Elektroimportøren AS (ELIMP) Earnings Call Transcript & Summary

Good morning, and welcome to the Q4 Webcast of Elektroimportoren. [Operator Instructions] And with that, I will leave the word over to CEO, Andreas Niss; and CFO, Jorgen Wist.

Thank you for that, Mona-Cathrin, and good morning, everyone, and thank you for joining us for this Q4 presentation. I will start with running you through a short operational and financial summary for the fourth quarter and then sum up the 2024 financials. After that, I'll give you an overview of our strategic key areas going forward and give you an operational update. Jorgen will then take you through the financials, and then we finish off with an outlook and the Q&A session. Q4 started good. October had a good growth, just slightly -- and when we went into November, we just -- we managed to just slightly beat last year numbers. Moving into the last month of the year, in December, we actually managed double-digit growth. We have continued to work for improvements in margin and category management, and this has led to gross margin improvements. We have managed to increase sales whilst decreasing costs, driving operational improvements in both countries. Number of visitors in Norway was up 6% in our stores, and we see cost reductions made during previous quarters coming through. We opened 1 new store in the quarter and signed a lease for another store in Norway. Financial summary for the quarter. Total revenue of NOK 520 million, which is up NOK 25 million from last year, which is an increase of 5.2%. Like-for-like growth in Norway was at 1.8% and online sales in Norway grew by 5.4%. And in Sweden, we increased sales by 19.4%. Gross margins are up 2% from 32.8% last year to 34.8% in Q4 this year. Operating expenses are decreased by NOK 3 million despite 2 new stores in the quarter, and we delivered an adjusted EBITDA of NOK 67 million and an EBITDA of NOK 66 million, which is up by NOK 20 million from last year. Net profit of NOK 23 million is up from NOK 7 million last year. And finally, cash flow from operations landed at NOK 76 million for the quarter. If you look at the full year 2024, our revenues increased by 1.4% to NOK 1.627 billion. In Norway, like-for-like sales were down 1.8%. Online sales increased by 1%. And in Sweden, we managed to increase sales with 12.7%. No new stores in Sweden, so this is like-for-like growth in our neighboring country. Gross margin percentage for the year is slightly up, 34.5% versus 34.7% and OpEx is decreased over the year with NOK 20 million. Our adjusted EBITDA increased from NOK 137 million in '23 to NOK 170 million in '24. And the EBITDA ended at NOK 150 million, up from NOK 136 million last year. Net profit of NOK 40 million, which is up from a negative NOK 12 million last year and cash flow from operations of NOK 184 million. The year started out challenging. We made necessary adjustments, and we have seen the results of these adjustments coming through in the second half of the year. The fact is that we, as a company, are in a much better shape today than we were 12 months ago. Moving into 2025 and beyond, we will focus our efforts on strengthening the key parts of our concept and make sure that we capitalize on the market opportunities that comes our way. Being a total provider of electrical equipment for everything needed to build and maintain a house is key to us. We believe that our local presence with our physical stores together with a well-functioning online platform will continue to be the most important thing we do. We continue to look for new store locations, and we believe that there is still room for 10 more stores in Norway. First one being just around the corner opening in April. To win locally is what we're all about. We will continue to invest in being the specialist in our sector, having trained electricians servicing both our B2B and B2C customers is not only essential for the safety of our customers, but also builds trust and loyalty over time. Our own brands working alongside the most well-known brands in our industry is key to our profitability and what gives us the opportunity to invest in better customer experiences. We will continue to focus on delivering quality products in all our categories, making sure that both we and our suppliers stays in front of the technical development. Growth in the coming years will, except for us building new stores and growing our like-for-like business, primarily come from our ability to capture new market opportunities, gaining proof of concept in Sweden and expanding geographically. This will undoubtedly be a big opportunity. We are not fully there yet, but we continue to move in the right direction with our Swedish business. The growth of smart home products and energy-efficient solutions will be key to outperform market growth in the years to come. Here, we have positioned ourselves in the forefront and will continue to do so going forward. With an expected increase in people moving and new build projects coming back on track, there should also be a possibility for somewhat better market conditions for the later part of 2025. There are many indications that demand for energy in terms of electricity will grow in the coming years. Us being a provider within the electricity sector with local market presence, best-in-class service and specialist advisory of quality products gives us confidence that we should be able to capture the opportunities that the future will bring. Bringing this into Q4 performance, we had a successful opening of store 29 in Norway located at Skoyen in Oslo. We have signed a contract for a new store in Lillehammer, which we aim to open before summer. SpotOn sales increased from NOK 11 million last year to NOK 14 million this quarter, and we have managed to grow both in B2B and B2C, gaining market share in B2B -- in a rough B2B sector. We had a slight increase in Namron share of business, up 0.4% from last year. In terms of category performance, we had the greatest growth in our largest categories, electrical material, smart home products, cables and lighting. The warm winter have made heating sales decline, unfortunately. Our Swedish business grew by almost 20%, and this is, as I said, like-for-like growth, and we managed to grow -- also grow -- increase gross margins in Sweden. Namron share of business was at 10.2% in Sweden, which is up from 8.5% last year. Looking even deeper into Sweden, revenue increased by 19.4% compared to last year. Gross margins up by 6.2%. Increasing share of business from B2B segment are, of course, influencing the margin actually in a negative way. So the total margin improvement is a great job done. Our plan for getting Sweden back to profitability shows early positive signs. We still have a way to go, and we are continuously exploring opportunities for improving our profitability. EBITDA in Sweden increased from minus NOK 1 million -- minus NOK 8 million last year to NOK 1 million this year. Looking at customers, visitors increased by 6% in Norway. Average basket size is moderately up, and conversion rates are slightly down. We managed to grow sales, as I said, in B2B and B2C, and the customer split for the quarter is 50-50 B2B, B2C with 50% consumers, 40% electricians and 10% other businesses. Brand knowledge and perception is important to us. We have now reached a prompted brand knowledge of 77% and perception of highly skilled staff is above 70%. These are key metrics to us measuring the brand of Elektroimportoren and its performance. And with that, I will hand over to Jorgen for some more details on the financials.

