '18 to '21, '22. And we're going to then do our future organic growth. We're going to change that to an ambition on 5 percentage to focus on margin. And how we're going to do that? First of all, we're going to build and enhance our current contracts with a lot of life cycle services, which would give us around 5% CAGR. That could be preparation, on-site installations, swap, take back further by growing our cross-sell and upsell with increased private label focus. Secondly, we're going to increase and drive our share of wallet, driving 3% CAGR, meaning that we will like to power the hybrid workplace. We would like to secure the enterprise, transfer the network and cloud and enable sustainable IT. But thirdly and importantly, we would like to do contract optimization and minus 3% CAGR, where we focus on selective contracts. Contracts that suits Dustin LCP, that sees our ambition for higher margin. On top of that, growing our corporate business and continuously focus on an assortment that will then give us a COGS level that is better for our existing contracts. All of that in the Dustin way where we invest and scale in new customer offerings as API connection to enhance value and secure customer stickiness, but also utilizing a clear data-driven approach to enhance our win rate and cherrypicking the contracts that gives us the best opportunity. While we are giving a greater customer experience with a lot of self-service and security, so a good digital experience, pragmatic, easy to access, giving the customer a lot of transparency and control and, of course, giving us opportunity to be trustworthy and give a lot of high IT competence. Then we have the opportunity to leverage on our European capabilities to drive scale and win rates by sharing our digital offerings between our 2 regions, but also implementing the best practices. For instance, what we are doing on our tender desk work in both our regions and also unifying our experience to serve customers that operates in both our regions. But let's hear a little about margin, Angelo?

The LCP margin -- the LCP margin development, as you see, we're going from 4% to 4.5%. Why are we confident that we will reach that target. Basically, we have 4 main buckets of growth. The first one is general scalability efficiency where, as Michael said before, implement best practices across the regions to have a big impact. And also for our service offering, we will use standard building blocks for our customers. The second part, prioritize contracts. As a volume, the current form that we have gives us the opportunity to be a bit more picky and pick the contracts with a higher margin and contracts where we can actually add the value. The third one, mix of sales. We want to increase cross and upsell, mainly on a private label product. We kind of grow in take back and other life cycle management services and we're going to increase our software share of wallet. And the last main bucket is the global procurement part. The fact now that we can pick our procurement in one basket over 6 countries will give us more leverage to negotiate better terms and conditions towards our vendors. And that will end up '25, '26, a bit over 4% to 5% margin.

Thank you very much, Angelo and Michael. A really important part of the LCP journey is margin, of course. Talking about margin, a very important part of the margin journey is actually to capture the synergies. And we will now run through the synergies in a summarized form. And to help me there, I will ask Alexandra Furst to support comments on that.

Thank You.

So let's look at the synergies as we have presented them before and just check a little bit how we are doing. As you remember, we divide the synergies in 2 groups. There are revenue synergies and cost synergies. And cost -- the revenue and synergies are actually 2 and first one being the SMB Benelux. That is really the introduction of our online business in the Benelux region. And that we have started that job. And as you see in this slide, you will see, in the pie chart, a little bit how we are doing in progress first in activities and then financially and then where we expect to be at the end of '23, '24. So that's how the slide works. And as you can see them from the introduction of the online business in the Benelux, we have done part of it. Obviously, launching our model in the new country doesn't financially yield so much in the beginning. So we don't see any financial impact yet from that initiative. And it's, of course, a long-term initiative. This we expect at the end of '23, '24 that we have reached maybe 25% of full potential in this initiative. But it's well underway. Organization is in place, and we are ramping up. As we speak, we are gaining customers every day. If we look at then LCP tenders, that's really -- you could say, exchange of knowledge between the 2 regions. And here, we are in full speed doing that, and we have actually started with one country in the Nordics to start a tender desk, which is a copy of the Benelux one. And here, we see good progress. We will continue now with the other countries in the Nordics, and here we expect full effect at the end of '23, '24. If we then move to the cost synergies, there are 4 of them. And I would say 2 of them are more business-driven and 1 is more OpEx driven -- or 2 of them are more OpEx driven. The first one is private label. As you know, we have a great success with private label in the Nordics, and we have now expanded the assortment also to the Benelux. It's doing fantastic, and we are already on a run rate basis on the levels close to our target. And we, for sure, believe that we can do the targets in this area. In procurement, we have done a lot of activities in the last 6 months after changing the organization. So there, activity-wise, we are doing good, and we are starting to see effect. And our belief is that we will see full effect of that. And Alexandra will show us a bit later on the procurement side. When we look at the cost synergies, these are divided in 2, and I would say the first one more related to the integration of the units in the Benelux, where we have now started to integrate the old Vincere Groep companies into Dustin and we see good results from that. But that work will continue now for the next year. And still, we will get, as it looks at the moment, good synergies coming from that. And the last one is really the, let's say, using that integration to form a global or regional organization entities and also using the effects from the one IT platform. And I think that's where I would ask Alexandra to continue a little bit on the One IT platform and on the procurement side.

