Embellence Group AB (publ) (EMBELL) Earnings Call Transcript & Summary

Good morning, everyone. Good morning, and welcome to Embellence Group's First Capital Markets Day. Yes, I'm eager to get started, but there are a few practicalities and formalities we have to go through first. First, I want you to read this notice, if you can from the back. While you're doing this, I will inform you that the exits are right behind you. The presentation that we will share today, it's available on our website since -- probably a minute ago. My name is Olle Svensk, and I'm the CEO of Embellence Group, and this is the agenda we have today. We will go through and I will present our business, then we will look into our strategy and our strategic priorities going forward. Of course, with this audience, we will also share and give you financial update and our financial targets. We will wrap it up and then having Q&A at the end. All right. Fasten your seatbelts, and now we will get started. At Embellence Group, we believe that the environment, the rooms and the spaces we're in, affects everyone's emotion, everyone's feelings. And through the power of our brands and the power of their design, we want to make an impact, too. We have, as an ambition, to be one of the leaders in the interior decoration category with a focus on premium brands -- with a certain focus on premium wallpaper brands, but also on other categories that are driven by patents and colors, such as rugs and textile. And this one. Our corporate focus is to make sure that we have a successful long-term good development of all our brands. And this we do, at the same time, by respecting their uniqueness and their identity. And as a group, we will achieve this by ensuring that our brands get the right support, the right to develop, to design their products with the highest quality at the same time, we are utilizing all synergies that we have by being a group. Let's go through some fast facts about our company. Well, we've been in premium wallpaper for 150 years. So yes, we have picked up a few things. We have five strong brands and we do manufacturing at three sites. We have a weaving mill for Pappelina up north in Dalarna, in Leksand. We do digital printing for customized wallpaper in Italy for Wall&decò. And then we have one manufacturing entity that we actually operate as a separate entity, and that is for Borås Tapetfabrik. Head office is in Borås. We have brand offices in Italy, in U.S. and in the U.K. And last year, our products were sold in more than 100 countries. But it's Sweden, U.S., U.K. and Italy are the main ones. Let's have a quick look at our history as a company. Well, back in 1875, Cole & Son started up. 30 years later, Boråstapeter and Borås Tapetfabrik was starting up as well. Then in the late '19s and the beginning of 2000, Artscape, Pappelina and Wall&decò saw the light for the first time, or the sun for the first time. So these five brands, and one manufacturing entity, together, with a lean head office of Embellence Group, that is what Embellence is today. We are in a company and we love brands. So of course, I want to give you an update or presentation of our different brands. And where to start, of course, the brand, that is the reason that we are here, the root of this company, and that's Boråstapeter. Boråstapeter was started by a person called Waldemar. And in -- he had a vision that he wanted to create wallpapers for all homes, all kinds of different homes. But all of them really with a strong connection to the Swedish roots, the Swedish roots with -- in terms of colors and patterns in Sweden as well as in around Scandinavia. Last year, Boråstapeter reached a revenue of SEK 283 million, sold in more than 65 countries and Sweden by far being the biggest one. Our second largest wallpaper brand, well, that is Cole & Son. Cole & Son is, I would say, one of the strongest brand in the wallpaper industry. It has a rich history, but it's also very modern and future-looking and setting trends in the industry. It's known for its focus on quality craftmanship, artistic excellence as well as being quirky and having, what I would call, talkative design, design on the wall that makes people talk, of which you see an example here to the right. Last year, Cole & Son's revenue reached SEK 154 million. And the brand was sold in more than 75 countries, and U.K. and U.S. are the biggest ones. Our third wallpaper brand then, well, that's Wall&decò out of Italy, outside Bologna, Wall&decò stands for beautiful design, but also innovation. Innovation in the way to go to market, but more importantly, Wall&decò is a reference brand in the category of customized wallpaper with different technical solutions. The traditional indoor wallpaper, but also out system for facades, and wet system for shower rooms or for wet rooms as a beautiful alternative to tiles. Last year, Wall&decò reached a revenue of SEK 98 million. It's our most international brand, sold in more than 100 countries and having Germany and, of course, Italy as the biggest markets. The recent years, we have acquired two companies outside wallpaper, Pappelina in 2021 and then Artscape in 2022. And the first time we came in contact with Pappelina, we saw that it had the ingredients that we are interested in. It has a distinct design and a distinct positioning. It's playful, it's joyful, clear Scandinavian touch. Pappelina reached, last year, SEK 47 million revenue and is sold in more than 50 countries. And the channel that Pappelina is sold in is another thing that attracted us as well. It's sold through interior decorator stores. So we thought -- we think it's a good fit. Main countries, it's really Sweden, U.S. and Germany. Then 2022, we did another acquisition, and that's Artscape. And Artscape, for me, that is really wallpaper for furniture or for windows -- sorry, windows. Here -- currently, I'm moving too much. It's for privacy, but also for decorative solutions, like the example here with New Leaf that is sold a lot in the U.S. and really well appreciated. Artscape sales is very much focused in North America, and this is where we see that we have more potential for the brand. The market for window films has been a little bit challenging over a couple of years, but now it's coming up. And we estimate, and the industry estimates, that the market is growing some 5%. North America being really the focus for this brand. So these are our five brands. And in 2022, we decided to make a change. We wanted Boråstapeter to focus on the design, the development, the marketing, communication and sales of its brand. So we separated Boråstapeter from the manufacturing. And that is what is today Borås Tapetfabrik. Borås Tapetfabrik has a lot of knowledge, deep insight and knowledge of how to produce wallpaper, insights in material, in the inks, in different printing technology, offering everything from classical surface print to high-end top-notch digital printing. The most part that Borås Tapetfabrik is producing that's to [indiscernible]. But it also has external customers, mainly in the Nordics. And last year, the revenue reached SEK 48 million. Thank you. All right. Let's see if this works better. Yes. So our five brands, our manufacturing entity. And I'm proud to say that with all the hard work that we have done, all the passion, engagement and drive we have done as a company over the last years, we stand stronger today than we did some years back. If we look at what kind of company we were in 2020, we -- well, we focused on wallpaper -- only wallpaper, so from a product point of view. From a geographical footprint point of view, it was very much Nordics, complemented by U.K. and Italy. And then our sales channel, that was the traditional physical retailers. Our sales development was weak. Gross margin was not strong. And then taking a step ahead to where we are today, well, we are still very strong in wallpaper is still our prior focus. But we have complemented it with rugs and other interior decoration products. We have a much healthier and more balanced geographical footprint, which is very healthy when markets are developing in different ways. We have not stopped investing in marketing, in product development, in sales, in fairs during this period. And still, even though the market conditions have been a bit challenging, we have been able to keep our EBITDA margin to more or less on the same level. But you know enough about history. Let's talk about the future because that's why we're here, right? And let's talk about the market. What we are dependent of any company is dependent on is, of course, the wins of the market. What is happening out there. It's a good day to say learn out. If we look at the rug market, we have to be honest, the rug category, it's big. It's very large, and we are tiny. So to be perfectly honest, that shouldn't not really affect us or shouldn't stop us from growing because we are small. We are strong, but we are quite small. Window films, as I mentioned before, the market after a couple of tough years is now coming back with a 5%, so -- and we are focusing on the U.S. and North American market. The category, though, where we are affected by the market conditions and the wins is, of course, wallpaper because we have a large share of our business there and have a good business there. So let's take a look at the opportunity -- the market opportunity, wallpaper. First of all, wallpaper sits in the global interior decoration market, and that's a great place to be because it's big, it's a large, it's USD 800 billion, of course, dominated by furniture. Furniture is around 55% of that, but it's a good place to be. If we zoom in into wallpaper, well, the global wallpaper market is USD 10 billion, 60% is residential to end consumers, to