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Operator: Welcome to the Dustin Q4 presentation for 2024, 2025. During [Operator Instructions] Now I will hand the conference over to the CEO, Johan Karlsson; and CFO, Julia Lagerqvist. Please go ahead.
Johan Karlsson: Thank you, operator, and a warm welcome to this Q4 presentation from Dustin Group. And as you heard, Julia and myself, Johan Karlsson is here to present that to you. If we start with some summary of the Q4 numbers on Slide 2. As in the last quarter, sales was affected by a weak but stabilizing market with continued general cautiousness by the customers mainly in the smaller customer groups. In the quarter, we saw some positive development in LCP, where the market, primarily in the Nordics, is stabilizing. Sales in the quarter was SEK 5.056 billion, representing an organic growth of 3.6%. The organic growth in the SMB segment was negative 6.3%. However, this number in SMB was affected by a retroactive change in accounting treatment. And without the correction, organic growth was negative 2.2%. LCP showed strength and reported an organic growth of 7.0%, mainly driven by the Nordics, where the market has been stronger. In the Benelux region, market continues to be difficult, but due to some large new contracts in Belgium, we saw growth even there. Gross profit ended at SEK 642 million compared to last year's SEK 644 million. Gross margin was at 12.7% compared to last year's 12.9%. Gross margin in the quarter is seasonally low due to high share of public sales in Q4. As market continues to be slow in the Netherlands, the margins have continued to be under pressure also in Q4. Adjusted EBITA came in at SEK 83 million compared to SEK 28 million last year with an EBITA margin of 1.6% compared to last year's 0.6%. And cash flow from operating activities was negative SEK 73 million compared to last year's negative SEK 355 million. Leverage at the end of the quarter was 4.3, which is in line with Q3 and compared to the end of last year was 4.0. If we look at operational highlights for the quarter, we can conclude that the previously announced efficiency measures are fully implemented and that the cost savings from that is around SEK 200 million. We are currently implementing the strategic changes that we announced in Q3 with long-term profitability improvements. And we have updated our sustainability targets and aligned them with the science-based target initiative. If we look at the sales growth a little bit more in detail on Slide 3. As I said before, the market is stabilizing, and we can see some signs of recovery. However, the pattern is not the same as in previous downturns in the market. As you can see in this slide, looking at the solid black and brown curve, the normal pattern is that SMB is coming back to growth earlier than LCP. This time, however, we see the larger customers moving ahead of the small. This is due to the fact that the stabilization and return of the market is fueled by the change of Windows 10 to 11 and not by change in economic or geopolitical sentiment. The trend of exchange of Windows is so far mainly driven by the larger organizations. Further to that, we see that the larger customers are starting to replace old equipment at faster rate than the smaller. All in all, this result in a stronger market for the larger customers than the smaller. With that said, let's move to Slide 4 and a look at the operational efficiency initiatives. Julia?
Julia Lagerqvist: Thank you, Johan. Moving to Page 4, and looking at the cost development in the quarter, we see as in previous quarter that the reorganization and our cost efficiency measures have had a clear positive effect in the quarter compared to last year. Overall, SG&A expenses decreased by 6.3% in the quarter. This was positively impacted by ForEx, and excluding this, the cost decreased 4.6%. The effect is slightly less than in previous quarters as we had some positive one-off effects last year, plus that we have in general less consultants and temp staff over summer, so the saving there becomes more. The cost efficiency program is now completed with annual savings of close to SEK 200 million. The main driver is less personnel. Looking at the FTEs, we see that we have reduced FTEs by 225 or 10% versus the same quarter last year. And if we go back 2 years, the total increase is 13%, a solid reduction in workforce. In addition, there has been a reduction in number of consultants and temporary staff, plus reduced number of offices contributes to the savings. Then we move to the overview of the SMB segment on Page 5, where sales landed at SEK 1.2 billion or 7.9% below last year. However, as Johan said, the quarter was affected by the year-to-date retractive change in accounting treatment regarding net revenue recognition related to software and this lower net sales. Excluding this effect and the ForEx effect, the decline in sales was 2.2%. As Johan mentioned, in this quarter, we see some signs of stabilization, but overall, the market remained tentative due to the ongoing economic uncertainty. From a geographic point of view, Sweden and specifically Norway performed well, while