Dustin Group AB

STO:DUST

Earnings Call Transcript 2021-Q2

[Operator]

Hello, and welcome to the Dustin Group Audiocast with Teleconference Q2 2021. [Operator Instructions] And just to remind you, this conference call is being recorded. Today, I'm pleased to present CEO, Thomas Ekman. Please go ahead with your meeting.

[Thomas Ekman, President & CEO]

Thank you very much, operator, and good morning, and most welcome, everyone, both, of course, our existing and new and potential new shareholders to our second quarter presentation and conference call. Hope you all have had a good morning so far.Here on our side on the call is myself, Thomas Ekman; and Johan Karlsson, CFO; and also Fredrik Sätterström, Head of IR, in the room as well. So today, we present our second quarter results for our fiscal year 2021. And we are continuously navigating ourselves in our different markets through the current conditions. And I must say, I'm very proud of our achievements, and everyone at Dustin for their strong contribution in helping and supporting our customers and continuously enable our customers to say in the quarter. Especially also now when you see that the hard work also shows up in the numbers.We -- as you know, as you have seen, we have also announced an acquisition of Centralpoint in the Netherlands in the Benelux region today. And we will, of course, come back to that later on in this call. But let's first just go through the quarter in brief. And if we look at the quarter then, I should say that we have started -- we have strengthened our position in the markets, and we report an organic sales growth of just over 6% for the second quarter. Our productivity and strong position in the value chain have, of course, benefited our performance in the market, which has been impacted by component shortages and supply chain disruption due to the pandemic. This in combination, I should say, with a strong cost focus resulted in an adjusted EBITDA increasing more than 30%, and the EBITDA margin strengthening to 5.5%. And in addition, of course, our online core business performed strongly in pace with the higher share of online retail and great demand for mobility, cloud service security and driven by the underlying strong trend.And continuously, as I also mentioned in the previous quarter, I mean the 5 market trends that we build our strategy on: the online shift, the growth of mobility, cloud services, demand for predictable IT cost then focused on security and integrity and last but not least, of course, sustainability, they have all skyrocketed during the pandemic and making, of course, our long-term position even stronger. But with that said, there's an introduction, let's go over to Slide 2, Dustin at a glance. Most of you know us, but just briefly as a refresher. We are, by far, the biggest retailer in the Nordics and now also to in the Dutch, in the Benelux region with a large assortment, fast deliveries, great customer support and competitive pricing. Sweden is the biggest market in the quarter here with 40% of sales, and then the other Nordic countries, between 15% and 20%. And Netherlands, which we entered in -- a little more than 2 or 2.5 years ago, some 3 years ago, is currently 7% of sales but which, of course, be more now with Centralpoint.So that is shortly about Dustin. And moving on then to Slide #3 for the financial to see how we are improving and performing now during Q2. As said, we continue to strengthen our total market position. Net sales were SEK 3.6 billion, up with 4% versus last year. The organic growth of that was 6.4% of which SMB showed a positive 8.3%; LCP, 4.9%; and B2C, 5.5%. So overall, strong organic growth for all segments with an increased activity level among all our customers. Gross profit was SEK 591 million compared to last year's SEK 557 million. And that gives us a gross margin of 16.1%, up from last year's 15.7%. And I said earlier, our adjusted EBITA increased with 30% and came in at SEK 201 million versus last year of SEK 154 million. And that then gives us the adjusted EBITA margin of 5.5% for the quarter versus last year, last year was 4.3%. So overall, strong performance and record earnings, which is, of course, really good. I mean the margin improved by, of course, good performance, but also on the structural changes that we are doing, combined with continued good cost control within all segments, both the SMB and LCP showed good progress in the margin uptake. And then consequently, EBIT was up to SEK 177 million compared to last year's SEK 133 million. Cash flow, operating activities was SEK 218 million compared to last year's SEK 155 million. And EPS, earnings per share, also up to SEK 1.38 per share versus last year SEK 1.04. And our leverage is in the very lower part of our target at 2.0 versus last year's 3.1. And as you know, our leverage is between 2 and 3. And apart from an intense quarter from an operational perspective, we have, as previously announced, we have closed our business center in Stockholm due to the changed customer behaviors. And we have launched Easy Workplace, which is a true online service aimed towards smaller SMBs. And of course, as announced today, we have acquired Centralpoint in the Netherlands, giving us a leading position, and we become an IT powerhouse not only then in the Nordics, but also in the Benelux. But we will come back to that as I said before.But let's just briefly go through the segments. Johan, can you take us through the different segments?

