StrongPoint ASA (STRO) Earnings Call Transcript & Summary

Absolutely. I said that any market with a cash usage of some proportion which includes most European countries, maybe in Norway and Sweden excepted. But most European countries as well as, of course, the U.S., this would be very, very relevant. We should remember that 1 of the many -- but 1 of the key value drivers for the retailer here is actually to reduce the number of CIT stops and transactions. And although this might be -- or sound alien to a Norwegian or Swedish investor, the amount of security around cash transport in most European countries and certainly in the U.S., involves our good vehicle, minimum 2 people, in some places also armed people, armed guards. That is, of course, a very costly business and we're reducing these cash transports is of great value. So yes, we assumed this also as a solution that is -- has a global potential like that.

Great. Final question on this CashGuard Connect project. relating to providing some numbers. I think overall, it's difficult for us to comment specifically on numbers, but there is a question within how short over time can such a solution or product be paid off in the form of cost savings from the customer perspective. Again, difficult for us to comment specifically on numbers, but maybe, again, from a kind of business case perspective, we could share some light on that.

So from the customer's point of view, I mean, the -- once you've had the CashGuard Connect installed, you could -- or you will be able to relatively quickly adjust the cash in transit stops, meaning the volume of cash in transit business or cost that's coming out will be significantly reduced. You will also see pretty quickly the transaction time in the cash transaction going down, which means that all things equal, you'd be able to reduce the number of personnel to handle the exact same number of transactions. And lastly, for, in particular, new builds, you would also be taking this cash transaction reduction time into account enabling any retailer to reduce the number of cash sales in total or a number of TILs from, say, 20 to 18 or 19. So obviously also saving CapEx there. But the initial savings on staff, both internally the retailer with CIT companies internally is relatively rapid as well as, of course, the potential that is residing with any kind of cash transaction for theft or internal theft.

Great, thank you. So moving on to other topics. Next question, are the financial objectives for 2025 still within reach? I think the overall answer to that question is yes, absolutely. It is a mixed picture, and I think we are fairly transparent in the report. There is still a lot of uncertainty given where we're coming from, lack of visibility. On the other hand, we are seeing positive signals in several markets. We have also increased customer interest, especially in the U.K. dialogues that we haven't necessarily had before. So that's on the positive side. Also, if you look at the Q3 figures that we now have delivered with a 4% EBITDA margin as compared to our ambition and goal of 4% to 6%, we are within that range. So the objective for next year, absolutely within reach. Obviously, assuming that the market will pick up and that all the good stuff that we are doing will materialize. Next question. Could you please quantify the effects of the cost savings? And if it's possible to comment specifically on Q4. I think we have -- well, obviously, we have done now 2 rounds of reorganization. Without quantifying super specifically, I think we're looking at good cost savings that have already been evident in Q3. We expect similar savings within Q4 and going forward. Again, these are gross savings, we said up to NOK 220 million per year when we made the initial restructurings. I think anytime you do reorganizations to our restructuring costs, there's also a sense of building in other markets, which were also quite aware of because there is a huge opportunity, especially in the U.K. So the stuff that we have done now allows us to allocate our resources in other places as well. You stated in the report that growth was held back by U.K. and Ireland. Could you provide more flavor, please? What measures are you taking to solve the issues?

So in the U.K. and Ireland, I think it's important to differentiate between shop fitting which was the core business of ALS when we did that acquisition and the product and solution sales. So I just want to take a step back that the reason why StrongPoint acquired ALS was to get a foothold into the U.K. and Irish market, knowing very well that this was an engineering company involved in shop fitting and refurbishment, which is a not core of what StrongPoint does. But it is and has been, I can even argue for the strong Sainsbury's agreement, very important for us to have a local presence with a personal base and offices in both those countries. Now what we've seen in this quarter is a quite dramatic reduction in shopping. And we've not been alone. There's been actually quite a lot of rough conditions for shop fitters. There's been actually, some competitors leaving going [ bankrupt ] or going into restructuring, but it's -- so we're not alone in that respect in that cyclical business. And we're taking measures to improve that. There is, of course, also opportunities arising from the bankruptcies of competitors we've seen, that's number one. But on the other hand side, it's also very important for me to clarify that the business opportunities on the product and solution selling side is going very well and have already started to materialize with the likes of Sainsbury. But in this quarter, we were massively held back by a big decline in the shop fitting business of close to 50%.

Thank you. Our next question. Could you please provide some color on how you see the market now? Where do you see the most activity either in terms of regions or segments? Has there been any change since the Q2 period? Or what has not changed?

So I think, generally, you could say that there is somewhat better market conditions across the markets we operate, both -- sorry, both us and our -- customers are starting to see the peak of any interest rates. So things are getting more stabilized in that respect. So then a brilliant example is the sort of hesitation or postponement of the rollout of self-check out here in the Baltics with Maxima. Now we have that fully ongoing. Client is super happy, and we will continue with that through this year and next year as well as an example. But in general, business conditions are slightly improved. We've also taken -- as you mentioned, Marius, organizational measures along with the cost restructuring, that has enabled us as a business to move fast around the opportunities as they arise.