Denmark and Netherlands were the main drivers of the decline. Looking at product mix, we saw that the share of software and services sales decreased down to 10.4%, but this was mainly due to the mentioned retractive change in accounting treatment. The increase in the gross margin improved versus both last year and the previous quarter. And the improved cost base from the cost saving program protected the segment result, which increased to SEK 34 million versus SEK 9 million last year despite the lower volumes. And all in all, the segment margin ended at 2.9%, which was an improvement versus last year at 0.7%, obviously coming from a low base. Note that last year was negatively affected by a one-off posting related to COGS on managed services of SEK 13 million. Going to Page 6, we look then at the LCP, the large corporate and public segment. And the sales in LCP was SEK 3.9 billion in the quarter, plus 4.6% versus last year, and organic growth of 7%. So there was a continued large negative ForEx impact from the strengthen segment. Sales were also improved versus previous quarter. Growth was mainly driven by the increased demand in the Nordics stemming from the demand of Windows 11, as Johan was just talking about. The economic uncertainty still impacted the market development, mainly evident in the Netherlands, where we also saw heavy price competition. On the other hand, Belgium showed continued strong growth as in previous quarter due to some large new agreements, and Finland also continued to show solid growth after a tough year. As I said before, we do see a large volatility in sales between quarters in LCP. Gross margin decreased versus previous year. The increased price pressure in the Netherlands on diminishing volume had a negative effect. We also saw continued effects from larger contracts with lower margin. On the opposite, margin in the Nordics was slightly improving helped by country mix. On a global level, there was a negative customer mix with a larger share of public customers versus last year from -- which then have a lower average margin, and this had a negative impact on the margins. We continue to see increase in takeback, which had positive impact on both margin and EBITDA and we also saw positive development in our private label business. The improved cost structure, mainly thanks to the restructuring program had a positive impact on bottom line. And overall, this led to a segment result of SEK 80 million versus SEK 53 million last year, and margin ended at 2.1% versus 1.4% last year. We note that last year was also impacted by a nonrecurring cost of SEK 21 million. Moving then to look at the cash flow and CapEx on Slide 7. We see that the cash flow for the period was minus SEK 1.2 billion. This mainly driven then by the repayment of loans after the rights issue, where the proceeds from the rights issue came in the end of Q3. Looking at details, we see the cash flow from operating activities before change in net working capital was SEK 150 million plus, which was an improvement versus previous year, mainly driven by the improved operational result, but also a better tax position. Cash flow from change in net working capital was minus SEK 188 million, which was still better than last year. We normally have a negative seasonality effect in Q4 with purchases earlier in the quarter and not rollout at the end of August. We look more at net working capital on the next slide. In total, operating cash flow was minus SEK 73 million in the quarter. And the cash flow from financing activities was, as said, impacted by the repayment of loans. Looking at CapEx, we see that the total investment in the quarter was SEK 52 million, of which SEK 36 million affected cash flow. This is mainly linked to IT development investments. Investments intangible assets was SEK 15 million this year, of which only SEK 2 million was affecting cash flow. The noncash items are mainly lease contracts. Investments related to services was SEK 4 million compared to last year at SEK 23 million, and none of it affecting cash flow. Coming then to Page 8, we look at the net working capital development. Net working capital landed at SEK 477 million higher than last year at SEK 170 million and also an increase of the previous quarter. Inventory levels increased versus previous year, now at SEK 1,086 million. This is mainly linked to Benelux and customer-specific inventory but somewhat lower sales than expected. It is slightly below previous quarter, but clearly above our target levels, and we have a clear target to reduce going forward. Accounts receivables increased versus last year, impacted by invoicing the larger contracts in Benelux at the end of the quarter. There is, as said, a normal negative seasonality to accounts receivables and payables in Q4 as we get goods in early in the quarter for configuration, and have large rollout at the end of the quarter. And this was more visible this year with large sales volumes with specific customers. As I said before, we always have some timing effects in the quarters, but our long-term target remains to be around minus SEK 100 million. And with that, I hand back the word to, Johan.