private house, and 40% is contract that is hospitality and the hotel sector. Then zooming in even further into our addressable market, well, our addressable market is USD 2 billion. Why? Because we focus on the premium segment of this category. We focus on the premium segment. And an important driver or trigger to the demand of wallpaper, that is actually renovation. The intend to renovate your home or your hotel or what is it. And we continue to follow that. And if we look a little bit more into detail what has happened over the last years, well, here is a graph of the homeowners' renovation intention in Sweden, in U.S. and the U.K. And as you can see, all of these markets has gone through quite challenging time, especially post-pandemic. U.S. held up fairly okay relatively to others, but U.K. has been hardly hit. Compared to 2020, it's actually -- the intentions were down 27%. The message with this slide is we have performed better. We have performed better in this market. But there are some good news actually as well -- not actually. There are good news. A month ago, I was in Salone del Mobile in Milano. Salone del Mobile, it's one of the most important fair for furniture and interior decoration, most influential one in the world, I would say. This year, Salone del Mobile reported 20% more visitors than last year. And if that is not a good indication of things are coming back, I don't know. It was really a positive buzz there. And I bumped into several CEOs and owners of -- in the industry. And the conclusion here, and I would say, the view of the industry is that the market this year is likely to be flat, but there are several positive signs that it will come back from 2025 going forward. So let's talk a little bit about the competitors. The wallpaper category is really fragmented. You have many, many brands out there. The large focus is on volume and lower price points. So 75% of the market is really on the basic level of the market, the entry level. A lot of traditional national heritage brands with their own production, typically focusing on its domestic market, maybe have some sales in the nearby country. Few large players in the category, very few, with revenue of SEK 1 billion or more. And those who are present there are mainly focusing on the entry segment, too. But yes, there are new entrants into this category as well, taking the benefit of digital printing and all the speed that you get out of that. You have several ones in the market. They are growing, some of them, and they are mainly taking business from traditional retailers -- traditional physical retailers. Because the wallpaper market is divided into -- you can say that it's divided into two segments. It's the residential part, where it's consumer-driven, you can say, consumer making the decision, representing 60% of the market. The other part is contract where hospitality, resort, hotels, restaurants. There, the decision maker is not a consumer. A strong influence there, in many times, decision-makers, actually the architects and designers. These are the two subsegments of the market. And there are two things for you to remember here, two very interesting dynamics. First one is what's happening here. Traditional retail, lower footfall in the traffic in the stores and more and more consumers buying online instead. So there's business going from this area into this area. That has happened for a long time and it continues now. That's one takeaway. The other takeaway is the notion around hospitality. Hospitality is growing. There are many reasons for it. There are large investments into the sector, both building new hotels, new resorts, but also renovating a lot. So that's the first reason why hospitality is growing. The second one is that wallpaper is actually picking up and becoming more and more -- very attractive alternative [indiscernible] so much. It offers a very good alternative to stone and tiles, it's easy to install, it's much more [indiscernible] for them to install, it's a more sustainable solution. But then, of course, it's so beautiful compared to stone, right? So there are strong drivers that this part of the market. It's growing a lot, and we will take a part of that. All right. It's time to talk about our strategy and our strategic priorities going forward. And this is the way we will create shareholder value. This is the way we will create shareholder value, and this is the shot, I will share with you many times. First of all, we have the foundations. Then we have the -- three foundations and then six strategic growth areas. A foundation that is something every company has. That's kind of the personality or the -- that's how a company is. Something that doesn't really change over time, it is there. These are our foundations: Entrepreneurial spirit with commitment and engagement, creative spirit to lead not to follow and to do things that are not expected in the market, to drive the market. Second one, decentralized operating model. So the brands can focus on what they are best at, while getting support and coordination from an Embellence Group. The third one is strong finances. Even through this period of which has been challenging, we have delivered strong finance. We had strong gross margin. We have good cash flow and we have a decent EBITDA margin. Another thing that we are really as well, it's a sustainable company. This is another thing that we have been for many, many years. I mean, Borås Tapetfabrik, was the first large manufacturing in wallpaper that moved from solvent-based ink to water-based. So it kind of sits in our DNA. And we are just happy that others are starting to tag along, but that's in our DNA. Our six strategic growth areas, and what we will focus on now the 4, 5 years ahead of us. Well, the first one, it's to -- we will dial up our growth -- focus on organic growth. There has happened -- happened many things in our company. We have a different shareholder base that we had before. We have a new Chairman. When we first met pretty quickly, the stars were aligned because we have the same passion for strong brands and organic growth to change the strategy that came quite evident quickly. But then more importantly, to have a company that generate organic growth creates energy. It creates a good place for our employees to grow. It creates a winning culture. And then, of course, also you become really sustainable as a business. So that's a change compared to our strategy before. How we will do it then? Well, we have great brands today. We will just continue to do this to support them and becoming even stronger and even greater. We will continue to nurture our design icons, some of them that you saw outside here, but we will also add even more resources in product innovation -- in relevant product innovation to the market, focusing making products more durable, sustainable and as always, when we are around beautiful. On geography and channels, well, I expect a lot to happen for brands in the U.S. in the coming years. We are still small there. We have a huge space to grow there across all brands. From a channel perspective, keeping in mind what I said before, it will be about hospitality. We are making good inroads there now, but also our direct-to-consumer sales. The fifth strategic growth area, well, it's utilizing group synergies. We have five great brands and one manufacturing entity. All of them are fairly small. And it's by utilizing the fact that we're part of the group, we can help them and support them to elevate even further, and we can get nice economies of scale as well. And the sixth one here, we are narrowing down our focus on M&A. It's still a component of our strategy, but a much narrow focus. It needs to be premium positioning of the brand, it should be wallpaper, it should be rugs or pattern-driven textile or textile. So that's the sixth one. So we'll continue to look at companies, but with a narrower focus. And we will deliver on this. We will create great shareholder value. Let's take quick look into the foundations then. And I've been through part of it, but creativity and passion, when you are in the high end of the market, the premium part, quality in all touch point is fundamental, and also the fact that we are committed to make a positive impact because desirable products can only come from sustainable business. We are running a decentralized opting model and get strength through coordination and taking the benefits of having more brand and offering the right service, not necessarily the same everywhere. But all brands, they should be both autonomous but also responsive. Strong finances, I mentioned that before, EBITDA margin over these challenging times has been above 12%. Cash conversion, above 70% and cash from operations more than SEK 300 million. So our net debt end of the first quarter was 1.6. Then what we will focus on now, the coming 4, 5 years, dialing up focus on organic growth, but also develop how strong brands and make them even more excellent. Our brands, we will always have a long-term vision for our brands. It's a matter of combining the roots and the heritage we have, but also be future and forward-looking. And we are a product company. So products will always come first. The products are the carrier of our brand promise. And we will do that by nurturing our design icons, deliver new designs, new materials and as I said before, always with focus on quality and excellence. And what our brands do that? Well, they, in addition to this they add key marketing and sales [indiscernible] to address their products into their core audience, being it consumers or architects and designers. And now I'm really happy to invite up Marie Karlsson, on the stage. She has been running the Cole & Son business for -- since 2018. Welcome.

