Dustin Group AB

STO:DUST

Earnings Call Transcript 2023-Q1

[Operator]

Welcome to the Dustin Q1 Report for 2022 and 2023. [Operator Instructions]

Now I will hand the conference over to CEO, Thomas Ekman; and CFO, Johan Karlsson. Please go ahead.

[Thomas Ekman, executive]

Thank you. Thank you. And Good morning, everyone. Good afternoon here also and welcome to our first quarter presentation conference call. We hope you're all well.

Here on our side it's me myself, Thomas Ekman and Johan Karlsson, and also Fredrik Satterstrom in room as well. And so today, we present our first quarter results for fiscal year '22-'23.

Our Q1 from September to November 2022 has on a macro level being characterized by the, obviously, continued escalation of the war in Ukraine, high inflation followed by increased interest rates, a fairly weak Swedish krona and high cost of energy, which is obviously dramatic change compared to our comparable Q1 just a year ago.

We kicked off the financial year with a continued software growth despite an anticipated and very cautious development in SMB. Access to standard hardware increased sharply, and that has fueled a certain degree of price pressure in the market, which combined with the cost inflation, affected the margins for the quarter.

We see the same patterns as we have in -- seen in previous economic crisis periods where the SMBs are the first ones to react. Corporates start lower and the public sector continue to spend. Typically, these periods have lasted around 3 quarters. And we have now passed the second one, which is a clear low point.

We are now -- and with that said also, we are now further intensifying our cost focus to adapt our operations, of course, to the prevailing economic climate. I am now pleased to say that the integration process in Benelux is proceeding according to plan. And that will enable continued positive growth and, of course, synergy effects and thus lower costs over time.

So let's go into the Q1 presentation. And for your reference, we have Dustin at a glance on Slide 2. But I think we can move directly to Slide 3 for the financial highlights to see how we are performing and now during Q1.

The first quarter of the financial year, as said, distinguished by general economic uncertainty and that's a clearly cautious trend among some of our customer groups, primarily SMB. The supply integration for standard hardware was highly favorable, you can say, which impacted the pricing campaigns in the market. And for us, that have had a negative impact on growth among smaller SMBs as well as consumers, primarily.

Greater availability, though, and a continued healthy demand among our large customers and public sector, laid a foundation for strong sales growth in the first quarter despite as has been expected and more cautious approach by small and midsized companies.

Organic growth was 8.5%, of which a negative 8.1% for SMB, a very good 17% for LCP organic growth, and minus 3.3% for B2C. Like recent quarters, growth was mainly driven by strong sales of standard hardware, such as mobile phones and computers.

In the quarter, availability of the more advanced hardware has improved within certain product categories, not everywhere, but within certain product categories. And net sales in total rose to SEK 6.6 billion versus SEK 5.8 billion in the corresponding quarter last year. And that, of course, leads us to 13.9% reported total growth.

Gross profit was SEK 893 million compared to last year's SEK 894 million, giving us a gross margin of 13.5%. The change in gross margin versus last year is mainly attributable to pricing and order mix with higher share of sales within LCP, together with the organic growth in SMB.

Adjusted EBITA amounted to SEK 201 million compared to SEK 301 million last year. And the adjusted EBITA margin was 3% compared to the 5.2% last year.

So the lower margin was mainly related to lower gross margin, combined with the cost inflation, which we are expecting to, but it has not driven through yet. EBIT amounted to SEK 138 million, and including items affecting comparability of negative SEK 19 million compared to SEK 7 million in the previous quarter. Primarily, that's, of course, relates to the integration of Vincere and Centralpoint.

And EPS, earnings per share, was SEK 0.59 per share versus last year's SEK 1.47. And cash flow from operating activities amounted to minus SEK 85 million during the quarter, mainly impacted, obviously, by the lower EBIT, combined with the higher net working capital. And this was predominantly the result of the further accumulation of inventory for related customers in the public sector.

As a result of the increase in net working capital and negative exchange rate differences, combined with lower profit, net debt in relation to adjusted EBITA, increased to 4.3x versus 3.7x last year. And the current leverage, though, is higher than our target and it is a state that's being temporary and it's expected to fall significantly in the next few quarters as inventory reduces as a result of the deliveries or anticipated deliveries of large orders to related customers with high stock balances.