Thank you. I'll start with the One IT platform. One IT platform, as we talked about before, I mean, it's really an enabler for capturing these cost synergies that we just heard about and also a key component in building the European IT powerhouse -- that is our strategy. So what is then One IT platform? Well, it's a lot of things, of course. The major blocks is here on the slide. It's 4 major initiatives, you could say. That is really forming the One IT platform. The first one is the One ERP, what we call the One Dynamics and One ERP is, of course, for the group. That's the whole thing. Then we have One Web experience for our customers. They should have one experience when meeting Dustin. And for us, that's consolidating the portals we have and also the open webs. The third part, it's all about One Service management. We had Rebecca talk about that, one service operations, both internally and externally. And last but not least, the One Data platform. For us to be able to take data-driven decisions on the group, we're forming the One Data platform moving on. And this future platform is something that is scalable. That's important for us. It's scaling across geographies. It will align way of working. We are also leveraging from standard processes in the different IT components that we select in each and every box. And of course, it's a digitalization of our customer journey that we also hear, that's what we want to meet, to continue with the self-service and digitalization of the customer experience. And last but not least, to cater for further efficiency and further automation. So the focus from us at Dustin is that we will be able to continue on this efficient path to really go to efficiency in our core processes to increase the level of automation from where we are to a higher level and, as we heard Johan described, to reduce the integration time of acquired companies. We also see the benefit of having one quicker time to market for new functionality since we will have one development process eventually and last but not least, to communicate internally but as well externally with One Dustin. So all in all, this is an enabler for us to realize the synergies within the back office area, as we heard Johan talked about, and also within the processes improving quality and, of course, the efficiency overall. And between this year, '22, '23 until fiscal year '24, '25, we expect to invest SEK 300 million in the IT transformation moving on. And then about procurement. We have formed a global procurement department within operations. And the focus we have and the key activities we drive really keeps delivering to the procurement synergies. And as we heard, we expect them to be realized during this year. So the global procurement, what does it allow us to do? Well, again, it harmonizes the way you're working across the 6 different countries we operate in, which is, of course, more efficient. It also enabled us to use our full size and to achieve the lower COGS, which is the benefit for our customer and for Dustin. And also to use the total procurement power to create better results but also terms and conditions. The focus we have in global procurement is to continue on this path, to continue to work with the kickbacks and the renegotiation and negotiations when it comes to payment terms, and I'll come back to this also when we talk about net working capital and that impact. It's also about harmonizing how we procure and go to just-in-time procurement in smaller batches more often rather than the opposite, having large procurement more seldom. And this, of course, has an impact on the inventory levels that we have. It's also an opportunity for us now to really align on the one way of working on a group level and to use this combined size to secure better deals, and last but not least, to really have the right competencies in the right place within Dustin.

Thank you very much, Alexandra. I think this shows again, the importance of capturing the synergies for us in order to deliver on the financial targets that we have just presented. Actually, we will now continue from the EPS target towards the target regarding leverage. And as you know or as Thomas said before, we have not made any changes to the leverage target. We are still committed to be between 2% and 3% of net debt to EBITDA. There is no change on that. We will go through a little bit here what we believe are the important steps to make sure that we come back to that level in the future. That -- just look at the history a little bit on leverage. Here, you can see that as we acquired Centralpoint in 2021 in Q4, leverage went up to 4.3%. At the time, we had a plan to reduce that along with the dotted curve here, which would take us back to the level of 2% to 3% within 8 quarters. What has happened in the meantime, obviously, that life is not always going the way you plan it. So what has happened now is, of course, because of the tougher market, we have a lower EBITDA result that affects our plan, let's say, with 0.2%. We have FX, Swedish Krona being quite weak, and that also affects our leverage with 0.3%. And then we have working capital and inventory primarily being quite high at the moment, and that has affected our planned leverage with 0.4%. All in all, this affects our business with approximately 1x on leverage side. So what are we now doing in order to get the leverage back? Well, we are working with net working capital for sure. And Alexandra, can you take us through this?