Okay. Thanks so much. Okay. Great. So delighted to be here today and honored to be here to present for you, one of the exciting brands within the group. So I am Marie Karlsson, I'm the creative and Managing Director of Cole & Son design house. I'm based in London, in the heart of Chelsea, a fantastic place to be working in art and craft. At Cole & Son design house, we share this one thing together, we are all driven by our passion for art and craft. And this is really what reunite us there. So 1875, this great man called John Perry, fantastic craftsman in London, started this fantastic prominent brand by being a block carver. And he also was very clever. He bought in loads of extraordinary designs dated back to the 1700. And by that, he entered the most amazing building in the world, the House of the Parliament, Buckingham Palace, Windsor Castle. Yes, Cole & Son is part of English heritage and culture. So thanks to John Perry, I think the world of interior would definitely have been a different place without him. And we have continued that legacy and created new fantastic buildings in the world, and I can stay here maybe for 1 hour, talk about those super fantastic places in the world that we're decorating every day, not only those extraordinary heritage building, but also private members clubs, hotel, boutique hotels, just to mention a few of them. In Cole & Son we say, design first. We work with two type of pillars. We work with living art and living history. It really set the strategy for us, and it allows us to work in a different way when we create the future collections. So in our archive, we always go back. It's a very sustainable way how to work in design. We go back and bring out those beautiful, beautiful hidden originals from the past. We recolor them, we make them trendy and we make them relevant for tomorrow, for this, today, audience. And our living art is slightly different. Here is where we do new designs. We hand paint, in London, 3 Jubilee place, a fantastic artist team work every single day to paint. We actually do it as we speak. They're sitting there and painting every day. So if you want to work as an artist in Cole & Son, make sure you're prepared to paint for 6 to 7 months of the year. Here, we do the new beautiful collections. And we want to be the owner of our artwork. That's why we hand paint them. So nobody can say, I do that. We will always be cherishing that. Under this type of pillar, we also take the opportunity to play with others, quirky brands, who share the same values who also have an archive, who also hand paint, but they definitely all potentially are not in a type of wall design that maybe are working with different type of craft. Here, we have the luxury Italian Atelier Fornasetti, we have Ardmore come from South Africa, fantastic luxury design companies in the world, who definitely bring some strength into the ingredients of in-home. Let's me just swipe the surface of one of our pillar. So living history, custodians of 150 years. Owner of probably one of the most extraordinary archive in the world, and they are carved. I mean this is like walking into a wine seller, but it's filled with blocks. And on top, it's pear wood because that was the best and easy wood to carve in and back with something else, and it was hand printed at that time. And then you converted that technology into a surface print, which is this. And in this fantastical archive, we go back and we play and we bring them relevant. So that's why it's called living history. And just to mention, in the 1961, we got awarded by the late Queen Elizabeth, Elizabeth II, by a royal warrant. But Cole & Son was there a long time before. In the 1920s, we decorated Queen Victoria's bedroom in the Kensington Palace with our gorgeous Hummingbird design, who John Perry, very clever man, bought in that design from the 1700, fantastic. Contained 24 blocks to create one little bird. And in that room, the artist even went in and hand painted on the top because that was a very special place where you need a special wallpaper. This is Hummingbird, which we launched this year as well. We went full on pink. This was launched in Paris 2024 as a very relevant design, dated back to the 1700. We have converted it into a surface print today. It's a 12 color surface print. So you need 12 of the cylinders to create this beautiful pretty little bird. And this is what we do when we live art. So as relevant today as in 300 years back. Obviously, we have put in some other fabulous new designs into collection, but I just wanted to show you this. This is obviously style in a very quirky way. Another design icons, not so old, but very well known. This is actually one of my designs in my home. I love that design. But I have it in different color. I had a couple of friends of mine, come and said, "Wow, Marie, I saw that design on Netflix." I was like, "Okay. Which film was that, because we are in loads of them." But you don't know, we are in those rooms. This design was featured in the Sex and the City, And Just Like That..., where fashion meet interiors and art. We are there, just hiding, we don't say so much but we are the one who dress the walls. So it doesn't really matter what fashion icon you're wearing because you will be dressed to [indiscernible] if you walk into a room with Cole & Son. Miami, I just had to bring this because one of my favorite, pastel pink, I mean that's all in Cole & Son we have a relationship with Miami. I think you guys, you also have a relationship with Miami. I mean it's just unbelievable. It's so nice, their art deco. It's probably the most used design for a front cover of a magazine. So we're not only just wallpaper, we are everywhere where you need a special piece of design to create something extra. Let's touch the surface of living art. So what do we do when we don't work with our archive? We create new icons. So maybe, I don't know, 50 years from now, there would be a new Marie standing here and inspire others. And that design team will go into the draws and hence, some new icons and make them living history. Being custodians becomes a lot of responsibility, and we are determined to continue doing that. That's why we hand paint and using modern technology to print, but in some cases, also a different technology, we date back 100, 150 years, just