[Johan Karlsson, CFO & Executive VP of Business Support]

Yes. Then let's move to Slide 4 and SMB segment in some more detail. Sales for the quarter in SMB was SEK 1.615 billion, which is an increase of 6.9% over last year, representing an organic growth of 8.3%. Sales growth continues to improve quarter-over-quarter despite challenges in the global supply chain. During the quarter, we saw good sales development in all the hardware categories from all customer groups in the segment. Recurring sales of services is slowly coming back after last year's negative effect of the pandemic and grew by 6.3% in the quarter to an annual sales rate of SEK 838 million.We saw positive sales numbers in all countries with Norway and the Netherlands performing particularly well. The project-related installation and services was still suffering from people not being in the office. However, situation is getting better, and we saw a slight positive trend quarter-over-quarter. Segment margin for the quarter was 10.6% compared to last year's 9.3%. The main reason for the good margin was strong sales of private label products and high pricing levels due -- in the market due to shortages and the effects from our cost efficiency initiatives. This was somewhat offset by lower sales of high-margin projects related to services and advanced hardware. The share of software and services was 21.6%, down from 22.8% last year, mainly due to the strong hardware sales this year. In total, segment result ended at SEK 170 million compared to SEK 140 million last year or an increase by 21.6%. Segment margin at 10.6% was 1.3 percentage points higher than last year. All in all, a very strong quarter for SMB, both in regards to sales and margin.We then move to Slide 5 and the LCP segment. We can see that sales in LCP was SEK 1.894 billion for the quarter. This was an increase by 1.7%, of which 4.9% was organic. During the quarter, we saw continued good sales to the public customers with strong performance in Norway and Denmark. Sales to the larger corporates declined slightly as they were affected negatively by both component shortage and delivery issues. This effect was stronger for the larger corporates than it was for public customers. Segment margin ended at 7.2% compared to last year's 6.3%. The increase over last year is mainly explained by generally improved margins in some of the larger contracts, scale effects from higher volumes and effects from last year's cost efficiency activities. Segment results improved from last year's SEK 118 million to SEK 136 million or by 15.4%, continuing the strong performance we have seen in the LCP segment during the last 5 quarters.Moving on to Slide 6 and the B2C segment. B2C had a strong quarter from a profit perspective. Sales was up from SEK 169 million last year to SEK 175 million this year, representing a growth of 3.3%, of which 5.5% was organic. The main reason for the sales increase was a strong underlying demand for home office equipment and gaming. Segment margin was up from 5.4% last year to a record high 8.6% this year. Good product mix and high price levels due to the shortage of supply in the market contributed to the good margins. Leaving the B2C and moving on to Slide 7 and net working capital. The net working capital was negative SEK 549 million compared to last year, SEK 154 million negative last year. We continued to deliver low working capital numbers as we used our strength in the value chain to get good terms with customers and suppliers. Further to that, we have utilized the opportunity made available by the authorities in our markets to delay tax payments of SEK 135 million. All in all, this has made it possible for us to maintain the low level of working capital in Q2. If we look at the details, we can see that inventory increased in the quarter to SEK 575 million compared to SEK 495 million last year. The main reason for the increase was higher purchase volume due to our -- as an activity to mitigate the risk of shortages of components. Also, the higher sales of private label contributed to somewhat higher inventory levels. Accounts receivables was up with SEK 88 million as a result of higher business volumes. And if we look at accounts payable, we increased SEK 236 million, mainly as a result of the actions taken last year during the pandemic. In total, we continue to see strong performance in the area of working capital and remain at the level of Q1. Leverage at the end of Q2, as Thomas mentioned before, was 2.0, where our target is to be in the range of 2 to 3. The main reason for the decrease compared to Q1 is a stronger business result.Moving on to Slide 8 and cash flow and investments. So cash flow for the quarter was negative SEK 32 million compared to last year's negative SEK 9 million. Looking at the parts of the cash flow, we see that cash flow from operating activities before change in working capital was SEK 207 million compared to last year's SEK 159 million. A change in net working capital slightly positive, plus 10 this year compared to negative 4 last year. And cash flow from investing activities was negative SEK 18 million compared to negative SEK 123 million last year. And last year's numbers was affected by earn-out payments in that period. Capital from the financing activities was negative SEK 231 million compared to last year's negative SEK 42 million, where the main reason was that we took up a new financing last year of SEK 256 million in the period. Total investments for the period amounted to SEK 43 million compared to last year's SEK 216 million. CapEx related to IT development amounted to SEK 9 million, which was the same as last year. And investments in tangible and intangible assets decreased from SEK 191 million last year to SEK 23 million this year, as last year's numbers was affected by prolonged rental agreements. Investments in assets related to services or service delivery was SEK 5 million compared to SEK 11 million last year. All in all, SEK 18 million of the SEK 43 million in CapEx was affecting cash flow. The others were changes in lease or rent contracts.With that, moving back to Thomas.