Thank you, Andreas. We start with the revenue, which has increased in both countries and all sales channels during the quarter. This resulted in revenue of NOK 520 million, corresponding to an increase of 5.2% compared to last year. The like-for-like revenue growth in Norway was 1.8% in the quarter. B2C revenue increased by 8.6%, while B2B revenue increased by 1.1%. Online revenue in Norway increased by 5.4% in Q4 compared to last year. The store in Elbutik contributed with NOK 10 million in revenue for the quarter, while online revenue in Elbutik was NOK 40 million. B2B revenue in Sweden in the quarter is included with NOK 9 million. Other revenue is mainly solar projects invoiced from our project department and not sold through our stores. Solar orders were NOK 4 million in Q4, down from NOK 8 million last year. Invoiced solar projects in the quarter were NOK 5 million and an order backlog of NOK 1 million at the end of December 2024. Gross profit for the quarter was NOK 181 million, up from NOK 162 million last year. This translated into a gross margin of 34.8% compared with 32.8% in the same period of 2023. Overall, margin were impacted by the shift towards B2C with higher margin. In addition, gross profit in 2023 were impacted by inventory accounting and provisions of NOK 7 million. In Norway, the gross margin was 36.2% compared to 34.4% last year. The margin in Sweden is 22.4% compared to 16.1% last year. Margin on both B2C and B2B continues to increase in Sweden. Operating expenses are reduced with NOK 2 million compared to last year, even with general salary increase, inflation adjustments of costs and 2 new stores. OpEx to sales ratio at 22% compared to 23.6% last year. The group continues to maintain our rigid cost control, but the comparables will be tougher going forward due to the cost savings during the last year. Reported EBITDA for the quarter was NOK 66 million, up from NOK 46 million last year. EBITDA margin in Q4 was 12.7%, up from 9.2% last year. Adjusted EBITDA for the quarter was NOK 67 million, up from NOK 46 million last year. The improvement is driven by improved gross profit of NOK 19 million, together with cost reductions of NOK 2 million. EBITDA, excluding IFRS 16 effects for the quarter was NOK 41 million, up from NOK 25 million last year. Net change in cash for the period was NOK 42 million. Cash flow from operation was NOK 76 million, driven by positive EBITDA and reduction in working capital during the quarter. Cash flow from investments of NOK 7 million are mainly maintenance CapEx and our new store at Skoyen. Cash flow from financing of minus NOK 26 million consists of lease payments and interest paid. As a result of this, we have available cash of NOK 139 million at the end of fourth quarter. In addition, we have an unused overdraft facility of NOK 120 million. Excluding IFRS 16 effects, net interest-bearing debt was NOK 108 million at the end of Q4. This corresponds to 1.5x the last 12 months and GAAP EBITDA. The loan facilities have a net interest-bearing debt EBITDA covenant of 4x at the end of Q4. Then I hand over to Andreas again, which will take you through the events of the period and the outlook.

