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Ladies and gentlemen, welcome to the Momentum Group AB Q1 report for 2021. Today, I am pleased to present Ulf Lilius, Niklas Enmark and Clein Ullenvik. [Operator Instructions] I will now hand over to the speakers. Please begin.
Thank you. You can turn to Slide 2. Very welcome to our web meeting presenting our interim report with my colleagues, Niklas, Executive Vice President; and Clein, Business Area Manager for Alligo. If we go to Slide 4, I'll give you some highlights from the report. The pandemic has had an effect on the group's operations also in the first quarter, even though the sales were recovered somewhat during March. The integration between TOOLS and Swedol continues according to plan, with store and purchasing coordination as well as starting the implementation of own brands in the business area. Actions have been taken to mitigate the negative effects of lower demand in both business areas, where business area Components & Service managed to maintain a stable profit development and completed 4 acquisitions with a total turnover of SEK 285 million in February. The pandemic will likely continue to affect the group in the coming months as well, and we carefully follow the development and take actions accordingly, even though the group's financial position remains very strong. If we go to Slide 5, Clein will give you some remarks about Alligo.
Okay, everybody. Welcome to Alligo, the first time I say that in this forum. No more Tools, Consumables, Workwear & Protective Equipment. So a little bit shorter and a little bit more powerful. Revenues for the first quarter is more or less in line with last year, a little bit below just gross, a little bit 1% up, if you adjust for workdays and currencies. And of course, we do, varying degree, has been affected by COVID-19. But as we said before, we have a huge homework to do ourselves also. We are not at all pleased with our performance in all parts of our organization. EBITA, more or less in line with last year, a little bit less, but EBITA margin 1/10 down compared to last year, some effects on purchasing prices and also effects of lack of containers and things like that. In fact, we even had the containers on Ever Given, which was stuck in Suez Canal, which is more on the market. The integration of TOOLS and Swedol continues, just as we planned, and the launch of the name was one very important cornerstone. We've launched common product assortments. We launched the very important strategic cornerstones with mission, vision, strategic direction and core values. And the name is Alligo is where we all belong. That's what we're building our core values based on. We've changed ERP system in Finland on time, below budget and we will say without any disservices in the market. So the customers shouldn't have noticed much, even if it was, of course, a tough period for our colleagues in Finland. Yes, the co-located stores are now 11 and some 20 more to follow. So Slide #6, and back to you.
Thank you. If we look at Components & Services, the sales in this area decreased by 3% during the first quarter and was, of course, affected by corona as well as a weak start in January, but demand from industrial customers recovered gradually and was very strong during March. The acquired business contributed with SEK 45 million in turnover. And all in all, sales increased by 7%. Measures to improve efficiency and higher margins continue to contribute to a stable profit development despite lower sales organically. Focus has also been on profitable growth, both organic and acquired, and the acquisition of [indiscernible] Swedol service operations in Sweden was followed by 4 corporate acquisitions with a total turnover SEK 285 million during the quarter. If we turn to Slide 7, we'll give you some group in summary. So as both Clein and I mentioned, the general demand in the quarter has been affected by customers' restraints and caution in all our main markets, but of course, with some variation between the different customer segments and countries. In total for the group, the net sales decreased by approximately 2% during the quarter for comparable units, including Swedol. As mentioned, measures have been taken for increased efficiency and increased margin have resulted in stable earnings trends for the Components & Services business area, while the Alligo business area works with initiatives to increase sales and efficiency in order to improve the profit development. In total, for the quarter, EBITA decreased by 7% for the group, while the EBITA margin remained almost the same as last year. One of our main focus area is to continue to decrease funds tied up in working capital. And I'm very satisfied that the group cash flow from operating activities remained very strong during the quarter. And the Board of Directors proposes a dividend of SEK 1.50 per share for the shortened financial year, which will be decided on the Annual General Meeting in May. This is a promised return for the company's dividend policy at the last year's uncertainties for future development of the group, which resulted in no dividend being paid in 2020. So if we turn to Slide 8, Niklas will give you some hints about our nice cash flow.