[Thomas Ekman, President & CEO]

Good. Thank you very much, Johan. And continuing then on over to Slide #9, and our updated sustainability targets and commitments. And just to highlight a little bit on our work here. In the previous quarter, I explained more in detail about our zero-carbon emission target as well as our ambition to increasing a fully circular offering by 2030. Today, I also want to highlight our work within our third target there 100 initiatives for social equality. And again, all these 3 commitments, they are designed to redefine the impact of our business and how we behave and how we act. And it will, of course, naturally involve innovations and solutions with all those around us throughout our value chain. And as always, we believe that hard work will pay off, and these commitments really keeps not only us, of course, but also our whole sector moving ahead. If we look at the 100 initiative and 100 actions and to set those, we start off this year with setting 10 of those. And let me just briefly go through some examples of that. As you can see on the slide, we will work to close the generic pay gap in all our markets. And here, we have reached a good way in Sweden, but we also want to emphasize that work, of course, so we close that in all markets. Health and safety training has been established for all our private labor suppliers. We have introduced a diversity inclusion training internally. And we have also introduced sort of a stamp, which is factory audited by -- at Dustin as a guarantee for fair working conditions in our factories. And with this, of course, also with the diversity and inclusion work, I should also mention that we form partnerships within that work with different partners that support this and can drive this work forward together with us.We have also trained all our managers in a competence-based recruiting, how that has worked and how that is done. And we have also introduced -- or working on introducing competitive parental leave conditions for all employees in all markets. And we have -- when it comes to recruitment also activated an anonymized recruitment in our recruitment systems. And I think these are just very practical and pragmatic and clear examples of how we work with this. There are lots and lots of actions that needs to be taken. But all in all, to sort of improve the social equality for all around us and all the things that we can have an effect on. Through this, of course, we also continue to ensure that our suppliers adopt our supplier protocol that -- and we're right now at 99.8%, aiming, of course, for 100% on that. In this work, we also do a risk assessment, I should say, to evaluate our supply stability to long-term compliance with our course here. So all in all, these are strong commitments, and they require, of course, hard work, all 3 of them, all 3 of the commitments, but that is also what is needed.So before moving on then telling you more about our acquisition announced this morning. Let me just sum up our second quarter and for our fiscal year 2021 on Slide #10. Net sales grew with 4% to SEK 3.683 million -- SEK 3.6 billion, where organic growth for the group was 6.4% with SMB at 8.2% (sic) [ 8.3% ] and LCP 4.9% and B2C at 5.5%. Gross margin, 16.1% versus 15.7%, up due to positive product mix and our dynamic pricing model, working together with higher volumes, of course, and strong sale of private label products. Adjusted EBITA came in at record high, SEK 201 million, giving us an EBITA margin at 5.5%, which is, as you know, spot on, on our financial targets and an increase from last year's 4.3%. And the initiatives and actions we have taken on the cost side, both on the strategic ones and the short-term ones has, of course, given effect as well as the strong performance as we also indulged during the quarter. EBIT at SEK 177 million, and EPS then coming in at SEK 1.38 per share. And on balance sheet, operating cash flow at SEK 218 million, and the leverage at the lower end of our range at 2.0 to EBITDA. And operation, of course, worth mentioning we closed our business center, as we announced earlier, in Stockholm due to changed customer behavior, and we have launched our Easy Workplace, as I mentioned before.So as I summarize the quarter, the corona pandemic and its effect are still very present, of course. It is a challenge, both in our markets and in society as a whole, and it continues to be short-term disturbances in supply chain. However, we have also demonstrated, I think, great strength during this quarter with the speed at which all colleagues at Dustin have adjusted to meet the needs of our customers, both the short-term and through the long term behavioral change that is brought on to all of us by the increasing pace of digitalization. So with the good organic growth and record earnings in Q2, we see that we are correctly positioned with the strong and unique digital relationship with hundreds of thousands of customers and even more optimized e-commerce platform as well as the ongoing buildup of our standardized service offerings, where Easy Workplace is one example of that, to further increase our relevance and the benefit for our customers, of course. And that, combined with our strong financial position means that we are well equipped to face the opportunities and challenges that comes to us through the climate -- business climate and our customers.And building on that, we