then depending on the client. So living art here is where we also work with our beautiful art ateliers Ardmore, Fornasetti. Here, gorgeous design, if you saw the new [indiscernible] [ Lindsay Lohan ], you maybe saw when she was there in the powder room, that was that design in a different color. The new [ Cartier ] boutiques in the world also uses a lot of these gorgeous designs. So we are where you don't know and inspire you in your everyday lives. After today, you will definitely go out and say, hang on a minute, I think I know that design. PR and marketing is very important for us. So if we work or do a collab, that's extremely important. The values, what type of client segment, where do they operate and we need to just see that those fits. The most important design fast, and obviously, selective distribution is a fact. leopard walk, not in private members club. And yes, very well used, absolutely amazing. If you come and visit us in our flagship in London, you can go down in the basement with this guy, beautiful. And then their recent collab something we really want to do. We are a [indiscernible] brand. Why don't work with another quirky brand. So that 1 day, Stella McCartney and her team reached out to us and said, you know what, you want to do a cool collection with us? Of course, we want. And what we really loved about that is because she had the design. She had a [indiscernible] that already done for the fashion industry, and she wanted to develop that. So that's the Fungi Forest. And we -- and she really wanted to work with a quirky brand like us. We said, okay, let's us focus on the raw material to create something that fits in the portfolio of sustainability as well because she's very -- she's the rebel in that. So we really started to work on a fiber that we've never done before, actually. So it was the best way ever to push the manufacturers to do some of it. Sometimes you have to do a collab to push that. And we did that. We haven't been successful with that before, but now we were, so that was good. And 79% renewable fiber. And here, you have the clothes, Fungi Forest. And I mean, super trend in the world. You can eat mushrooms. It's going to be coming to leather. So it's just right in time to do this. And we also use same type of distribution. We work with selective distribution. We also have quite equal marketing mix. So there's a lot of value that goes together with Stella -- with a collab with Stella. So it's really one of a kind. And there, we were at Salone del Mobile launched this beautiful designs, and we won best collection of the year. The [indiscernible] International Design Award, and we were so proud. That's a nice fashion walk. I had music on this, but all is said, not today. Some, yes, okay. That's good. A little bit. So then Fornasetti. Casa Fornasetti founded by Piero Fornasetti and our Barnaba Fornasetti, the sone, he is the custodian of his father's work. And he loves what he do. He's an art freak. He loves design, suits perfectly to work with Cole & Son. It's so playful, so fun to work together. That's why we've been so, so successful in this journey. It actually requires a lot of analyze before launching a collection. It looks very nice. It looks very easy. That's just something you did in a day. No. It takes a lot of time to select those pieces they're going to be in the future homes because we don't look only for tomorrow. We look decades ahead to be trendy. And the Casa Fornasetti obviously only have the most prominent collabs in the world I mean just saying it was fantastic launching a collection together with their launch, with their new collection with Louis Vuitton. So that was quite nice. Look at that cat walk and then our new collection. So that's fantastic. So again, we feel that this is a long-lasting relationship. We have 2 amazing collection together. We launched our recent collection last year. I would say these designs are probably the most used in the world of interior for interior designers. This is where they really love to play. And then apart from doing all that, we invite people to us because we feel we would like to educate people as well in the world of interior, how fun it is in wallpaper. I was growing up with wallpaper all over the place. I mean that had a massive impact on me. And therefore, we would like to continue that legacy as well. Here is actually our flagship, beautiful. We run panel talks there. [indiscernible], he's the old culture -- Minister of Culture in the United Kingdom, he was our moderator. He did a great job, by the way, managing creative people and people who love this. This is the elite in the industry. You have everything from all the editors and chiefs of magazine, house and garden, world of interior, just to mention a few. And this is how we reach out to our audience. This is how we create communication with them. And then here, we did another event at [indiscernible], Stockholm, which we love so much. So carefully decorated and taken care of [indiscernible], who have done a great, an amazing job there. So it was no better place for us to do a beautiful collection -- event. Yes. Just a couple of quick slides, recent projects, Shangri-La, Hong Kong, the President Suite, 222 square meter, loads of fashion events and other events being hold in this beautiful place. I know my colleague, Gianluca, is going to talk more about projects, but I just had to show. And then I don't know, maybe you remember, this is Barclay Square. Not many people are allowed into this [indiscernible] building, Annabel's, the most prominent old private members club in the world. If you walk in these rooms there and in those corridors, you all filled with Cole & Son designed by Martin Budinski, who recently done the Grand Hotel here in Stockholm. Fabulous. And then being a part of Embellence culture has been so, so important for Cole & Son because our playground is really to create magic in the world of interior. So we get support and help with our strategy, we share beautiful synergies with our lovely sister brands in the group, and we are very, very determined that this is really a good collaboration for us. And apart from that, our vision is to continue now tomorrow and forever creating fabulous walls that will surround the world of interior. Thank you. And now over to you, Olle.