Thank you, Ulf. My name is Niklas Enmark. I'm CFO of Momentum Group. And as we have mentioned before, this last quarter, we have taken a very vigilant approach relating to our cash flow and liquidity situation during the pandemic, making sure that the decrease in revenues has been met with the corresponding decrease in working capital and that's contributing to our cash flows. It's very positive to see that we continue also into this first quarter showing a stronger cash flow, not for the first time since the outbreak or the pandemic is showing a positive organic growth in revenue. This last quarter, cash flow from operations before working capital increased to SEK 180 million. Adding to this a positive contribution from working capital was SEK 35 million, which means that we generated SEK 215 million of cash flow from operations in this quarter. The corresponding number for the last 12 months, basically since the acquisition of Swedol and the start of the pandemic, amounts to SEK 1.3 billion, which then corresponds to a cash conversion of approximately 106%. Looking at working capital in this last quarter, we see a buildup of accounts payables as well as inventory. This is normally a sign of increased customer demand, which then reflects in higher purchasing and accounts payable buildup. This is also in line with the improved customer sentiment at the end of the first quarter from some cash relief goods that we see. IFRS 16 effects impacted the operating cash flow by some SEK 104 million positive for the quarter and SEK 400 million positive for the rolling 12-month period, which is then, of course, reduced by the same amount in the cash flow from financing activities. As I mentioned, also before our level of CapEx is higher today than before the Swedol acquisition. On the CapEx during the quarter, the largest part has been attributed to the finalization of the Alligo logistics facility and also for adaptation this quarter also unpaid investments for the implementation of the common ERP in -- for Alligo. Turning to Slide 9. I will highlight some performance measures in summary for the 12-month period. As of Q1 of this year then, Swedol has been included for the whole period. But we show some of these numbers for the historical periods also including the Swedol acquisition for comparability reasons. Our top line revenue stood at approximately SEK 9.2 billion for the last 12 months. This means that since the inception of the pandemic basically in March of last year, we have lost approximately SEK 700 million in turnover, also taking into consideration additional acquisitions that we have made. And this corresponds to approximately 7% of revenue. Despite this, our EBITA margins have been kept on a pretty stable level, basically on the same as pre-pandemic levels. And this in turn is due to hard work maintaining and also increasing our gross margins and new cost control. Also, we have been able to generate good cash flow from operations, as we have stated, which here also can be seen in terms of an increased return on working capital. Our working capital turnover has increased to close to 5x. And I'm especially pleased to see that we have been able to keep stable import for the number despite the decrease in top line and also now have a positive net between our days of payables and days of sales outstanding. Our financial position is strong. Operational net loan liability amounted to SEK 1.3 billion at the end of the quarter in relation to EBITA and adjusted core accounting principles, our net debt-to-EBITDA to stood at 1.9 at the end of the period. Cash and cash equivalents, including unutilized profit credit facilities totaled SEK 1.4 billion at the end of the period. Related to our other external financial objective, our return on equity was 11%. This measure is, of course, affected by the restructuring reserve specified of last year. And the equity assets ratio maintained on a very strong level at 39% at the end of the period. Handing back to you, Ulf.
Thank you, Niklas. If we turn to Slide 11, and you have seen this before. Our 3 main focus here is still the same. Of course, the middle one, number two, is continue to develop the group companies that we have. And of course, also acquisition-driven growth strategy within the business area Components & Services and then also the integration and merger of TOOLS and Swedol in the business area, Alligo. If we turn to Slide 12, Clein will give you some remarks about that.
Yes. As I said, we launched the name Alligo, our common core values, that is more than it sounds. Because we are so convinced that with a good set of core values, especially when we are merging 2 large organizations, it's extremely important for us. So based on 3 words: commitment, collaboration and competence, we will now start the rework with the core values for the group. ERP system in Finland went live, and that is important for so many different reasons. It's especially important that it went well. Thinking about that, we will now in 2022 do the same in Norway and in Sweden. So failure in Finland would make us noticed in Sweden, but it went well in Finland. So now we are a little bit happier. Store integration continues, customer offers, more services is an increasing demand from our customers, which is fun to see that they have higher demand for us. So smart services is increasing. I can skip supplier and product range and go directly to our proprietary brands, which are being launched in the TOOLS business, especially Gesto shoes will be first out, and we see some good effects of that being rolled out. The regional warehouses in Norway, 8, 9, 10 of them have been closed. So we have much more efficient logistics structure in Norway. And we have closed the Grolls former warehouse, the acquisition, stood [indiscernible] made in 2016, the central warehouse in Hisings Backa in Gothenburg, that is now closed, and it's relocated to the extended Ă–rebro central warehouse, and that has also gone well. So Page 13, back to you.