Yes. The aim is to reduce net working capital to be between minus SEK 100 million and minus SEK 200 million. And the actions we take will have an impact on the reduced inventory levels, as you can see there, and also getting net WC back to negative levels. So what are we then doing? Well, first of all, as you heard me talk about, we're leveraging the new organizational setup, the structure we have to really use the combined size and the power we have in the market. And we are also moving the way we procure to adjust in time procurement which means in -- per se that we will also reduce the inventory by having a smarter way of procure. And that is also possible now because we're not in the pandemic anymore, and we heard that the supply chain is normalizing in another way. So it's also an opportunity to do this. We are working across the group to reduce the inventory when it comes to customer-specific inventory. And by quarter 4, this year, '22, '23, we expect it to be reduced by SEK 400 million. And in parallel, we're also working on what we call the core inventory to be reduced by SEK 60 million. So this, of course, has a direct impact on where we are on this targets. We're also focusing on the payment terms and the payment days towards our major distributors and the estimated impact of this is SEK 250 million on the net working capital. And again, this will get us back on the negative levels we want and also this facilitates our asset-light business model.

Thank you, Alexandra. Let's have a look at the total impact of these actions on the projected numbers for leverage. I think it's important to understand that if we take the financial targets and with some assumptions that you see on this slide, the -- we will take -- we will come back into the range or even below the range of leverage target until '25, '26. What have we then done? Well, we have used the EBITDA -- or we have calculated the EBITDA using the financial targets until '25, '26. We have assumed SEK 200 million of CapEx every year, and you heard half of that more or less will be building the One IT platform. We have assumed a negative net working capital of roughly SEK 100 million, where inventory reduction is the main facilitator. We have calculated with the dividend according to our policy and we have assumed the current FX rates. And what you can see here then is that leverage from now on will reduce to 1.7% in '25, '26 of which a large part obviously come from a better business result that's about 70%, and the other part will come from improved net working capital. So this is a projection of the future leverage using our financial numbers. I think by that, thank you very much, Alexandra. We will move on to the third target in the total market.

Thank you. Exactly. Let's talk a little bit about the CO2 emission and what we have there. which is the target that I was in the beginning that we lift up from our current commitments that we have on being climate neutral in 2030, but we think it's also important to start to report in this and lift it up in a higher level because we can and we can drive that development forward. We look upon it like this, that we have a 25% reduction in CO2 equivalents on per SEK 1 million in net sales for the coming period, coming 3-year period. And as said, that leads us towards our 2030 commitment of being climate neutral. And this we report, we already report this in our annual report, but we will also now follow it up in a higher level, you can say, that's what we did. And obviously, we do this because, I mean, the trends are quite clear. Climate reduction is increasingly important in procurement. Demand for circular products and solutions is also increasing heavily. And obviously, the responsibility and transparency in supply chain management is also increasing heavily. So with the trends, I mean, sustainability is becoming an integral part of buying IT. And we -- today, we have done a lot of actions. As you heard us talk about before, we have launched our own take-back service. We have a production facility in South of Sweden, in [indiscernible] and we also have a production facility in South Netherlands, where we take in products from all our clients and refurbish them or recycle them and resell them. This work that we have done in sustainability has also given a lot of advantage for us in tenders where we see that we can win new business by having the thorough work in sustainability. We've also linked -- as we've announced before, we have linked our loans, our financing towards 2 KPIs, which is CO2 equivalent per shipment and of course, also the number of takebacks that we do. And this gives us a discount on the interest rate we pay. We see also that we have a full value chain approach. We have included Scope 3 in our reporting that you can follow in our annual and sustainability report. So we take the full value chain as an approach to this, obviously, and we are compliant with the TCFD. And then, of course, our -- for our third year -- or fourth year, actually, we have done the external integrated reporting, same level of sustainability as the financial accounting. And this, of course, leads us to a lot of potential. I mean, we can, in the future, also sell more of refurbished products online. We obviously do it offline as well, but we can also do it online. We can use the data that we have to help our customers make the sustainable choices and help them out on that. We offer circular options that add clear customer values as well. LCP, sort of the driving LCP customers is also -- those expectations is also driving change in SMB. As Rebecca was into the SMB, I'm more sort of taking it for granted that we fix this and that we work with this. And it comes a lot with the cooperation we have with the large corporate and public players, especially the public players, which is driving this ahead, which is really good. And then obviously, given our position and our size in the market, we can have a positive impact in the entire value chain. So for us, it is making sustainable IT easier for our customers and by that also contributing to margin development. Profit is obviously a very good sustainability metric as well. So how do we look -- I mean, our path to decrease our CO2 impact? Here, you can see a graph where we are starting point. This is the end of last year when we ended. We included all the scopes here, Scope 1, 2 and 3. We started at 61. And in the full year of '25, '26, we will come to 46, and this is 46 CO2 equivalents per SEK 1 million of net sales. So that means a 25 reduction until then, taking us further on our journey towards 0 -- or a climate-neutral company. This we will do with a lot of actions in our main levers, as you can see on the right-hand side there and an estimate of the share of the total improvement there. I mean obviously, expanding our services such as managed services and take-back that will bring -- contribute to this. We will also promote solutions and products with a lower negative environmental impact to actively support our customers' reduction. Cooperate with the committed vendors, who also has their own sort of targets and actions towards reducing CO2 equivalents or CO2 emissions. And that will, of course, for us be more steering towards those type of vendors. We'll also partner with stakeholders towards climate action, which could be either institutions or other -- partnering with other companies and finding partners that also work towards this to find a better in terms of distribution, better in terms of packaging, and the different measure here, but we see this as an important task as well. And then, of course, be carbon neutral in our own operations, which means that we go for right energy sources, we secure that we have the right cars when we travel, et cetera, everything we do, and of course, also our own private label operations that they also work towards a carbon-neutral environment. And then there will be a residual that we probably know already and then all companies will have this. And that we will either do certified offsetting. We'll see how that looks when we come to 2030 but there will be a receiver that we will deal with either in offsetting or have found other innovations on the way towards 2030. But it's an exciting time ahead, and I think that we have a great opportunity, and we both can and will work on this and lift it up and show the importance of this and also show the way forward on this target. So with that, I think we are through the presentation of this. I hope you have before we go into summary and Q&A. So before we go into Q&A, let's us just to summarize this on that. And you can say that right now, in the middle of this, we are very extreme, more exciting market as we have been into during the -- as we talked about in Q1, as also both Rebecca and Angelo and Michael have mentioned on the markets. But if we look at our more long-term targets now, Johan, would you like to summarize?

