Elektroimportøren AS (ELIMP) Earnings Call Transcript & Summary

Good morning. We at SpareBank 1 Markets would like you -- to welcome you to this first quarter result presentation with Elektroimportøren and the company is represented by CEO, Andreas Niss; and CFO, Jorgen Wist. And I'd like to hand the word to Andreas. Please go ahead.

Thank you, Trond, and thank you all for joining us this morning. As said, my CFO, Jorgen Wist, will take you through a short presentation of the first quarter 2024. I'll give you a trading summary and the highlights of the quarter, and Jorgen will go through the financials. We have an outlook for the coming quarters, and then we'll finish off with a Q&A. So we had a rough start to the quarter with January coming in with a double-digit negative development versus last year. However, February ended better than March. Better in March, if we compensate for Easter, looked even better. So a tough start, but trending towards growth throughout the quarter. Sales decline in Norway is a combination of fewer visitors in January and March and slightly lower conversion rate and average basket. Statistics. From statistics [indiscernible] shows that home sales in Norway has a decline of 13.4% in the quarter, and this is an indicator we link to our sales development. People do refurbish in connection with moving in and out of new homes. Easter being in March versus April last year, equals to 2 lesser days of open stores. This, of course, had a negative impact on the quarter but should be equally positive in Q2. Out of our categories, Heating due to a very cold January, and Energy solar are the 2 categories, which shows growth in the quarter. Mid-March marked 1 year since the Easee sales ban hit us. So from now on, sales comparables in EV-charger will be significantly better than the last 12 months. Gross margins for the quarter are up from Q4, but down 1% from Q1 last year. We have managed to keep a good cost control throughout the quarter, and we now see last year's savings coming through with a full effect. That gives us the following results with a revenue of NOK 350 million, which is down 8.6% from NOK 383 million last year. Like-for-like sales had a decline of 10.2%. Cost is down NOK 9 million despite high inflation and the fact that we have one more store opened compared to last year. With the decline in sales, we still managed to keep our OpEx to sales ratio at last year levels at 27.5%. We delivered an EBITDA of NOK 24 million, down from NOK 32 million last year. We're not satisfied with the top line development. We do need to continue to fight for new sales to every potential customer, but at the same time, make sure that margin management and segment -- on segment level is on par or better than last year. Looking at Sweden. First quarter revenue of NOK 33 million, which is up NOK 6 million -- 6%, NOK 2 million from last year. The sales growth in Sweden is driven by our new store. Online sales is declining. Gross margins are lower than last year, and this gives us a decline in EBITDA from minus NOK 1 million last year to minus NOK 3 million this year. The market environment in Sweden have continued to be rough in first quarter, but we do see some positive trends for our Veddesta store. Mainly, we are succeeding better within the electricians market, whilst we still need to do more to increase knowledge of our brand with the consumers. We made a reduction in staff at the central warehouse and head office in March and this will have full effect from July and onwards. Central Bank of Sweden, Riksbanken, decreased their policy rate with effect from today. Hopefully, this will lead to a bit more positive market development going forward. If we look at Namron, the share of business for Namron in Q1 was 33.4% in Norway, which is up from 32.9% last year. Namron gross margin at 56.5% for the quarter, weak NOK to U.S. dollar makes it difficult to maintain or increase the gross margins on Namron products. We continue to focus on product development, increasing share of business in Sweden and to penetrate business to business in Norway with our Namron brand. Namron sales in Sweden had a share of business of 8%, which is up from 2.7% in Q1 last year. We still need to talk about EV-charger. Sales of EV chargers were down 25% in the quarter. The Swedish Elsäkerhetsverket have now lifted the potential claim of repairing the already installed chargers. We therefore see it has the risk that was related to repair is now eliminated. Stock levels are normalized. And this, together with the fact that it now is more than 1 year since the Easee sales ban hit us, we believe, in a far better development in this category versus last year going forward. Solar. Solar sales of NOK 10 million in Q1, which is in line with last year. We have an order backlog of NOK 11 million at the end of March. Margins are being pressured in solar. This is due to great availability. Everyone has it in stock and new products at lower cost is coming into the market, and this is mixed with a decline in consumer demand. We still believe that there is money to be made in this category, but we need to focus on sales to commercial buildings rather than private houses and cabins. We will also change our model more to an order on-demand model than to keep products in stock. However, we do need to sell down a major part of current stock at very low margins. Looking at SpotOn. Sales in the quarter were at NOK 7 million, down from NOK 9 million last year. The sales at SpotOn continues to be slowed down due to also the decrease of sales in EV-charger. EV charger sales and installations down 49% in the quarter compared to last year. Gross margins, however, are up 2.6% (sic) [percentage points] from last year. And as we have done for some time now, we continue our discussions with external partners for a cooperation that enables other craftsman areas on SpotOn. We are in dialogue with several potential partners who are all part of the construction market. Therefore, we do believe that market conditions would have to improve somewhat before we can sign up with a new business partner for SpotOn. And then I'll leave to Jorgen for the financials.