Thank you. As mentioned before, the main focus of the business area is to grow through acquisitions, and we're looking for companies working with industrial components as well as industrial services. Acquisition targets should be able to achieve a long-term sustainable profit and growth. So if we turn to Slide 14, this is how we look now in the business area. Based on this strategic process, we have so far been able to add 5 interesting companies, with niche competencies and offerings in industrial services as well as industrial components and with the total turnover of around SEK 300 million. After the latest acquisition, the business area now had a substantial turnover in both our focus areas, industry components with some SEK 1.1 billion in annual revenue and industrial services with some SEK 400 million in annual revenue. Our company's competencies and offerings will strengthen our market positions going forward, both individually and whenever it [ bounces ], where customers are not combined. The acquisition pipeline continues to look interesting for further development. And hopefully, we will be able to travel in the Nordics to meet companies after the summer months. So if we turn to Slide 15, our last page today, you have seen our 3 focus areas. And now the Board of Directors have given us a fourth focus area. So in an effort to provide the 2 business areas with better prerequisites to achieve their goals in an optimal manner and thereby increase shareholder value, our group management has been assigned task of investigating the possibility of splitting the group into 2 separate listed companies as well as the conditions of such a split. And further information of the result of the investigation will be presented by the Board during the financial year.So if we move on to Page 16, we can take some Q&As.
[Operator Instructions] Our first question comes from the line of Karl-Johan from DNB Markets.
Yes. Karl-Johan Bonnevier from DNB Markets. Just to -- sort of where you finished off with the split-up of the group, when you now have the mandate from the Board, is there any areas where you are worried that you would come up with a reason for not splitting the group? Is there any areas where you would highlight extra concerns, so to say, for not going with the split?
Not really due to the former split, which we did with Bergman & Beving. We kind of did the setup that we would be able to do it again. So of course, we have some work within IT and others that we have to separate, but not that much. So I don't see any obstacles for not doing it.
And when you compare it to the split-up of Bergman & Beving and Momentum, would you consider this being an easier process to conduct than that one?
The listing process is kind of the same. Of course, the prerequisites for being a listed company increased and being tougher every year. But the separation that we did last time was very intense. I think we separated somewhat 300 IT systems, and we splitted the logistics with 220 trucks, moving parts. So I think the separation process is much easier than last time.
Sounds promising, sounds promising. Clein, when we look at Alligo, your -- the new name for the company, how did you come up with that? Just interesting to note.
Yes. No, we had a little contest in the management team and the winner should be awarded a medium-priced bottle of wine, and one [ Gustaf ] came up with the name, which I like it because it includes old and also go all listing, including we are merging to, in a way, different organizations, and we need speed and positive [indiscernible] but in [indiscernible] it should mean something like unite, which is also a good meaning. So that's the background of it.
Excellent. So is that strong enough to stand on their own feet and continue to be developed?
Sorry. We lost you there for a couple of seconds.
No. My microphone is not the best at the moment. If you look at the concept brands, the 4 brands you are proposing to continue to develop, do you feel that all of them are strong enough to put the energy into rather than maybe putting it into -- yes, to say a fewer of them?
It's a very good question. And of course, they have different strengths, and we monitor that closely, and we have customer surveys continuously. And depending on country, some are stronger, some are weaker. And on that note, weak '21, now we will close the brand Swedol in Norway was such a small business and TOOLS in Norway was a stronger brand. So in Norway, it will be Univern and TOOLS and Swedol will be phased out. But for all the other countries, those are the brands that we use there. But who knows in the future how we will mix our portfolio. But from Norway, there will be a change. So that's a good question.
Excellent. And good news on that ERP change over in Finland went so well for you. When you look ahead to do the same thing now in Sweden and Norway, would you say that the relative size of the operations mix, the challenged figure in Sweden and Norway or you have a good lesson from Finland that you can bring back to Sweden and Norway when you're trying to implement it?
Both, of course. I mean, Finland was our smallest country and the biggest need of a new ERP system. So in that sense, we could learn a lot, and we gave everybody involved in the project some self-confidence. So now when we take on the much larger countries, Sweden and Norway, of course, we start with some optimism and self-confidence, which is very, very important. But of course, the complexity is bigger in Sweden and Norway, absolutely.
And I saw you just announced an acquisition in Finland in the reseller segment. How quickly would you now try to integrate that into the structure that you have in Finland with the new ERP system? Is this something you can do quickly? Or like that seems a little bit [indiscernible] that it's done in due course?