Yes. I think -- I mean, really important is, of course, to rise the site a little bit with the times we are in now. If we look ahead, again, on this call, we have announced that we will change the targets, primarily on the business side from growth and margin to EPS growth. I think that's an important move as we are steering the business going forward. We have also changed how we allocate the central cost towards the segments where we believe this will have a good impact on accountability and transparency on the segment's result. If we look at the segments by themselves, SMB really is all about growing the customer base, primarily done in the Benelux and expanding the margins primarily in Nordics. On the LCP side, we need to scale on the life cycle management services and take-back, and we have a priority on the high-margin contracts. And that will affect a little bit the growth expectations going forward, where we are now 5% instead of 8%. And obviously, improvements of segment margin will come through the synergies. So delivering the synergies is of utmost importance. And I hope you have followed us in the presentation on how we will do that. The leverage target, we have not changed. We are strongly committed to come back to the level of 2% to 3% of leverage. We have clearly identified activities there. And I think our model is really geared for taking us back to that level within the next 1.5 to 2 years. So if we repeat them on the financial target side, EPS growth above 10%. Leverage stays at 2% to 3% on net debt-to-EBITDA. CO2 emission is now quantified on a 3-year basis to a reduction of 25% and that is still a part of the 2030 commitment. And the dividend policy remains the same of above 70% of net result.

Very good. Great. So let's move into Q&A. And I hope you have been following through the slides here in the presentation, and that will obviously be available also on dustingroup.com for you to look into furthermore. And obviously, you can also post questions to us any time to me on or to Fredrik Satterstrom, our Head of IR as well if any questions arise. Or if you have any questions now, please post them just in the chat and just post your name and the question and we will respond to them.

And I think we have already got the names, some questions during the talk here. Let's see the first one we have here. Yes, according to market sources, Apple forced iPhone volumes to, among other CSPs. Is Dustin also impacted from this, perhaps explaining some of the inventory issues in Q4? No, this is not actually nothing we have experienced that they forced volume on us. Obviously, iPhone is a very popular phone and Apple is a large vendor. So they have somewhat lower margins, you can say. But still, we haven't been forced on taking those volumes. We take them because the customers wanted the model. So that's why we are so. Then there has been a lot of imbalances during the last year where we got volumes in different kinds of orders. As you know, we have talked about before, the imbalances in the supply chain due to primarily China's behavior on Corona. But now that is smoothing out. So it should be easier going forward in the future. Let's see here. Next question. A recurring question has been your too high gearing following the working capital build. You have denied the need for a new share issue repeatedly on back of an estimated working capital release in H1 '23. Can you reiterate this statement also today? Yes, would you like to elaborate on that? I think we've talked about some of it in the presentation.