Given that there were questions in general on inventory levels in the industry, it is good to remind on that the majority of our earnings are related to customer specific pre-ordered inventory with low risk. Nevertheless, though, we are working on get down inventory levels from the overstock we had during the panic period.

So apart from an intense quarter in general, from an operational perspective, we have continued the integration work with our Benelux companies, where clear steps have been taken. We are on track with the synergy extraction. We identified SEK 200 million to SEK 220 million with -- that will show clear effects from second half of this financial year.

And as an example, I mean, private label is really taking off in Benelux, which is very promising and encouraging. We have also merged our SMB organization and thus start to surface also efficiencies from that. Yesterday, we announced a cut of 35 FTE in the managed service organization. And that is just one example of what happens when we merge the organization, so we can be more efficient and work as one organization for SMB over the group.

And as you know, I will soon move on and the recruitment of my successor is ongoing, and hopefully, we are ready to communicate that -- the name of that in the coming weeks. But now, Johan, you can take us through the financials for different segments and how we have performed in Q1.

[Johan Karlsson, executive]

Yes. Thank you. Moving to Slide 4 and then the SMB segments in some more detail. So sales for the quarter ended at SEK 1.771 billion, representing a negative organic growth of 8.1%. In the quarter, we saw that the economic uncertainty is continuing to affect mainly our small and medium-sized B2B customers and the consumers.

However, for the larger SMB customers, demand continues to be somewhat stronger. The market sentiment is similar in all our geographies. But the overall growth was strongest in Finland and Norway. As we are realigning the service portfolio, the share of software and service was down from 14.4% last year to 12.2% in Q1 this year, the main reason being the move away from time and material consulting towards standardized managed services.

Segment margin reduced from last year's 12.4% to 10.1%. A higher share of standard hardware such as computers and mobile phones had a negative impact on margins in the quarter. Recurring revenue from standardized line of services was developing well and contributed to the margins positively. Also private label is continuing to deliver strong sales and margins, contributing positively to the margins and profit. Segment result ended at SEK 180 million compared to SEK 230 million last year.

Moving on to Slide 5 and the LCP segment. Sales in LCP was SEK 4.727 billion in the quarter, an increase of 23.3% of which 17% was organic. During the quarter, we saw a very strong sales increase in both public sector customers and large corporates. As for the SMB segment, availability of standard hardware has continued to be good and deliveries are now back with more normal lead times. From a geographical perspective, growth was strongest in the Netherlands, Sweden and Belgium.

Segment margin was 5.9%, down from 7.6% last year. Compared to last year, the higher share of standard hardware has a negative impact on margins. And as we are growing at a very high pace by winning new frame agreements, this impact the margin negatively as the margins at the beginning of the contract period are lower than at the end.

As for SMB private label products affect margins and result positively in the quarter. And we're continuing to see good potential for further development as we're launching more and more products in the Benelux region.

The takeback offering continues to show good development and the interest from customers is strong. Segment result in LCP for the quarter was SEK 279 million, down from SEK 293 million last year.

We then move to Slide 6 and B2C. And sales in B2C was SEK 139 million and it was down 0.7% compared to last year and the organic growth was negative 3.3%. The main reason for the sales development was the economic instability affecting negatively, but a better supply situation affecting positive.

Segment margins are now normalizing and was 6.9% compared to last year's 10.1% -- 11.1% mainly due to the better availability of products. Segment result was SEK 10 million, which is down from SEK 16 million last year.

Then we move to Slide 7 and net working capital. So net working capital was SEK 336 million compared to last year's negative SEK 334 million. The higher net working capital is mainly an effect of higher inventory as the supply situation for our main suppliers are improving back to normal and more orders are being shipped.

Looking at the details, you can see that inventory in the quarter was SEK 1.610 billion or up SEK 472 million compared to last year and SEK 270 million compared to Q4. Part of the increase is seasonal as end of November is in the middle of the peak season for us.

However, part of it is also customer-specific inventories being delivered to us as the supply situation has improved. And more about inventories a little bit later in the presentation.

Accounts receivable was up SEK 186 million, mainly as a result of higher sales volume and more sales in the LCP segment. In accounts payables, which was SEK 3.856 billion, this was up SEK 143 million, and the majority of this comes from higher business volumes.