would, of course, like to take the opportunity now, while we're on the call to present our acquisition of Centralpoint. And I suggest that we take any questions you might have on the quarterly result as well as our expansion in Benelux after that. So let's proceed over to the acquisition and move over then to Slide 12. I mean, with this, Dustin, we take a leading position in the Benelux region by acquiring Centralpoint. We've become the market leader in the region and, of course, creating a European IT powerhouse. We expand our whole market. So it's not only Nordics, it's also Benelux now, and that is, of course, paving the way also for continued expansion. It is a very accretive effect on this. If you look at EPS, it's more than 50%. If you currently compare it on a pro forma basis, we see that we -- given the fact that it is a very strategic fit in this. And we know the real, we know the business, we know how it works. We see, of course, significant sales and efficiency synergies in this. And we also see that we can -- due to this, we do not change our financial targets.It's then moving on to Slide #13 to go through a little bit about the strategic rationale and key facts on the business. As said, this is an opportunity for us to establish Dustin as the market leader across all customer segments in the Benelux region through combining existing operations that we have in the Dutch market with the Centralpoint. And I also said it is a strategic fit with attractive value creation opportunities for us. It fits very well to our current business. And we get also critical mass in the market and across all segments to enhance the local service offering and, of course, introduce additional value-added service in the market. As said also, we see significant sales and efficiency synergies in the areas worth mentioning here is, of course, procurement. I mean, we can -- we will also introduce private label -- our private label products in the market. And we see also, of course, synergies within IT and the technical platform. And then not to say the least, we, of course, have knowledge sharing and SMB sales in this that we can leverage on even further. And it will also be a natural platform for us to -- if we -- when we continue expanding in Europe, both organically, but of course, also with bolt-on acquisitions.Centralpoint then, some short facts on that, that it is an IT supplier or a value-added reseller with focus on hardware and software to the LCP as well as the SMB segment in the Benelux region, Netherlands and Belgium. It's approximately 600 employees, and it's a presence in 3 locations in the Netherlands and Belgium. Revenues amounted approximately to SEK 7 billion, with an EBITA of approximately SEK 280 million in 2020. And it is a market leader today in the Netherlands, with a market share of around 5% in -- of the total addressable market. What is really good here also, of course, is that they are -- have strong tender capabilities, and that result in high revenue visibility, which is good. And management will -- current management will also stay in their current positions. If we move on to Slide 14 and look at the financial impact and expected sales and efficiency synergies. We are -- the combined revenue of the companies will be approximately SEK 20.4 billion. And then combined revenue, if you look back 2018 to 2020, would be approximately 7%. The combined EBITA will be approximately SEK 800 million. And with the combined EBITA margin, if you look back at 2018, 2020, of about 4.3%. But the EPS accretive effect of more than 50% on a pro forma basis, including the cost synergies. And we see expected sales and efficiencies synergies, where we expect to find those in areas as procurement, increased labor penetration, the IT and technical platform as said and, of course, knowledge sharing between both LCP and SMB and the online operations. And we see that it is expected to generate approximately SEK 150 million of sales and efficiency synergies fully implemented in 2023. And we expect to invest approximately SEK 50 million to accelerate the extraction of those synergies. Centralpoint has an omnichannel approach, very similar to Dustin in the Nordic. It's a combination of consultative sales or relation sales, outbound sales and, of course, online sales. And it also has -- Centralpoint also has the same hybrid supply chain model as we have in the Nordics, where we work directly with vendors, but we also work a lot through distributors. So it's a strong company that fits us very well. And again, just to brief, so you get the full picture of the company. It's a leading supplier in the Benelux, hardware, software as well as services. It was formed through a combination of Infotheek, Scholten Awater and Centralpoint in 2018, but the company was originally founded in 2001. It's based in Nijmegen in Netherlands where they have the headquarter and the sales office for Netherlands, and it's also in Wijchen in Netherlands, where warehouse and distribution center and in Aarschot in Belgium, where the Belgium sales office are situated. They have very efficient and central logistic operations to serve the Netherlands and Belgium. And as said, a total of 600 employees with around 36,000 customers across the Benelux. And financial asset, it's SEK 7 billion and around SEK 280 million in EBITA for 2020. So with that, Johan, you can proceed on Slide 16 to talk more about the other.