Thank you. Next question. You have said that you have some large competitors who is challenging you, who are the main competitors in the different markets? That's a very good question with the current portfolio that we have, I guess, a detailed answer would be individual competitors on each of the different products and solutions we have. So I'm not sure if it's [ grateful ] for us to mention 3, 4 competitors on each of our products, but maybe we could give some general flavor on the market out there. What we are seeing, if it's price or if it's positioning example for Sainsbury's that we won, if you have any kind of overall reflections on the competitor side of things.

I think it's as you said. It widely depends on, first of all, the products that we're looking at, and to some extent on the markets. So it's a very broad question. We can spend probably 10, 15 minutes just talking about that. So as suggested that's not so related. We could follow up on this on a different occasion.

All right. Next question appears to be relating to Sainsbury's. Again, those the minimum fee from Sainsbury's relate to each point for the 13 installations. Or do we charge the minimum fee as per the contract right now? Again, I think we touched upon it quite well initially. From an overall perspective, yes, we do have a minimum fee, again, which is quite common normal for this kind of contract. We did say that we started the professional services and onboarding of this project spring time. So we are now I would say, close to the minimum fee on an annualized basis, of course. And then Jacob also touched upon the potential going forward with continuing into the first half of next year. So that's pretty much what we can say about that right now. All right. Other questions. There is 1 question relating to the U.K. market. I think it's more of a general question on Vensafe, especially relating to the U.K. Do we see any expectations on sales of Vensafe, especially in the U.K. within the next 6 to 12 months?

Brilliant question. So Vensafe, of course, or should I also say a very well-known solution in the Norwegian and Swedish market. We're seeing an increase -- a very increased interest in particular in these theft prevention solutions across the board. You asked the question points to is, of course, in that respect, very interesting because theft is a big and rising concern with any kind of retailer in the U.K. Some has actually labeled it as the -- as an epidemic when you look at the size of theft being an issue. And as a consequence, we've had very good discussions with a number of retailers, and we are happy to confirm that we have 3 confirmed proof of concepts on the Vensafe in the U.K. with Tier 1 customers. The use cases are quite different. So these are 3 different customers. The use cases are quite different, ranges from the traditional tobacco sales that we see in Norway and Sweden to our other theft prone items. This proof of concept typically take 6 months before you get the comfort from the retailers about whether this not the solution to solve issue. We feel very strong about that having a very good references and experience for the Nordic markets. And so we're very excited about these opportunities. So whether or not these proof of concepts convert into bigger rollouts is yet to be seen, but we never had 3 proof of concept on the Vensafe confirmed in a StrongPoint before. So of course, that gives a certain amount of optimist when it comes to what Vensafe can deliver in the U.K. market.

Thank you very much. We will try to round off at the 11:30. We have a few questions remaining relating to ESL and self-checkout. As far as ESL, some questions overall relating to the potential of revenue increase or increased sales of ESL in new countries, for example, the U.K. And I guess, secondly, a current status on installations in Finland and other countries relating to service and the implementation work. So maybe again Jacob if you could give some flavors on what's going on with ESL potentially in some of the other countries that we're in, including the U.K.

So just in case we don't have -- we have new investors or ESL, electronic shelf labels, which is so dominant in Norway and Sweden and where we are going between being the largest and second largest partner, Pricer. We're also, of course, seeing as anybody in the market an interest for this kind of solutions in all markets, but the U.K., in particular, U.K. being a very sophisticated market, but yet with very low ESL penetrations, starting to see more and more confirmed orders coming in across the different tenders. So what StrongPoint is doing to -- in most cases, in these events is to do some installation work. There is yet to be seen in any of the major Tier 1 players going heavily into ESLs, but we're awaiting that and seeing what kind of role we could be playing in that aspect. When it comes specifically to Finland, obviously, we had Pricer winning a very significant deal with SOK, the Coop of Finland as part of that deal. Coop themselves were -- saw this as a strategic initiative and chose to actually invest in doing the investments themselves with their incumbent installation partners. So for StrongPoint's point of view, there was low and has not been in the financial benefits from exactly that contribution.

Thank you. So I guess final question relating to self-checkout. What about self-checkout sales? Any expectations for the next 6 to 12 months, either in existing markets where we do have a good presence or in -- not necessarily in our markets, but in our core markets where we could have some expectations on self-checkout going forward?

So first of all, we expect to continue our, I should say, dominance and very, very strong position in the Baltics. Again, that's why we're here in the Baltics to oversee the rollout of self-check out to Maxima. So we feel very, very confident that we have a solution which is cost efficient and not least, have the right kind of features, including security features that the market is in demand of. When it comes to exporting, if you may use such a term, our brilliant self-checkout solution and our competence and expertise to other StrongPoint countries were slower than we were hoping for, we have to confess. The -- whereas the integration with the point of sale, the POS sounds like a small thing that's actually quite perceive as a hassle, although we have remedies that we perceive as a hassle to grocers. And as such, we just have to confess that we've been slower than we were both hoping and expecting to see in both Norway and Sweden and in the U.K. market as well as Spain. We're constantly working to both increase the number of of POS integrations that we have. But we have technology that's going to take some time before we are at the same kind of presence and situation as we are in the Baltics.

Great. Okay. That's it for now. Thank you very much for listening in and also thank you for sending the questions in advance. That's also always very helpful. So please don't hesitate to contact us if you have any other questions. And we'll see you next time. Have a very good Friday.