I really think that we showed you before in the presentation that we are really committed to come back on leverage. I think we have the model, we have the way of operating our business is delevering. Short term, we will work with the working capital. As you saw, it will come back to the levels where we aim to be primarily through reducing inventory.

Exactly. Great. Here is another one. On the net working capital targets, have you abandoned the plan to sell SEK 750 million accounts receivables? Have you abandoned that? No, we have not actually, but we haven't started.

I think we can say like this. What we discussed previously on the net working capital or the operational issues with net working capital, we will continue with having the, let's say, the bridge activity of selling receivables. If we can and want to, we will use that opportunity. But that will not take away our focus from actually reducing net working capital operation.

No, exactly. Exactly. Here is another one also only more near-term net working capital. How do you see the near-term net working capital and leverage to develop during '22, '23 until year-end -- until August -- end of August '23? Is there any risk of this causing a too stretched balance sheet?

Well, I think what -- again, maybe repeating ourselves, but we -- we said before that our aim is to reduce inventory down to SEK 1.1 billion from the Q1 SEK 1.6 billion. And I think that will release obviously SEK 500 million, reducing debt levels with that number. And I think that will take the pressure off a little bit from the balance sheet.

It will.

Yes.

Let's see how have you distributed the central functions cost to each segment? Do you have an allocation keeper segment?

Well, actually -- yes. Quite a technical thing. But yes, we do have a look at each of the functions and how much of that functions work is really related to one or the other segment. So it's qualitive key for each of the cost centers or each of the functions.

Yes. Here, we have a question also on SMB. The 20% growth in Benelux and the investor growth impacting negative 0.3 percentage points to reach a target of 6.5% EBITDA. Do these figures include and/or need updating warehouse to more efficient automated solutions like Sweden? Well, what we have said so far is that it's not needed to reach those levels. We will, however, obviously look into how we can automate the warehouse as we did in Sweden and the Swedish warehouse, which is, by the way, also a very successful operating now. And we obviously can take that model to export to Benelux as well. But for now, it's not incorporated in the plans, that is not. So that will be another benefit -- that will take some time. Yes.

The volume will take some time to grow in the Netherlands in order to do automation profitable.

As you know, we waited somewhat -- many years before we automated the warehouse outside Stockholm here. And you do that when you sort of optimize your flow and you have the right customer base and you have the right customer flow, then it's very good to put in an automated solution. But we're not there yet in the Benelux, so it's not incorporated in this time. Let's see here. Here is another one. The most important reasons for the negative margin trend in the past few quarters and why you have not reached EBITDA margin of 5% to 6%? Seen primarily due to temporary issues according to your quarterly presentations. What are the main reasons for the downgraded growth and margin targets today? Are there any fundamental changes to your market and how you operate? I think I can start to elaborate on that. But I think overall, you can see that our company has developed, and we are a different company today than we were when we set the previous targets. And we just touched upon the margin target we passed about 5% last year. But still, we have grown significantly in LCP, both organically and through the acquisition of Centralpoint, and we have also grown significantly in SMB. But we have a different split. And also the fact that the segments are much larger today than they were before, we see it much more efficient and more transparent and actually creating more -- yes, it's more clarity for us to follow us on a group level with EPS and leverage, and obviously, CO2. And that is, for us, a better way of mirroring how the company looks today.

But we haven't really changed the ambition on each of the segments. That's clear. It's the same as we have had before. And the main change is what Thomas said, is the mix between the segments.