[Johan Karlsson, CFO & Executive VP of Business Support]

Yes. Let's go to look at a little bit on the -- what Thomas was talking about in value creation going forward coming from the acquisitions together with the Dustin organization. So with these 4 building blocks, we think we can explain how the value creation will be generated in the coming years.And you will start on the left-hand side with the business plan of Centralpoint, which is quite a growth inspired business plan, and it builds on, I would say, 3 fundamental pillars in order to grow. These would be to expand in the Belgium market to become as strong in Belgium as they are currently in the Netherlands. It is to grow expand the offering also to software and grow software business in combination with hardware in -- mainly in the Netherlands market. And then to add infrastructure offerings and sales on top of the basic hardware sales that is currently done mainly in the Netherlands. So that forms a part of the local Centralpoint business plan. Then on top of that, obviously, we -- as Thomas was saying, we have identified SEK 150 million result synergies coming from both sales and efficiency initiatives.Moving to the efficiency initiatives. I would say that purchasing power and what we can do with the purchasing power is one of the strongest part of this plan. It's clear that, as you know, from before, we are one of the leading IT partners in the Nordic region, where we can use our power of purchasing to a great extent. Now we will have the same situation in the Netherlands, but also, we can use the fact that we are now a true multiregional player, which we believe will give us an even better position with the vendors and distributors in the European market. So that will clearly contribute to the synergies going forward. That, in combination with launching our own private label assortment to a greater extent in the Netherlands, will add to profit. And then moving on to, let's say, the competency and capability transfer. And you can, to some extent, also take them with you from the synergies because one of the competencies that we can clearly use is our Nordic excellence in online SMB sales. This is an area where I think we can generate a lot of sales synergies coming into the Benelux market. And we have a very strong plan and targets in this area, but also not to forget the excellence that Centralpoint organization has on tender business. And I think we can, in many cases, we will be able to leverage on that knowledge also in the Nordic context.And last, but not least, we will, of course, continue to look for bolt-on acquisitions as we have done in the Nordics. We are now in a better -- even better position in the Benelux market to continue that journey. So all in all, we believe that this makes it the prospects of continuing with a good speed of both sales and profit growth in the Benelux region and also for us.We then move to Slide 17, we basically say that this acquisition will not affect our financial targets as they are stated today. As you know, the growth target is 8% organic growth over a business cycle. As you can see on the Slide 17, if anything, we believe that the acquisition can support that growth target. Moving to margin, I think we discussed a bit before that the -- our firm belief is that the margin potential in the Benelux region is the same as in the Nordics. Now as the customer split in the Benelux region, including Centralpoint is slightly more skewed towards the LCP side. We are currently at slightly lower level of margin in the Benelux compared to the Nordic, but that is also one of the possibilities for us to -- with a better scale, support our SMB expansion in the Benelux, and that by itself will improve margins going forward. And then if we look at capital structure, obviously, after the acquisition, you heard that -- from Thomas that in the end of the Q2, we were at a leverage of 2.0. And after the acquisition, we will end up at 4.5. But with the proposed rights issues, we will be back on 3.3. So we believe that we will deleverage with the cash flow generated by the business down to the area of 2 to 3 within a reasonable future. So no change of the financial targets.Now moving to Slide 18. If we look at the transaction in a summary. The total consideration was EUR 425 million on a cash and debt-free basis. And we bought Centralpoint from Infotheek Holding B.V. The acquisition multiple is 15 excluding synergies and 10 including synergies. And as part of the consideration, we have issued about 8.2 million shares to the former owners. And obviously, the acquisition is subject to competition clearance by the Dutch Competition Authorities. In terms of financing, we have a bridge financing from Swedbank to cover the initial period. And then the -- we will propose a rights issue of SEK 1.2 billion to reduce leverage in the first instance. And that we will have some in EGM where -- which will give authorization to the Board of the issuing time and the rights issue that will be held on the 18th of May. And at the moment, the main shareholders are supporting that decision. And I think with that, back to Thomas.