Thank you, Marie. Thank you, Marie, for inspiring presentation. Well, this was about building exciting brands and fantastic design. But we will add other ingredients as well to support this, and that is innovation, product innovation, both in materials and of course, in products. We are doing that to make them even more desirable but durable and sustainable. Beautiful, we are always beautiful. But it's also due to the fact that 72% of our greenhouse gas emission comes from products is really important. And we have already recently taken some important steps there and actually being the world's first, both of them. End of 2022, well, Pappelina launched Bio Edition, it's the first -- the world's first rug made of bio-sourced carbon-neutral PVC, a residual from the forest industry. So it's made by the nature. With those learnings and those insights, and this is where Embellence Group really makes a lot of sense and can support with the insights we had from Pappelina, we brought that into Wall&decò and start to work on that last year, 2023. And in the beginning of this year, Wall&decò launched d.ecodura. It's the world's first bio-based vinyl wallpaper with no compromise in durability, sustainability or beauty. So we have all the certificates there needed to make inroads in hospitality, but we also offer a product with a 50% lower carbon footprint. And as an acknowledgment of that, last week, Wall&decò and d.ecodura received this price of -- from the -- have received the German Innovation Award ''24 Special because they were so impressed with the work that we have done to innovate that into the market. Moving on then to geographies and channels. Well, traditionally, all our brands have been strong in their domestic markets. But then since 4, 5 years, we are growing internationally quite a lot. And as I mentioned, last year sold into more than 100 markets. Going forward, we will have increased focus on U.S., Continental Europe, but then also around Mediterranean Sea where there are a lot of hotels and resorts being built. So this, when it comes to geography. Let's move over to the channels where we need to mitigate the challenges of our traditional physical retailers, the challenge they are having. It's our direct-to-consumer sales. Our sales from our brands, from our consumer brands into the end market. We are now sold in more than 35 countries. And for us, it makes perfect sense. It's perfectly logic to many other premium brands here. I mean, for us, brand building, always comes first. And it's an opportunity for us to showcase our full portfolio. And it also provides for us internally fast feedbacks on products, but more importantly, on designs or new designs that we bring to the market. Then, of course, we will benefit or we are benefiting of the fact that we are selling directed, always at full retail price, and we have very healthy gross margins there. Going forward, well, brand -- the brand positioning will always come first, always come first here. But it's also a matter of supporting the customer on their journey. On their journey, in many cases, starting online, and then might get the offline in a store, back online. We want to be there and give them a stellar experience across that journey. And the most important thing for us is that it's our brand that is -- necessarily that it's directly from us. I'm more than happy if it's bought by one of our partners, but we want to win this business. Another thing worth mentioning is that -- we are only open up our direct-to-consumer markets where it makes sense in terms of the fact that it's profitable. Sometimes, it's difficult to sell into a country. We will not do that just because we want to. So always prioritizing that. The other important channel for us on our future growth journey here is hospitality. And here to tell you a little bit more of that is Gianluca Laganá, responsible for sales and marketing at Wall&decò.