Thank you, Andreas. We start with the revenue for the quarter. Total sales in the first quarter were NOK 350 million, which is 8.6% down compared to last year. Decline was impacted by a tough start in January, but improved somewhat in February, which ended just below last year. The development from February continued in March, but it was affected negatively by Easter in March this year compared to April last year. The Easter effect, we estimate to be approximately NOK 10 million. Stores in Norway had a decline of 8.6% in the quarter. The negative development on EV Charger product category, which we have seen last year, continued in the first quarter, but has stabilized with a reduction of around 30% or NOK 8 million year-on-year. From second quarter this year, we expect the sales of EV charger to increase against last year as the sales ban of Easee was implemented from end of Q1 last year. The number of visits to physical stores in Norway was slightly down compared to last year because of the Easee effect. And in addition, the heat rate and the basket is lower. This is a result of customers being more conservative in terms of their spending. Online revenue in Norway declined by 18.6% in Q1 compared to last year. The store in Elbutik contributed with NOK 7 million in the quarter, while online sales in Elbutik was NOK 25 million, which is NOK 5 million lower compared to last year. B2B sales in Sweden in the quarter are NOK 6 million. Gross profit for the quarter was NOK 121 million, down from NOK 137 million last year. This translated into a gross margin of 34.7% compared with 35.7% last year. Overall, margins were impacted by a shift towards B2B with lower margin and FX effects. B2B margin had a negative development year-on-year due to lower margin on solar products and higher competition in the service segment. B2C increased gross margin in Q1 compared to last year. The margin decline is also driven by a higher share of sales from Elbutik, which has a lower margin up 21.6%. In Norway, the gross margin was 36.1% compared to 36.8% last year. Increased share of B2B sales impacted margin by 0.2% and exchange rate effects impacted the margin by 0.7%. Adjusted for these effects, gross margin would have been 37% in Norway in the quarter. Operating expenses are reduced to NOK 9 million in the quarter compared with last year, even with general salary increase, inflation adjustments and 1 new store in Sweden. The group continues to maintain a rigid cost control and the cost reduction implemented during 2023 is coming through. OpEx ratio at 27.5%, which is in line with last year. EBITDA for the quarter was NOK 24 million, down from NOK 32 million last year. EBITDA margin was 6.8%, down from 8.2% last year. EBITDA decreased due to lower sales and gross margin, but the drop is reduced by a reduction in costs with a stable OpEx to sales ratio. And by that, I give the word back to Andreas, which will take you through the outlook.

Thank you, Jorgen. In the beginning of May, we published our first ever sustainability report. There's still a lot to be done in this field for us, but we see a great opportunity in guiding our customers to make informed decisions about more sustainable solutions in the future and in driving development of more sustainable products and services. So we're looking forward to this for the year to come. Looking at the market, we still -- we believe that market conditions will continue to be challenging. So cost and margin management will be of great importance going forward. However, we have experienced a better development in sales versus last year in the first half of the second quarter than what we saw in Q1. So slightly positive sales development after the end of Q1 and now first half of Q2. With that, we open up for questions.

Thank you, Andreas and Jorgen. I can see we have some questions in the chat that I can read for you. First question, can you comment on the sales trend in April and May for both Norway and Sweden, please?

Yes. Well, we do not like to give you the exact numbers in terms of trading. But as said just now with the final remarks, trading in Q2 has had a better development versus last year than we saw in Q1. And that is also if we take -- if we take in consideration the move of Easter being in April last year. So trends are a bit better and that goes for both countries, both Sweden and Norway.

Next question. How has EV sales been post a new decision on Easee?

EV sales has continued more or less as it's done for the last 6 months in terms of how many chargers we sell every day, every week, every month. The big difference for us is obviously that when we compare sales to last year, from 15th of March 2023, 2024, we do compare ourselves to a much easier comparable than we have had so far.

Have you concluded on your strategic review of Sweden?

No, we haven't. And that is partly due to the fact that on our general assembly that we had in 30th of April, more or less a full new Board was elected. So out of 5 Board members, there's only 1 left. And it's -- it will be a new session with the new Board, of course, where we talk about all our strategic initiatives, Sweden being one of them.

And then there's a question on inventory. How much inventory do you have on solar?

At the end of March, it was NOK 37 million -- NOK 38 million.

When does the new shop in Norway open in second half of 2024?

We don't have the exact date yet. If I remember correctly, it will be in the -- yes, between September and October.

Then there's a question in -- another question here. What is driving the increase in lease liabilities?

That's mainly the new warehouse we opened in Sweden of last year and the auto store being installed there.