As the supply situation is now improved, and our way of operating, mainly in the Benelux region is being changed, we believe that inventory will come down to more normal levels during the year. This makes us continue to believe that our target range of negative SEK 100 million to SEK 200 million in net working capital is realizing.

As Thomas mentioned, leverage, that this net debt in relation to rolling 12-month EBITA at the end of Q1 was 4.3x, where our target is to stay in the range of 2x to 3x. The higher net working capital, the currency differences and lower results, effected net debt and leverage upwards.

We then move to Slide 8 and look at inventory in a little bit more detail. As said before, inventory in the quarter increased by SEK 270 million compared to the previous quarter. We have -- in order to explain the difference we have tried to detail little bit of the -- what the different kind of inventory that we have in Dustin.

So if you start from the bottom, the core inventory increased by SEK 76 million. Core inventory would be the inventory that we use for our online -- primarily for our online business. And the increase by SEK 76 million here is mainly coming from the seasonality effect of moving from end of August to end of November.

In private label, we see a sharp increase in the business volumes and hence inventories following and the increase of SEK 10 million is really an effect of higher business volumes. And when we then look at customer-specific inventory, we see the increase of SEK 132 million. This is mainly attributed to the public sector customers. And is a result of the better deliveries that we now get from our suppliers. This part, we expect to come down in the next couple of quarters.

We then move on to Slide 9 and cash flow. Cash flow for the quarter was SEK 218 million compared to SEK 294 million last year. Looking at the parts, we see that cash flow from operating activities before change in net working capital was SEK 150 million compared to SEK 283 million last year. This is mainly a result of the lower operating results.

Change in net working capital was negative SEK 235 million compared to SEK 86 million last year, mainly -- the main difference being the increase in customer-specific inventory to public sector customers.

And cash flow from investment activities was negative SEK 51 million compared to SEK 40 million last year. And out of the SEK 51 million, SEK 40 million was related to IT investments. Cash flow from financing activities was positive SEK 353 million, mainly coming from new loans raised.

Total investment -- if we move to investments, total investment amounted to SEK 63 million compared to last year's SEK 81 million, of which CapEx related to IT development was SEK 40 million. And out of the SEK 40 million, SEK 13 million was coming from the project of moving our ERP system to the cloud.

An investment in tangible and intangible assets was SEK 17 million, which was down from SEK 46 million last year. And then finally, investment in assets related to service provision was SEK 7 million, down from SEK 17 million last year. All in all, SEK 51 million out of the SEK 63 million in CapEx was affecting cash flow. The others were change in lease or rent contracts.

And by that, we'll move back to Thomas.

[Thomas Ekman, executive]

Good. Thank you very much, Johan. Then I move on to Slide 10. And just let me elaborate a bit on the gross margin development in the quarter. The gross margin, as I said earlier, amounted to 13.5% for the quarter versus last year's 15.4%. The change is primarily attributed to a supply-driven price pressure compared to the opposite scenario last year, which was marked by high demand and limited supply.

This, combined with larger customer-specific rollouts in LCP and -- then also changed the sales mix with a high share of standard lower -- slightly lower margin in hardware and increasing share of sales in LCP, which also adversely impacted performance compared to the corresponding period of the last year, also had an effect on the gross margin.

But also as saying this the -- supported by our strong position, the SMB denoted a greater success in maintaining its margin, although the decline in growth in SMB. Good. Let's move -- continue to the -- just an update on the synergies and the integration activities we're doing.

As we have previously announced, we believe when we did the acquisition of Centralpoint that it'd be possible for us to extract synergies at estimated SEK 150 million, where we, as you know, added another SEK 50 million to SEK 70 million in last quarter, where we have identified more opportunities in synergies. And now we have estimated that SEK 200 million to SEK 220 million annual savings and synergies.

And they will come from and are already starting to surface from both revenues and costs on the revenue side for SMB in Netherlands or in Benelux. It is to merge one organization for SMB, and that is in neighbor for what we'll be working in the same way, in the same platform, with the same offering portfolio and synergies will also be realized in full by year '23-'24 for SMB.

Same for LCP, where we, given our sites, now have a large portfolio of contracts and by that being less dependent on certain deals. We can choose more thoroughly and with better quality, what contracts to hunt for, which also, of course, will help the margin also in LCP going forward.