Thank you. I can use mine, right? Great. Thank you. Well, first of all, I might say that I was amazed by your presentation, the Marie was such a colorful and [indiscernible] presentation. I can almost smell the roses. And yes, so after I emailed [indiscernible], I need to exhale mine now. So my name is Gianluca Lagana. I'm born and raised in Rome. And I recently joined the Wall&deco and the Embellence family, so I got the great opportunity to attend today this event. So I thank Embellence family for having me here. Where I'm coming about, I mean, I spent 25 years of my professional life in hospitality. So I led and grew business development and market expansion of 2 companies, mainly one in -- which is the one of the largest fitness manufacturers in the world, always focus on hospitality and the second in cosmetics. So I do see like this [ field rouge ], which [ he comes ] like to the senses because the wallpaper is about the touch as much as like the perfume industry is about the smell. So it's something which is stuck in your mind that [indiscernible] senses. As I said, my time was all about hospitality, which is an industry I love the most. It's very large, broad line of industry. So when we -- with the word hospitality, which means like multiple market segments. But here, you see list 3, the main ones that we want to focus on, the hotels, of course, which are the right away, typical like interpretation of the Hospitality segment, but also the restaurants and bar, and the leisure side of the business, which is made of spa, gyms, clubhouses faster-growing everywhere in the world. The overall sector like worth USD 4.5 trillion. And to give you some more data. I mean, it's like in 2023, after the pandemic, the luxury market, which is the one that we focus because we don't want to swim in red oceans. I mean, Wall&deco and Cole & Son want to swim in a blue ocean. So the 5-star hotel is the real target we have in our radar. The luxury market in 2024 is expected to hit USD 106 billion with a CAGR, so an average growth over the past few years after the pandemic, close to 8%. And a forecasted pipeline, which is due to construction and renovation to hit a record in the next 5 years, so USD 160 billion by 2029. So it's a tremendous opportunity ahead. Of course, the U.S. market is leading by far, any pipeline, and it's not just related to the domestic market because that the footprint in the U.S. market is made by the largest hotel chain in the world. Some of the names you are familiar with are The Four Season, The Hyatt, The Marriott joint with Starwood, which is now today the biggest player in the industry. The InterCont represent themselves like the largest pipeline construction and the renovation worldwide. So that's extremely important for us to focus and to put our radar in the U.S. because it's where the decision is coming from, no matter like they do have regional offices across the world, but the goal ultimately will be what is called a glocal approach, something global or into local. And that's how we, let's say, mirror our organization worldwide. As I say, like the goal is focused on the 4 and 5-star hotel. The first impact to a client when he comes to a hotel is the interior design. The new generation is by definition, picking up the hotel based on the interior design. They want something he would call different. It's no longer time where people just pick up the same hotel over and over to get only inclusive formula. It's more about the overall experience, a sort of home away from home feeling. But at the same time, when I'm going to the hotel, believe me, I spend average of 150 days a year traveling and staying in the hotel. I want to get inspired by the trend the hotel [indiscernible] -- what I can bring as takeaway home basically. The great opportunity is not just on the opening, of course. I mean, that's the very fast and immediate scenarios in the market, but it's also about like this refreshment, which is not a refurbishment. The refreshment might come for several reasons, either [indiscernible], for instance, like a hotel rebranding or management change, consider that most of the hotels are not owned by the chains, they are owned by owning company. So they are either manager franchise or eventually the ownership change. So every 3, 5 years average, there is a little touch and refresh, and that's where we can play a very important role because the wallpaper doesn't mean that you need to go -- I mean over a reconstruction of the space. You can easily go for refreshing room or any other areas in the hotels without shutting down the hotel because you may imagine, how expensive it will be to shut down a room for hotel, which is living out of selling rooms. That's fundamental. So we can pick up the business and make it with a state-of-the-art service because when it comes to a premium product sold for a premium price, there must be a state-of-the-art service as well. And that's why we're also working to create evangelist ambassador from a service standpoint, certified by Wall&deco to spread the wings across the market. Wall&deco started 20 years ago. So it's a baby brand compared to Cole & Son, but we're still [indiscernible] together. As Olle has mentioned, our pillars [indiscernible] about design and innovation. As a matter of fact, in the last 10 years, Wall&deco has introduced the most innovative solution for the specific environment such as Wet, what is called a line of technical wallpaper for the shower and also the Out, which is basically customize some outdoor spaces, if it's not even wrap the hotel facade in some cases. We got the highest certification. So we are ready to go, I mean, in any different market, you know that this product, of course, depending by which market they do need a specific certification when it comes to fire rating like sustainability and so on and so forth. But the most important thing about our strategy is the project management. So how we connect the dots. Basically, in hospitality, you have different decision makers. So it's about to build your ecosystem, I mean, because you have the owner, which is really powerful, especially in line in some areas of the world, it's all about like the owner. It is his last word, such like in the Arabian countries or China. Then you have the architect firm, designer. Our goal -- since the wallpaper is not a product specified by procurement at corporate level, it's very much up to the interior designer and the architect. The goal is ultimately to enter into specific and selected network that represent the brands, and they do have line of the pipeline. And then, of course, like the interior design team, procurement teams or purchasing agent depending. And of course, finally, I mean, everything which is the execution, so contractor and installers. What is the real plus and why, I mean, this company culture shift is moving ahead in Wall&deco without, of course, losing the existing DNA of the company, because we can definitely keep going on a very marked track on retail and residential. But at the same time, I mean, we have a great opportunity to move faster in the hospitality. The main reason is because of -- the order size is way bigger than residential because we can hit different business areas within the hotel. It's not just limited to room. We have the lobby, we have the hallway, we have the club house, the gym, the spa, so multiple areas. And of course, the lead time and the decision time is a bit longer, but the return of the time invested is way bigger. So it's definitely a great opportunity ahead that we need to catch. I select here picture just to show you, I mean, how the wallpaper is integrated in the environment. And that's the Wet Solution installed at one of the most iconic hotel in Florence, the Grand Hotel Baglioni. The Wet Solution is going for its 11th anniversary with 28,000 installations performed in over 81 countries in the world. This is a wallpaper installed on a fiber glass support. So that's the way the wet works. That means it's absolutely waterproof, water resistance, can be installed in wet environment as much as into spas. Wall&deco is a made to measure. It's sort of coutilier of the wallpaper industry. So we can really work like any solution without any limits in terms of, I mean height and customization. And that's a massive installation we made in a suite. So you see, I mean, our predominant is like this wallpaper solution in Juliana Hotel in Brussels, Belgium. And more, this is another sample, how can we really attack other business areas within the hotel. We installed [indiscernible] the hotel boutique in shop of the Bulgari Hotel in Shanghai. Of course, Bulgari is a world renowned brand in the luxury industry, which is now quite consolidated also in terms of footprint in the hotel business. So this is one of the massive installations. So you see how, I mean, the wallpaper enhance also something which is, I mean, luxury by itself without any explanation. Sea environment, so a different one. This is a resort in the Caribbean Island and it's in Saint Martin and this belongs to the Hyatt Inclusive Collection. I just want to catch your attention, the fact that we replicate these curtain waves, I mean, to match the rest of the interiors. So it's really something, which is really unique as a feeling. And last but not the least, an iconic hotel in Houston, Texas, which is called the Houstonian. The Houstonian can -- the graphic installer, you see either like on the ceiling and on the spas. So that comes from a collaboration with one of our 38 designers we herald with over 2,000 graphics developed plus new additions presented at the Salone del Mobile, which makes line of the spa environment pretty unique. So to summarize, like in a nutshell, my presentation. There is a large and very fast-growing market, which is led by U.S., but is also having -- or presenting great opportunity in Europe as all they say, but also in the Middle East, just thinking about, I mean, the pipeline construction in the Saudi market, which is coming very strong. Wallpaper is one installation is a win-win solution for the hotelier, definitely. Of course, luxury hotel wants to deal only with premium brands. They want always to differentiate themselves. So we don't want to fight in the red oceans with economy or budget or let's say, midscale hotel, that's not our business. I'm not saying that it's not big market, it is, but it's not our business. Large and well-planned project, a great symbiosis and synergy, I mean, among the brand in our portfolio, specifically with Cole & Son. And of course, as I said, the geographic expansion that we expect coming over the next 12 months. I think we should keep the ball rolling now. Can I take you the lead?