Johan Karlsson: Thank you, Julia. And now we're moving to Slide 9 and our plan to sharpen our strategic focus in order to increase profitability. There has been a high pace of change in order to strengthen the efficiency in Dustin during the last year. And there, you can say we have implemented the new organization structure around the value chain with offering sales and delivery and support functions enabling higher pace of execution of the strategy. We have reduced the organization with approximately 200 positions and some office locations, reducing costs by approximately SEK 200 million. We have also continued to transform our business toward more business customer focus, and by that announced that we will close down the consumer business. At the same time, we are focused on our standard services on all our markets. In order to gain scale, we are moving to a European offering in all markets, driving a stronger relationship to partners and vendors. And last but not least, we're continuing to use emerging technologies to drive process efficiency and automation. With that said, we can move to Slide 10, where we go through a little bit of the changes that we have done in the sustainability -- on the sustainability area. On this slide, we have made a summary of updated sustainability targets. So the climate targets have been approved by science-based target initiative. This means that we have climate targets for 2030 and 2050. We have also circularity targets as social impact targets for 2030. For 2030, our targets for climate is to reduce the Scope 1 and 2 emissions by 50%. And for Scope 3, the target is to reduce the CO2 intensity by 51.6%. For circularity, our target is to increase revenue per kilo of new raw material by 20%, and for social impact, the target continues to be the implementation of 100 initiatives across [indiscernible]. And with that said, let's move to Slide 8 and a summary of the quarter. So in summary, Q4 quarter was a quarter where we saw continued market stabilization and where we achieved 3.6% organic growth. Nordics showed the stronger performance in the Benelux and the quarter. Gross margin at 12.7% compared to last year's 12.9%, was affected by higher share of public sales and by the price competition in the Netherlands. Adjusted EBITA margin at 1.6% was up from last year, 0.6%, driven by the finalization of the efficiency program delivering approximately SEK 200 million of savings annually. During the quarter, we concluded the efficiency measures, as mentioned before, saving approximately SEK 200 million on a yearly basis. We also continued the strategic focus announced in Q3 with the closing of the consumer business and the focus on standardized services. Further to that, as we've just heard, we have updated our sustainability targets to align with the market development and customer requirements. And with that, the formal presentation is concluded, and we can move to Q&A.
Operator: [Operator Instructions] The next question comes from Jesper Stugemo from Handelsbanken.
Jesper Stugemo: So I have a couple here. My first one is related to LCP as the main driver. In this quarter, do you have any feeling from the SMB side where they are in the approach to renew their hardware? Are they looking more to like extend security upgrades for an additional year rather than upgrading to new hardware? Or what is your feeling there?
Johan Karlsson: My feeling is that we don't look at additional time from -- having purchasing more time. It's rather -- they are a bit slower out in the process, let's say. So we don't see a lot of purchasing of prolongations.
Jesper Stugemo: All right. And with the LCP picking up here, do you see that we will enough volumes from this refresh cycle to increase their refurbishing to actually give some upside on the margin as well already in this new fiscal year?
Johan Karlsson: I think we will see that effect during the year because as the renewal starts to kick in, exactly like you say, also, let's say, the takeback will kick in because most of these customers are on that type of contracts. So it is our ambition to continue to increase the takeback in line with the, let's say, new sales of PCs.
Jesper Stugemo: All right. And in Finland here, we saw some good sales momentum up year-on-year. What trends do you see in the market? This has been quite slow in the last year? Is this mainly related to the negative trends have bottomed out? Or do you actually see a healthier market that customers are waking up and they're more active or...
Johan Karlsson: Yes. I would say that we are seeing customers waking up or getting more money because in Finland, we are relatively high in the public sector sales. So it means that the public budgets are of great importance. And here, you could see that primarily, let's say, police and military have very good budgets at the moment, so they can actually boost purchasing of IT equipment.
Jesper Stugemo: All right. So police and military is the main driver here in Finland, I guess.
Johan Karlsson: They are for sure, important parts of that. But I would say in Finland, in general, it seems like the public budgets are a bit more generous this year compared to last year, which affects us.
Jesper Stugemo: All right. All right. And -- just the last question here on the FTE side, down 10% year-on-year, but do you see a need to recruit more people now when LCP looks to be turning a little bit better?
Johan Karlsson: I don't think there is a direct need to recruit people because it -- we also work with, let's say, efficiency on the other side. So our ambition is to more or less remain while the volume is going up, up, of course, there will be areas where we need to strengthen a bit, but it's not a direct relationship between, let's say, volume increase and more people.
Operator: The next question comes from Daniel Thorsson from ABG Sundal Collier.
Daniel Thorsson: A question on LCP here in Q4. Did you see any larger deliveries in the quarter, especially related to the end-of-life support on Windows 10 that could cause a setback in Q1? Or should we expect these levels to continue recovering in LCP ahead?
Johan Karlsson: I don't think we saw kind of one-offs that immediately has a negative effect on Q1. But obviously, we are depending on customer continuing to exchange going forward to maintain the volumes that we have. But nothing on, let's say, a one-off churn in that case.
Daniel Thorsson: I see, I see. And then secondly, a more long-term question on your financial targets, you are targeting 6.5% margin in SMB, 4.5% in LCP, which is already next year, which obviously nobody believes in right now. But my question is rather, if those levels are achievable longer term in your view? Or has anything changed structurally in the market over the last 2, 2.5 years, that make those levels harder to get closer longer term in your view?