Cost synergies, they will primarily come from, obviously, integration activities we do in the Benelux entities, emerging organizations. As I said, we did a smaller change with managed services, for example, yesterday, where we can be more slim and more efficient in our way of proposed or communicating and delivering services to our customers.

Private label has had a very good start in Benelux, which is very promising and encouraging. In the reorganization we announced in October, we have also established a group-wide procurement and wealth management organization to make us -- to make use of our size in full. Of course, further improving our purchasing power and being even stronger and better partners for our vendors, distributors as well as customers.

And we are working to launch our own -- our common cloud-based ERP platform in Benelux and that will probably also in Nordics and that we aim to complete during this fiscal year. And that will, of course, also improve the efficiency and reduce the workforce. So that will be a good and quality improvement. And obviously, on quality, process and quality and efficiency, it will also contribute to an improved cost base.

So we see that we will see clear effects from this. And they will be visible from the second half of this year over this financial year, '22-'23. And the full effect of these synergies will be expected to come in '23-'24 -- the financial year of '23-'24.

So going through to Slide 12 and an update on our financial -- or sorry, an update on our 2030 commitments and the current actions we do towards reaching those. For the full year of '21-'22, we increased our circular revenue share to 25%, and now we have increased that to further 33.7%.

As you might know, our target is to reach 100% until 2030, so good development here. Takeback -- where we take back older products from our customers is progressing very well and we have so far taken back 150,000 units this year. And they are either refurbished or they are recycled or and -- or resold and we see continued increase in demand for those services.

And our facilities, in both in Nacka in Sweden, recovery for the Nordics as well as in Lincoln in the Netherlands and the Benelux is growing and taking on more volumes. And this is obviously great for us as it is great also for the environment, for sure.

So before going into Q&A, let me just sum up the full year -- or sorry, the Q1 results on Slide 13. Net sales grew with 13.9% to SEK 6.6 billion where organic growth for the group was 8.5% with SMB at a negative 8.1%, LCP at a very strong 17% and B2C at minus 3.3%.

Gross profit at SEK 893 million versus SEK 894 million last year. And gross margin came in at 13.5% versus the 15.4% last year. Change in sales mix as said, with higher share of LCP sales and large deliveries of standard hardware is behind the change in gross margin.

Adjusted EBITA came in at SEK 201 million, giving us an EBITA margin for the quarter at 3% compared to last year's 5.2%. Margin is affected by lower gross margin coming from sales mix, pricing and cost inflation as well as that we carry more cost right now due to the integration activities, but we see, of course, good progress in there.

EBIT was SEK 138 million compared to last year's SEK 251 million and EPS SEK 0.59 per share. And cash flow, as you all know came from operating activities of minus SEK 85 million. And leverage 4.3x, above our target, high at the moment, due to currency, working capital and customer-specific inventory.

So to summarize, September, October, November of 2022 will not go down as the best of our quarters, rather contrary. But of course, also the geopolitical macroenvironment has also been among the worst for a long time regards that. I mean, we are certainly happy -- certainly not happy with the numbers, with the performance. But we have a plan going forward and we look forward to that.

As said earlier, we see the same patterns now as in previous economic crisis in how SMBs and LCPs are reacting and historically these periods last for 3 to maybe 4 quarters. So we're drawing conclusion on that would be given that we are in the middle of it and on typically low point and that would also have the opportunity to give us a brighter spring.

We have now passed also 3 years to the pandemic with a lot of all-time highs and all-time lows in very short time frames. And a big difference from previous crisis is obviously the level of digitalization and the need for investments in IT, security and mobility and, of course, new equipment given new way of working for all companies. So things can change fast and that stays in our favor and we are very well positioned for that.

So for us, it's just we continue to work hard, adapt, adjust and we keep our customers moving. And I must also say from a near-term perspective, that we are progressing very well with the integration. And it's very positive to see that our Benelux business is delivering very strong growth.

And I think with that, Johan, we can conclude the presentation and are happy to take any questions you might have. Operator?

[Operator]

[Operator Instructions] The next question comes from Klas Danielsson from Nordea.

[Klas Danielsson, analyst]

So first one starting off with the kind of dynamic in how the sales mix will move forward here. So I think typically, the dynamic for you in a recessionary environment or rather perhaps now in certain environment, just now with SMB has dragged down quite quick, then LCP has lagged on a bit.