[Thomas Ekman, President & CEO]

Yes. Thank you, Johan. And let's just to summarize it on Slide 19. And to summarize the acquisition, I mean, this will create a market -- we will become the market leader in the Benelux region. And of course, as said, paving the way for continued expansion. The combined LTM revenue of around SEK 20 billion and an EBITA of around SEK 800 million. EPS accretive effect of more than 50% for the last financial year on a pro forma basis. And we see, of course, as you want as well that with the strategic fit, we see significant sales and efficiency synergies in this. And we have -- we do not change our financial targets due to this acquisition. So very exciting, of course, and it's a strong quarter, Q2 quarter, shows our position and our strength in the value chain and combining this with -- combining that with this acquisition, of course, makes and puts the foundation for us to create the IT powerhouse that we are building here. So with that, Johan, I think we are ready for questions, any questions you might have. So operator, over to questions.

[Operator]

[Operator Instructions] Our first question comes from the line of Fredrik Stenkil from Nordea.

[Fredrik Stenkil, Research Analyst]

I have a question on the synergy target of SEK 150 million. I was wondering, you did talk about it a bit, but if you could be a bit more precise of how much are sales synergies? And how much are cost synergies out of that? And I'll wait with my second question.

[Johan Karlsson, CFO & Executive VP of Business Support]

I think the rough numbers, you can design them in -- split them into 50-50. So our sales would be 75% and costs would be 75% or efficiency will be 75%. Clearly, most important are purchasing and our ability to exchange, let's say, accessories with our own private label accessories. Then these are also the ones that we have greatest visibility of, I would say, to start with. But then sales synergies are clear in the sense that we get scale now in the Benelux region. So we can -- from that scale, we can add our online competence and SMB competence also to that region. I think that is a very important both short-term but also long-term growth opportunity for us.

[Fredrik Stenkil, Research Analyst]

Okay. Makes sense. And then my second question, you're right out that the organic growth CAGR has been 12%. And that seems like quite an attractive number to me. What would you say have been kind of the main driving forces for them to be able to have that sort of growth because I assume the market has not been growing at that pace?

[Johan Karlsson, CFO & Executive VP of Business Support]

I think they have had -- they have a very strong competence in how to handle large RSPs, let's say, both in public and corporate tenders. And that's -- that is, I think, one of their strongest part. That's in combination with really good relationship with the local vendors to get good pricing. That has been a success factor, I think, from the Board.

[Fredrik Stenkil, Research Analyst]

Okay. Excellent. And if I can just add 1 last. If you want to disclose if it was a bidding process or if it was an exclusive negotiation?

[Thomas Ekman, President & CEO]

Yes. This was a bidding process. It was.