But the segments are the same targets as we had before. However, the mix has altered so we see more efficient and more better for us and transparent and more value to look at EPS from a group target. But we will have the supporting targets, which are the same. Then what has changed is also, of course, that we as Michael and Angelo was into on the LCP side is that we are actually exchanging growth towards being more and more specific and more prioritizing contracts where we see where we can add more value than just taking in the contracts. And that we can do because of the sites we have. We see the portfolio of LCP contract is similar to the portfolio of SMB contracts we have. So therefore, we can be a bit more picky or a bit more targeted when it comes to choosing contracts where we can add value and then hence more margin. Let's see here. Is the risk that software reselling in the future will take place more in the cloud? Meaning that you, as a reseller, may be less relevant to ask companies to buy more software directly from vendors? Well, this is a very interesting question, I think, because it's sort of -- that was also the starting point when Internet was actually the one said that customers will go directly to the vendors, but it has not happened. And what is the interesting part, as I also mentioned in the beginning, is that the beauty of being an aggregator like we are in IT, specialized in IT, is that the customer typically wants a lot of different solutions. They want a laptop from someone. They want a printer. They want a software solution. So rather, we see that the importance of being on our toes as an aggregator and depending on how you deliver because the cloud is just a delivery model, we still sell the product or the software. So we believe that, that there will obviously be companies that buy directly from vendors but that is already happening today and has happened since 1984, and it will continue to happen. But we, as a strong player and strong aggregator is we will help the customers in their full IT portfolio. So we believe there's strength in the model. Here, we have another one on acquisition. Should we expect bolt-on acquisitions or even mid-sized acquisitions in the next 4 years? Or is that put on hold and eventually come on top of the targets and most likely not to be share count dilutive when they occur? Yes, it is. You can say that everything we have presented today is without M&A. So there's no acquisition. Everything is organic. And we did that because we want to show how we -- as how we develop organically. Now obviously, as I understand, as we have talked about before as well in the quarter report is that now we have our hands full of integrating the companies we have, Centralpoint, for example, and that we will do. And so before we do that, then we will probably be able to do -- maybe some smaller but not [indiscernible] right now. So the numbers we have here is organically. Then obviously, we want to -- when you do an acquisition, you should secure that your operation, you can deal with it and that you can financially deal with it.

And I think in -- I mean, in the near future, we really have to make sure that we can yield on the investments that we have already done. That is the key priority at the moment.

Yes, yes. Good. Here, how patient are your lenders in your process to deleveraging it down to a net debt of 2 to 3x adjusted EBITDA?

I think they are patient. We have to do dialogue with our lender. I think they understand where we are and our model in a really good way, and that comes from a history of relationship with the lenders for many, many years. So I think I would say -- patient.

Yes, they are. And we have a good relationship with the 3 banks we have today.

Yes.

Let's see here. Next one there. A question on SMB and LCP on the plan to drive EBITDA margins to 6.5% and 4.5%. We have sales mix as an item behind improving margins. Can you expand on this? Does it simply mean your sales mix swinging back compared to what we have experienced in the last several quarters? Or do you have an intention to add on new product groups that you can expect will carry better margin contributing compared to the sales mix today? Would you say that?

I think here, we have to go back to why we did the acquisition of Centralpoint and why we changed the customer split or the segment split in the first place. I think what we have created now in the Benelux is the foundation to grow organically on the SMB side. And that we need to use, that we have also talked about today, and it is one of the most important targets that we have as a group. And that will, of course, as you could see between '15 and '20, we were actually in an increase of the SMB share. And then now we need to do that again. So we are back to growth in SMB, primarily coming from the Benelux expansion. And that should take us again a little bit more towards the balanced approach. It will, of course, not be 50-50 in the near future. but it will get slightly better year by year.

Yes, yes. Good. Here another question. What are the incentives for the management teams per segment? And how are they linked to growth, margins and cash flow targets? Well, incentives, we have both the short-term incentives. And obviously, that is within the year, we go. And there we have targets for all those 3. And then obviously, we have long-term incentives, which we now -- which you might have seen, we also have the performance share plan, which is very much linked into the shareholders. But obviously, the short-term incentive should also drive to shareholder value over time. I don't know if you want to comment any more on that.

I mean we do have individual targets for the segments -- for the ones working with the segments, but for everyone in the [indiscernible] team also share a group commentary.

Yes, exactly. Great. Let's see if we have another question here coming up, yes, here we go. We'll see if we can get -- there. How is the process going to find a new CFO? Well, let's talk as the incoming CEO. How does it work?

It has started, and I think it's going well. We have a process. We have a partner, and we're in full speed ahead.

Many people raising their hands for these jobs. So that's good. Yes. That's good. Great. Let's see if we have another -- that was the last question. Very good. Great. And thank you very much, everyone, for tuning into this. And I hope it gave you more flavor also to the press release that we gave this morning and announced that we have these new financial targets, which will create more clarity, transparency and obviously, it will drive shareholder value also going forward. That we want to do. So thank you very much for participating and just reach out to any one of us if you have any more questions further on. Thank you very much. Thank you.

Thank you.