Now looking at where we are at this point, I think we've seen the SMBs come down quite quickly as according to that dynamic. LCP is still going very strongly. So I think when you look at -- when you talk about the activity on the LCP side, should we expect this to also start to come down initially in the next few quarters here? Or what's the progression looking like in the communication from their side?

[Johan Karlsson, executive]

Well, I think if you look at, at least historically, you would see that public sector customers would continue throughout, I would say, ups and downs more or less to say. There is more about winning new contracts and we have actually won a few new contracts there that -- which is boosting at the moment, a bit of sales. But we don't see any -- we don't see the economic situation in our markets affecting a lot the public sales numbers.

Corporate, on the other side, that depends a little bit how the economy is developing. There we might see some reductions going forward. But again, more limited compared to the SMBs, at least from a historic perspective.

[Klas Danielsson, analyst]

And is that primarily, because I think also what we could see in a kind of recessionary environment and that sense is also them gearing more towards a replacement market and less so that kind of advanced equipment. And I mean, I know you've had very little in terms of mix from -- or sales from these types of customers or equipment rather in the last few quarters.

But what should we actually expect from gross margins? Is there a tilt towards those more advanced equipment still going on in the next few quarters? Or should we expect a continuation of this more basic equipment mix?

[Thomas Ekman, executive]

I think, in general, it's improving for advanced hardware, it is, which is, of course, a case in our favor. It does. And we see the continued need among customers the upgrade for our advanced, I mean, everything from routers to network products, which, of course, is good.

And as you know, China has now opened up for sure. We'll see how that pans out. But still it's promising that things are coming back to more normal also on those products. So with that -- we see a positive signs on the advanced hardware.

I also think that in a situation like this, our -- the private label assortment is really taking off because, obviously, a very cost-efficient way of supplying primarily accessories. And that's good for us, because our margins there are better.

[Klas Danielsson, analyst]

So should we expect an improving gross margin in the next few quarters? Is that kind of a definite approach? Or how should we think about that side?

[Thomas Ekman, executive]

From a mix perspective, you would expect that. And then it's all about what happens to volume because, obviously, that will affect the segment margin, if volume goes down more than we can compensate with cost.

[Johan Karlsson, executive]

Or from mix.

[Thomas Ekman, executive]

But from a gross margin perspective, yes, yes.

[Klas Danielsson, analyst]

Okay, fantastic. And then my last question, just a quick one as well. And thanks very much for the details on inventory, I appreciate it. It that a bit higher than normalized? I was just wondering, could you give us some additional color in terms of just pure numbers and how much higher this versus the levels you've had historically? What type of kind of progression towards the normalization should we expect over the year?

I mean, will we be back on the normalized levels already by Q4? Or is this kind of a multiyear story? Or what are we -- what should we think about on that side?

[Thomas Ekman, executive]

Yes. I think that's a really good question, because what is actually normal nowadays, that's a good question, especially since we did basically the acquisition of Centralpoint in the middle of this turmoil. But we really believe that the inventory level is in the range of SEK 400 million to SEK 500 million too high compared to where we would like to be.

So that will be our target to get it down by these numbers. Personally, I believe it will take us the next, let's say, 3 quarters to get there. That means end of this financial year, given the fact that supply situation is continuing the way it is at the moment. Because the start of this was actually the uncertainty in deliveries. Meaning that we will have to keep higher, let's say, safety stock locally in our markets.

This is now normalizing and we don't need to carry all that inventory anymore to secure deliveries to customers. And that is really the foundation to reduce our inventory levels.

[Operator]

The next question comes from Fredrik Lithell from Handelsbanken.

[Fredrik Lithell, analyst]

I have a few, if I may. First one is really if you could sort of elaborate a little bit more on the supply-driven price pressures, how that is influencing your gross margin, if you could describe that. Maybe me not really understanding it. Would be fine if you could put some color on that in more detail.

And then also central function cost was up year-over-year with SEK 30 million. Can you maybe give us a path on how that will develop going forward and what the items are that will sort of take it down a little bit.