Yes. Thank you. As we have spoken about over the last year, at least, we have for a longer time, been trying to find a partner for SpotOn that would bring a second craftsmanship area into SpotOn. We have not succeeded with this, and we are, therefore, refocusing our efforts to only include electrician services. In doing so, we have also reduced operational costs during January. We conduct a full handover to Elektroimportoren to take place in the coming month. Sales in January started somewhat slow, mainly due to loads of snow hindering customers to visit our stores. However, sales have picked up, and we see stable sales and margins at the start of the first quarter. In Sweden, Peter Aslan have been appointed Managing Director. Peter was -- has been with us since 2022 and has functioned as Assistant Managing Director for the last 8 months. Peter has more than 20 years of experience from retail servicing, both consumers and professional customers. We noticed that there is an increase in residential sales, and that gives us some reason to believe -- to have a cautious optimism for the market development going forward. That's what we had. Now we open up for questions. Mona-Cathrin, we cannot see any questions. I don't know if you see any.

No, I cannot see any questions that have come in yet. I don't know if you want to...

Then the first question says, can you be more specific on the cost savings expected from the SpotOn integration? Yes, sure. It's a full year NOK 8 million impact. Half of that, however, is CapEx, half of it is OpEx. So we're looking at NOK 4 million this year and NOK 2 million of that will go to the bottom line and -- but NOK 4 million cash impact. Can you expand a bit on how SpotOn will be integrated into Elektroimportoren? Yes. Well, during this time, when we have tried to find a partner for -- with another craftsmanship, we have expanded mostly in our development team to make sure that we would have the capacity to develop new services for this oncoming partner. When this is not happening, we are reducing cost mostly in the development department. And we will just continue to deliver what we have delivered so far with SpotOn, which is best-in-class electrical installation digital service. So that will continue. But with the integration, we mean that we -- SpotOn is a company standing alone until today or until January actually. And now we're incorporating it back into our -- to the day-to-day running of Elektroimportoren.

Next one is, how much is sales up in Norway and Sweden in Q1 so far? The January accounts is not finished yet. But from our orders, we see that there is a double-digit growth in Sweden and also a quite good growth in Norway for around 7% or something.

Any more questions? Mona-Cathrin, I don't know -- it doesn't seem like there are any more questions. Yes, there's one more. Could you give some color on the performance of the Skoyen store in terms of revenues? Well, I don't want to put out the number of the store, to be honest. But Skoyen is performing a bit -- well, on an ambitious plan, I would say. We have ambitious plans for Skoyen and thoughts about what the performance could be, and we're delivering on those. That means that Skoyen over time, like, let's say, like 12 to 24 months should be a top 5 store. And that means sales up around NOK 60 million to NOK 70 million a year. But we're very happy with the Skoyen store and it's performing well. In which segments, markets do you see the best growth opportunities going forward? Well, the best growth opportunities, first of all, I think we have a solid business in terms of when it comes to the basic -- well, our main categories like electro material, lightning, cables and smart home. But the largest growth, I think, will come from more and more people using smart home products, more and more people having the need to be more energy-efficient, using less electricity, getting the same comfort. And those products are -- it's a combination of energy saving products and energy steering products, which most of them are within the smart home category.

Can you share where a new store will be located? Yes. I think you said that already. It will be located in Lillehammer. We will open -- the plan is to open in April.

Yes. We have a really big white space in Gudbrandsdal. And we think that with all the cabins and people knowing us from other parts of Norway, I think that will -- we will have a good fit. Lillehammer is not a very big city in itself, but with all the cabins that are within Hafjell, Kvitfjell, et cetera, I think the possibilities to run a good store in Lillehammer is -- are there.

Should we maybe wrap it up then? And if anyone has any more questions, they can send an e-mail.

Sure.

Yes. Sure. Okay. Thank you very much, everyone, for dialing in.