[Operator]

[Operator Instructions] We have another question from the line of Ramil Koria from SEB.

[Ramil Koria, Analyst]

A few questions from my side as well. Just starting off on the financial targets. I couldn't hope to notice the fact that you're not mentioning the payout ratio. How are you sort of given the balance constraints now also post rights issue are you sort of increasing around potential dividends?

[Thomas Ekman, President & CEO]

I think overall, that's, of course, for the Board to decide later on during the call. But of course, they will consider how the overall balance sheet looks at the time for the possible dividend. So that will be for the Board to take a decision on later on.

[Ramil Koria, Analyst]

That's clear. And the margin target, which you outlined you were aiming at to reach in the next fiscal year, is that sort of still valid as per your CMD communication was it 18 months ago? Or does that change now?

[Johan Karlsson, CFO & Executive VP of Business Support]

I think it's still valid, and we are now working on -- it will -- the possibility to reach it will be, let's say, affected by how fast we can implement the synergies. And that plan we are doing in more fine-tuning it now when the deal is actually designed. So we will have to come back on exactly that. But there is no change in our ambition to reach that -- the financial target in margin for sales.

[Ramil Koria, Analyst]

Very clear. Great. And perhaps the 2 final questions in 1 go. So first off, if you could shed some light relating to Fredrik's question earlier about synergies and the cadence as to when they will be? You're saying so to synergies will be visible in '23-'24, but you're also taking a one-off write-off is the closing of deal, shouldn't we expect some cost synergies to be reaped sort of in the initial phases here?

[Johan Karlsson, CFO & Executive VP of Business Support]

I think you will see efficiency synergies coming through in '21-'22, for sure. And then, of course, on the sales side, it's more of a ramp-up situation on sales. It will start pretty fast, but that is a much more, how do you say, we need to build that business in a more long-term way. So it's not a one-off thing that you end up with them. But of course, on procurement, for example, you can move faster. So I think there will be, let's put it that way, it's not 1/3 every year added. It's probably more in the beginning, but it will take some time to get the full synergies out.

[Ramil Koria, Analyst]

Okay. And perhaps on the gross margin side, could you shed some light as to how the gross margin structure effect in the company?

[Johan Karlsson, CFO & Executive VP of Business Support]

Gross margin is pretty similar to what you can see in our LCP business. Actually, the business down there is pretty close to that.

[Ramil Koria, Analyst]

Okay. And then a final one, if I may, guys?

[Johan Karlsson, CFO & Executive VP of Business Support]

Yes.

[Ramil Koria, Analyst]

Yes. And sort of on a more high-level basis, I think you earlier mentioned that this is sort of -- gives you the potential to continue to expand in Europe, perhaps I'm mistaken. But how are you reasoning in terms of sort of accumulating market shares on your existing markets versus continuing to expand geographically, you have in the high single-digit area and market shares in both the Nordics and in the Netherlands now and some presence in Belgium as well. How are you reasoning for the future story?

[Thomas Ekman, President & CEO]

I mean what we see, of course, I mean, as you understand, we have a lot of things to do in the Nordics and the Benelux region right now, but we also see the -- what we have -- what is clearly visible is that our business model is very, what you call it, exportable. It's possible to export our business model, and that's, of course, for that, you need a platform. So what we're seeing is that we have now 2 strong platforms with the -- or 1 combined platform we did Benelux Nordic region, which gives us those opportunities. However, now, as I said, also, we have -- we still -- still our -- want to prove ourselves in -- continue for ourselves in the Nordics and continue to ourselves, of course, in the Benelux region. But it's very possible for us to do that. So -- and we see that our business model works in, of course, other European areas as well. But now we see with entering into Belgium as well, we see that there is also room for further expansion also there.

[Operator]

And as there are no further questions, I will hand it back for any closing remarks.

[Thomas Ekman, President & CEO]

Okay. Very good. Thank you very much, operator, and thank you very much for everyone listening in. And please just revert if any questions to myself, Johan or Fredrik, and we talk and see each other very soon again. Thank you very much for the day. Thank you.

[Operator]

This concludes the conference call. Thank you all for attending. You may now disconnect your lines.