It's a good question as well. It depends from acquisition to acquisition. In some cases, we move together quickly, and we change ERP system quickly. Now we need to really stabilize and feel that we are satisfied with the performance in the coming weeks in the [indiscernible] environment in Finland. And then in my example, it will be integrated. We are already active in that local market, but it will be a good complement to our market in that sense. So it will be done step by step. And we are always very, very cautious. We don't do anything to risk anything, losing customers or making our new colleagues nervous. But it will be integrated step by step.
Okay. I still see that you mentioned industrial accounts as being a challenge and a headwind looking at volumes. And I remember in the last conference call you talked about a couple of account losses, and you were putting extra energy and the time to really counterbalance that. How has that worked on? And when could we say that you're hopeful that you come back to sort of a more balanced development towards industrial accounts?
Yes, it's another good question, and we are struggling with that every day, and we would like to go from a defend mode and to be more active in winning new contracts, but a little bit different picture from country to country, but we were in very much and we still are, to a certain extent, very much in a defend mode. So contracts we already had that comes up for renegotiations that we start by winning them and then -- we then move on and a little bit more of [ self-offer ]. But to say when, it's very, very difficult, but we need to get better sales processes in place, get our sales forces to feel self-confident again. And a little bit boosted by also portfolio at one point with the private label will help them with our proprietary brands, gives us a much better competitive advantage in the local market. And there, we've already seen a couple of cases, but it will take some time. We will manage, but it's frustrating. We would like to be the ones really pushing in the local market but we are, to a certain extent, standing still.
And when I look at the [ construction ] part of it and installer segment, it seems that, that has continued to boom, so to say, over the last 8 quarters. Have you feel that you have managed to capture that market opportunity?
We have -- part of our organizations are growing quickly, very nicely, defending market shares and winning market shares. And we have part of our organization which are decreasing quite a lot and potentially not keeping market shares. I'm not so sure we can closely monitor where we feel we are strong as we should be or where we need to put in extra efforts.
Excellent. And just a final question for you, Clein. If we look at this 10% margin target, how do you see the journey getting there? You have put up a lot of milestones like ERP platforms, the [indiscernible] integration projects, the store consolidations? Should we see the journey there as a step by step one with the continuous improvement in the operating margin? Or would you see if that's where I'm guessing, into more of a lumpy road, where you still have [indiscernible] margins would not move very much, and then you have to quick step change it?
We are focusing now on building this platform as you said. I try to be as efficient [indiscernible] and building a united group. We have all the strategic cornerstones in place now with the mission, vision strategic direction and the core values. And also, even the name. And then the more operational activities continues. And one important thing, I don't think we've ever quantified it in time. But one important thing, of course, in achieving the 10% is the rollout of the proprietary brands, and that is also that activity that takes some time. I mean, for an external supplier, you can ask for a meeting and say these are the new conditions. And we get that you need to first order bigger quantities from our suppliers in Far East. And then they should be shipped whole, hopefully not with any disturbances in the Suez Canal or anything else. And they should arrive and we should then train our salespeople to be confident that I will now manage to get this customer to buy Gesto shoes instead of another brand. That is the time process. So in that aspect, relating to your question, that activity is a bit back heavy, so to speak. That is not a straight line.
Excellent. Ulf, just a question [indiscernible] implies the bigger footprint is now coming back to growth again when you're looking at [ Sweden ]. What has been with industrial production in Sweden and in Norway? And is that the right kind of interpretation of it?
Yes. I listened to Handelsbanken yesterday about their prognosis and they also say that the recovery is fast and the fastest growing is the industrial segment. So we also could see in the end of March [indiscernible] area, especially in Sweden.
And [indiscernible], has that kind of recovery, say, helped the consumer component from service operations with a short time as it's more direct?
No, I think it will help kind of directly. We could see the OEM was growing pretty faster than the MRO business that we are predominantly in. But we can also see that the industrial is growing and our order book is growing as well. But then we also have to manage the supply chain because it's more coming up shortages of products. So we'd be ahead of that and have ordered larger quantities that will stock up. So we will be able to supply our customers.
Interesting. And Niklas, just one final question also for you. Looking at the structural reserve you put up, how much of that has been released in the quarter? And what is remaining of it?
This quarter, we released SEK 5 million.
[Operator Instructions] And we currently have no further questions. I will hand back to the speakers for [indiscernible].
[indiscernible] and do not hesitate to call us if you have any more questions. Thank you very much.
Thank you.