Final question would be on your synergies and what part of the synergies do you actually maneuver? I mean, OpEx is something you can really decide yourself, sorry. But the sort of the revenue synergy effects and all that stuff is something that you can plan for, but really can't really judge if they will really show up or not. So it would be nice to have -- if you can divide them into those 2 buckets, the synergy effects you expect.

[Thomas Ekman, executive]

Sure. Good. Thank you for questions. If we start by the -- your first question on the gross margin or the price and the pricing driven by it. I mean there has been rapid change or dramatic or maybe not dramatic, but it has been a rapid change in supplies coming back to normal, as Johan said also on the inventory questions, where the standard hardware and supply of standard hardware is in -- just this quarter back to a sort of more normal situation.

And that, of course, gives -- given that also our competitors have a lot of stock, that has also created some of our price pressure towards the smaller customers, small SMBs and also consumers, obviously. And where we sort of do not fight for those price factors that serve for really price campaigns. And that is not our way of working. So therefore, we also lose out a bit of growth there.

And that is also -- that growth, of course, impacts also the gross margin typically for a time that is applicable for not to be aggressive -- too aggressive on price, but rather keep our price levels, but focus on the business growth. And from that point, we've seen on the gross margin. But long term that is a better way forward.

[Fredrik Lithell, analyst]

Okay. So if I understand it then, better availability of standard products is sort of influencing competition a little bit more and you have to fend that off. It's not that the supply side is pressuring you on prices?

[Thomas Ekman, executive]

No.

[Johan Karlsson, executive]

No.

[Thomas Ekman, executive]

It's actually over distributed at the moment in the market, which is, of course, the exact opposite of what it was a year ago, where it was no supply. And we could also work a lot more with pricing for all customers -- or segments within the customer base.

[Fredrik Lithell, analyst]

Okay. I understand.

[Johan Karlsson, executive]

I think on the question on central cost, I think 2 primary components on the increase side. First is inflation, but also FX rates increased, of course, a little bit there. And the other one is more investments in IT. These are the prime change from last year there.

Going forward, you will see improvements coming from the synergy side. So when we come back to this -- talk about synergies, part of them will affect also central cost, because today we are running -- in some of the central cost functions, we are now running kind of double organizations, one for the Benelux and one for the Nordics. And that is obviously not the most cost efficient way of doing it, so that we are moving away from. And there you would see improvements in the next couple of quarters.

[Thomas Ekman, executive]

Yes. And then on the -- your question also on the synergies and the extraction of that. You're very right, of course, I mean, cost you're controlling to a larger extent and you can control the revenues. However, if you look at revenue side the -- on the SMB -- so in SMB, we -- I mean, as we also saw on the slide there, we estimate around SEK 40 million to SEK 60 million in synergies coming from revenue side on SMB, which comes from the fact that we are now merging to -- or we have merged one organization. And with that, we can have the same operating portfolio. We can also have the same type of communication. We, obviously, work in the same platform.

So the one we are working there helps a lot in our revenue synergies, and it is especially in the Netherlands and Belgium side. There we also have seen that the SMB part -- and also one of the reasons why we also acquired Centralpoint was that the lack of SMB before our acquisition. And of course, we see the opportunity to build up that SMB position. Also being the reason for us exporting us to other countries is to performance and use the large LCP aspect for that. So that we believe that we come.

Then on LCP, obviously, here, we see that, I mean, if you look at the growth, a lot of the growth this quarter also comes from the Benelux. And we have a very good way of working there when it comes to tendering and when it comes to participating and winning contracts both for the public sector, but also for the large corporate sector.

And that we are also improving in the Nordics and using the same way of -- using the same way of delivering towards the customers. And also with the portfolio we have, now with a lot more LCP contracts that also creates more a similar thinking and way of working as with SMB where we have a lot of customers and become like a portfolio of customers. And the same for LCP, where we have a portfolio of customers now, which enables us to be more positive when it comes to these that we hunt for and therefore also finding better market.

So we believe we have a lot of things in place in order to deliver on those synergies. But, of course, of course, with that said also, we are very much on a tight time -- strict time on following our cost synergy side and by that also delivering the revenues.

[Operator]

The next question comes from Mikael Laseen from Carnegie Investment Bank.

[Mikael Laséen, analyst]

Just a couple of follow-ups and it's on the Centralpoint's cost. Just to be clear here, should we expect around SEK 270 million per quarter also going forward?