Thank you. Thank you, Gianluca. So back to me then. Focus areas, the coming 4 to 5 years, hospitality sector growth, part of the growth in it itself, but also take market share there. U.S., a lot about U.S. and then, of course, the direct consumer part. Moving on to the next pillar then, utilizing group synergies. We are already doing that today, the traditional ones. But we will continue now to include more to support our brands, so they can do what they are best at, and we can develop synergies and economies of scales as a company. It will be about several areas. But worth mentioning is here digitalization, the use of our artificial intelligence, but also global partnerships, what Gianluca was talking about here before. Then we have the sixth pillar around M&A. Well, at the IPO, we had a very wide group, what we are looking at and a long list of more than 200 companies. Now we are narrowing this down with our updated strategy focused on dialing up our organic growth focus, this comes natural as well. So a more narrowed target list, focusing on wallpaper companies, rugs and pattern-based fabrics with a good logical fit, but also brands that are in the premium segment. So our short list is now less than 20, still relevant for us or still of interest for us. So we will continue to look at this. Now it's time for me to hand over to another of my very dear colleagues, and that is Karin who will tell you about finance and sustainability.

Thank you, Olle. I would like to start a bit to talk more about our sustainability. Olle has already mentioned a couple of examples. For example, that [indiscernible] was actually a pioneer when they shifted over to water-based printing instead of solvent-based printing a very long time ago. And we are convinced that we benefit from offering high-quality products, which are responsibly produced to reduce our footprint to our customers. We care about the environment. We care about our employees. And of course, we care about our customers. Our sustainability agenda embellished with excellence includes 3 focus areas: A sustainable value chain, a stimulating organization and a stimulating workplace and responsible and ethical business. In a sustainable value chain, we work hard every day to reduce our emissions and reduce the negative impact on the environment and on the climate from our products. We work to optimize and have an efficient handling of our resource and materials management. A sustainable organization and stimulating workplace, we take care of our employees, and we promote openness, diversity and equality. And of course, finally, a license to operate. We do business with integrity and in an ethical manner. Olle, you said earlier the example of the Pappelina and Wall&deco collaboration, which we are extremely proud of and also got recognized for last week, developing the first bio-based vinyl wallpaper in the world actually is a very important step for us, and this is what we would like to do more of. This is our priority, looking over the next 12 to 18 months, what will we focus on. Of course, we want to focus on further developing the products. We would like to drive the development in the industry forward. As a market leader, you need to be in the forefront to deliver better solutions for tomorrow. During this period, we will also update our overall sustainability targets, and we will commit to the science-based target initiatives. In 2026, we will be ready to report according to CSRD reporting as everyone else, first year of reporting is in '26 for the year 2025. Being a sustainable company also means having a solid financial position. We need to have the position to be able to fulfill our commitments. So now I will move over to our financial targets, which I know all of you in the audience probably have come for. So a very important part of the presentation. But before we go into the details and the weeds, we need to take a step back. Where were we a couple of years ago, what has changed and what remains? During the IPO, we were a company very, very focused on M&A. We had a very aggressive growth target, and a lot of the growth in that growth target came from M&A, from acquisitions. We have done a couple of acquisitions during the years, but now when we shift our focus to build our fabulous brands even stronger, we focus on organic growth, and that leads us to change the sales target. And the sales target we present today is an organic sales target and any M&A we do will be added on top. So here they come. We will deliver SEK 1 billion in sales in 2028. We want to become bigger and more relevant. So SEK 1 billion sales in 2028, everything else remains the same. We keep our profitability target of delivering above 15% of EBITDA. We keep our dividend policy of -- with a target to pay between 30% and 50% in dividend every year, 30% to 50% of net income that is. And we maintain our leverage target to stay below 2.5x of EBITDA in leverage. I want to go in a bit deeper into the sales target and the reasoning behind it. So SEK 1 billion by 2028, what that corresponds to around? Perhaps a few of you already did the math, while I was talking, that it corresponds to around 6% of organic growth by every year. And we have done -- approximately for our legacy brands over the last 4-year period, we have done a CAGR of around 2%. This is a step up, but you need to remember, Olle shared the slide earlier about our core markets. Our core markets have actually declined with high single-digit numbers every year in this period where we actually maintain growth of our legacy brand. We have, during the last year, added additional effort in product development and sales and marketing to prepare for when the market comes back. And we will continue to add additional efforts into product development and sales and marketing to drive growth. Going forward, the EBITDA margin target, and I am convinced, and all of us are, that we believe in delivering EBITDA in real money is more important than delivering an EBITDA margin. We want to become bigger, and we want to deliver an increased sales. That's why we will continue to invest in product innovation and sales and marketing and maintain our profitability target of 15% in EBITDA. We have an organic sales focus, focusing on high-margin products and high-margin channels. We have pricing strength. We have opportunities to improve efficiencies in manufacturing and sourcing. And as I've said before, we will continue to add resources into sales and marketing and product development. But we believe or we are convinced that we will reach economies of scale as sales grow. So how -- what does all of this that Olle, Marie and Gianluca has presented today? What does that mean to our financial reporting? Well, I think I will make life a bit easier for you investors and analysts. Going forward, we will report net sales by each brand because we live brand every day. So that is our correct way of reporting. So we will share external revenue per brand in our quarterly reports. We will also share the external revenue for manufacturing because our factory in Boras, Boras Tapetfabrik, also has external customers that impact external sales. We believe this is well aligned with our strategy and the way we run our business operations. All of our other KPIs will be reported on group level. We will report gross margin on group level. We will report EBITDA margin on group level and cash flow as well as all other balance sheet items on group level. When it comes from the geographical perspective, we will follow the standard reporting requirements, which we already follow in the annual report today, that is we're going to share our sales number by main geographies. So here's the Q1 numbers restated. In Q1, we had a sales growth of above 8.5%. And these are the sales numbers in the way that we will share them going forward, where we have the group, we have each of our brands, and we have our manufacturing sites. So over back to Olle for a summary of the presentation.