Johan Karlsson: In our view, it has not changed anything. It -- obviously, with a declining market, it's very hard to reach them. But over time, with a more positive market, I don't see any reason why we should not be able to get to these levels going forward.
Daniel Thorsson: Okay. I see. That's fine. And then finally, on cash flow, do you expect working capital to recover already in Q1 and be significantly better?
Julia Lagerqvist: We do, I mean like I said, we have a clear target to improve on our inventory levels. And we also normally if you look historically, we normally have a better position when it comes to accounts payables and receivables in Q1 versus Q4.
Operator: The next question comes from Mikael Laséen from DNB Carnegie.
Mikael Laséen: Yes. I have a question about the Netherlands. That country remained challenging. And I was wondering if you could elaborate on the competitive landscape there, the price competition, and -- if you see any signs of improved tender activity or pricing pressure?
Johan Karlsson: Yes. Let's start with the competitive landscape. I would say that Netherlands is a country where many of the large European and U.S. resellers exist, let's say, they are in that market -- that was for CDW, that goes from computer center, Bechtle and a few more. There is also a few local players but smaller. So it's -- I would say, like in many areas in the Netherlands, it's a very fierce competition. And that has an impact when the market is slow because then that competition really comes out in price competition. So that's what we have seen lately.
Mikael Laséen: Okay. And when it comes to this market situation, then triggering this fierce competition, what -- I mean, the leading indicators are you looking at? And what trends are you seeing there? And how should we think about the coming couple of quarters?
Johan Karlsson: I think the -- if you look at the overall underlying market trends that will drive a more positive market, which we talk about is the Windows Exchange. It's the AI PCs, and it's the age of the let's say, PC or IT equipment at our customer site. I think they are the same in the Netherlands as they are in the Nordics. So our expectations is that over time, the market also in the Benelux will come to a situation similar to the ones in the Nordics. And in normal cases, when that happens, that the price competition goes down a bit because volumes are better. And that's our expectation this time as well.
Mikael Laséen: Okay. So you're not seeing this Windows 11 Exchange or demand in the Netherlands.
Johan Karlsson: We see it, but to a lesser extent and more mix compared to others.
Mikael Laséen: Okay. And so what can you do during this time when the market is a bit softer, and like -- to the margins or your market share?
Johan Karlsson: I think it's a very good question because that is exactly the question to ask what can you do in the current situation? And what we can do, we can add services, namely takeback and life cycle services to the hardware sales, which will improve the margin. So we can accept maybe a slightly lower margin on the hardware if we can also upsell with product near or life cycle services around the hardware that can help us. We can also add our own private label products in the mix in a tender, for example, which improves the margin. So we need to go back and work on all the basic stuff to improve margins. In parallel, we're trying to win the tenders, which will be won on a slightly lower margin level than before.
Mikael Laséen: Okay. Great. And when it comes to this gross margin decline that we saw now in Q4, how much is attributed to Netherlands, specifically? And how much is mix and other things?
Johan Karlsson: I think it's a combination of, you could say that a higher share of LCP sales than on an average quarter, and a part coming from directly from the Netherlands competition. If you could say that they are similar in size, I would say.
Mikael Laséen: Okay. And in general, can you say something about the difference in gross margin between LCP and SMB, broadly speaking?
Johan Karlsson: The difference is you could say that if the average is 15%, then as an example, I would say SMB is a couple of percentage points better, and LCP is a couple of percentage points lower. So it's that magnitude of difference.
Mikael Laséen: Okay. Yes, that's helpful. Great. And just wondering here what's happened with the SMB side. It seems, I mean like the Nordic region is stabilizing a bit, I'm not sure what you're seeing there and why you have that weakness of minus 2% underlying growth, excluding reclassification.
Johan Karlsson: Well, it's a bit mixed bag there. I think Julia was saying into that in the presentation. You could see that Norway and Sweden is doing relatively okay while Denmark and the Netherlands is poor. So the -- there is a bit of deviation between the countries in the SMB that nets out to the minus 2. So I'm not really sure what drives the Danish numbers to be perfectly honest, it's a market -- how the market -- we don't really have the market data for that, and that's clear, but...
Julia Lagerqvist: I think it's related to that. I also see similar price pressure there as we've seen in the Netherlands and Benelux and...
Mikael Laséen: Okay. Got it. Just also curious, if you we should think about this reclassification effect continuing in Q1 and Q2 as well? Or if this is behind us now?
Julia Lagerqvist: It's the reclassification effect in this quarter was the full year-to-date effect. It was a largely -- it will be very minor in the coming quarters.
Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
Johan Karlsson: Okay. Thank you very much for listening in and asking questions to the Q4 report presentation from Dustin. So thank you very much, and have a nice day.