[Thomas Ekman, executive]

I think -- I mean, the normal level we have said is around SEK 250 million and we are slightly high right now. And that, of course, as Johan explained earlier, comes from cost cycles or inflation items as well. But typically, we should -- I mean, our target is to be around SEK 250 million. That is where we should aim to be on that.

[Mikael Laséen, analyst]

Okay. But the FX side and inflation should continue also in the next couple of quarters or?

[Johan Karlsson, executive]

Yes. But we are also taking action.

[Thomas Ekman, executive]

Yes.

[Mikael Laséen, analyst]

So we can use SEK 250 million in our models going forward in the coming quarters?

[Johan Karlsson, executive]

Yes, but that is for -- firmly.

[Thomas Ekman, executive]

Yes.

[Mikael Laséen, analyst]

Okay, excellent. And then maybe also just to follow-up on that one. How much roughly could be more fixed cost in the central functions area where you can scale and how much is variable?

[Johan Karlsson, executive]

Yes. I think it's variable to, let's say, in one way, you would say almost all of it is fixed. But then you mean fixed in relation to sales volume. It is not fixed towards our investments for the future. So let's say, IT, we are investing a lot in IT at the moment, moving to the one platform and moving to the cloud for the total ERP system.

That doesn't really change a lot if we sell more, but of course, it change a lot when we are doing this initiative. So it is variable in a different way than the, let's say, other types of costs. I don't know if that explains your question. But it's a different sentiment of these costs compared to the ones that you have in segment costs, for example.

[Mikael Laséen, analyst]

Yes. And when it comes to the double cost situation where you have too high cost, I guess, in the Benelux, is that following or the reduction following the comments you made about the synergies?

[Johan Karlsson, executive]

Yes. Yes. And it's very much linked to actually the integration of the entities in the Benelux.

[Mikael Laséen, analyst]

Okay. Can you say something about roughly how much that impacted this quarter?

[Johan Karlsson, executive]

In cost?

[Mikael Laséen, analyst]

Yes.

[Johan Karlsson, executive]

Yes. Maybe in the range of SEK 20 million, if you take the total effect.

[Mikael Laséen, analyst]

Okay. Good. And just a final one. Can you say something about the receivables side? How we should think about that going forward? And if you are planning to sell any of those? I think you made a comment about that last quarter.

[Johan Karlsson, executive]

Yes. We have that possibility at the moment. We have made that agreement together with our financing partners. And we will pursue that primarily to public customers in -- to start within the Nordics. I think the effect in the next 1 to 2 quarters could be in the range of SEK 400 million to SEK 500 million.

[Mikael Laséen, analyst]

Okay. And that will be in addition to the inventory reduction of SEK 400 million to SEK 500 million that you expect until the end of this year?

[Thomas Ekman, executive]

Yes.

[Johan Karlsson, executive]

Yes. They are independent from each other.

[Mikael Laséen, analyst]

Okay. And the plan, if I understand it correctly, just to be clear, is to sell those receivables now in the coming 2 quarters and then pay those back when you normalize the supply situation or the situation where you have higher inventory than normally in the Benelux situation side, right? Or how should we think about that?

[Johan Karlsson, executive]

I think you can think about it that way. But it is actually at the moment, beneficial in terms of financing costs to make this move. So at the moment, it's purely cost-based. So by moving -- by selling them, we will reduce financing costs. And as long as that's accretive to the drops in value, we can continue to do it, but we don't have to do it as such. We can do it from a cost perspective.

[Mikael Laséen, analyst]

But you will continue with the receivables program for the foreseeable future until the financing situation is changing?

[Johan Karlsson, executive]

That's possibility for sure. It's lower -- it's lower financing cost for that we roll -- yes it's that cost. So let's see. But it's only for that reason.

[Operator]

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

[Thomas Ekman, executive]

Good. Thank you very much. Thank you very much for participating in Q&A. And also reminding you also that we have also, as you see, send out an invite to Capital Markets update on the 20th of February, which you are all invited to join, of course. And we will come back with more information on that. But please make a note in your calendars for that date, 20th of February.

Good. And if anything more, just to reach out to us if any questions or comments, and we're happy to answer that. And otherwise, for that, I wish you all a good day. Thank you very much.

[Johan Karlsson, executive]

Thank you.