Thank you, Karin. Yes, the summary. To wrap this up, there are 2 slides I will share with you. First of all, our model of creating great shareholder value. We have the foundation in place with the entrepreneurial, decentralized operating model, strong finance. We have our 6 growth areas dialing up organic sales growth with the help of building -- continue to build exciting brands, product innovation, nurturing our design items, expanding into hospitality in the U.S. market, utilizing economies of scale for the group and narrowing down our focus on M&A. This is our model, and this is what we will execute and I'm absolutely convinced when we do this, we will create great shareholder value. Financial targets, at least SEK 1 billion in 2028, over 15% EBITDA, the 2 other remain the same. So this is summing up what we will do and what we are updating now you with our new updated strategy, our focus and our financial targets.

With this said, I invite you up again, Karin. And we will now start a Q&A and [indiscernible] will start here. [Operator Instructions] Yes, we get started. I think Benjamin starts off first.

Hello. My name is Benjamin Wahlstedt. I'm from ABG Sundal Collier. I have a couple of questions for you today. Let's see which ones to start with. I can start with this one. What has prevented you from making any acquisitions in the last quarter? It's a big question, I know.

What has prevented us. I mean, first of all, we have focused to create organic growth. It has also been the fact that we wanted to take down our leverage basically. We were at 2.4 a year ago, now we're 1.6. We are in discussions, but we are prioritizing now the focus on organic growth.

So we can add another one as a Chairman as none of the companies were excited with [indiscernible].

Perfect. And perhaps more broadly, could you talk about capital allocation a bit? The headroom to your upper leverage limit is starting to get significant and the cash flow in the coming years could potentially be quite good.

You're right. It is -- I don't know what else there is to say about that. I mean, you are correct in that observation. And we believe it's helpful.

Perfect. And then perhaps more operationally then. You talked about adding more resources in product innovation. Could you quantify this slightly, please? Is this the way of the margin in the near term? And perhaps is there a way to quantify the current share of sales that go to product innovation, please?

I mean we -- Embellence Group today has a lean head office, so we will continue to do that. We have a lot of competence in our different brands and in our manufacturing entities. So we will utilize that. So we will have a team -- or we are having a team of talented people working together on bringing relevant innovation into the market.

And perhaps what is the size of that team?

It can always be more, but we have people in every company that are -- or every brand contributing to that and also in our manufacturing entity.

Perfect.

And the first time, you will see the number on what we spend on product development will be in the annual report for [indiscernible].

Perfect. And then I was interested as well in the DTC channel. Could we get an update here? Any share of sales figure, for example.

I know Benjamin that you are always interested in that. I can only say that it will continue to contribute more and stronger than our overall growth, and it's doing that right now.

Perfect. And a follow-up. I know you say you get a better gross margin in the DTC channel when cutting out the middlemen. Is it accretive or dilutive for the group's EBITDA margin overall at the current size?

Can you repeat that?

It's accretive. Yes.

[indiscernible] there we can do it accretive. In others, we might not [indiscernible].

Perfect. Those were all my questions for now.

Yes. [indiscernible]. I have a question around dividends. You actually reduced your dividend to nothing this year. And how are you thinking about dividends going forward, I saw the target. But of course, you didn't follow the target this year. So can you give some more color on that?

This year, we had a discussion with the Board, and we have some expensive financing in U.S. dollars, where we, together with the Board and then the Board suggested to focus on reducing that U.S. dollar debt to reduce interest rate costs. And our absolute target is to pay a dividend between 30% to 50% of net profit going forward.

Okay. Victor Hansen, Carnegie. So on your new sales target, SEK 1 billion, 6% CAGR at least. And you mentioned a couple of drivers, one being the market recovery and then you mentioned several company initiatives. I was hoping that maybe you could clarify a bit how much of this growth you expect to be from market and how much to come from your company initiatives?

As I said before, I mean, in our core category or the largest category, that's premium wallpaper. This year, we expect it -- or the industry expects flat, but then coming to a growth of 3%, 4% going forward. As Karin explained here, when we looked at the target and we do the maths that most of you have already done, we're talking about around 6% every year. It doesn't necessarily have to be an even growth every year, but that's how it's connected.

Yes. Okay. And then the second and final question. I was hoping that you could talk a bit more on your DTC expansion. Maybe how fast can you open new markets? Any initial investments? What's your marketing strategy, et cetera?