ITAB Shop Concept AB (ITAB) Q2 2026 Earnings Call Transcript

Good morning, everyone. Thank you for joining and welcome to this Q2 call. We will call her a little bit outside of the lines today since this is my first quarter. We will start with a short introduction and then my take on Q2. I will then leave for our CFO, Andreas, to give more context. This will clearly be the meaty part of the presentation. And then we're going to wrap up with a short summary of the first impressions and priority going forward after being with the business for the first two months. But let's get this show on the road. Introduction. Why did I get the board's confidence to lead the ITAB group? This is at least my take. I'm coming from a similar role with HL Display. I've been with that business for 11 years, the last six as CEO. The HL business is very similar to ITAB when it comes to its customer base. the geographies and also the business model running so a lot of things for me are very similar in ITAB as they were in HL the track record in HL was strong we delivered the last eight years was consecutive years with profit growth and then we've had a successful acquisition journey as well of 12 add-on acquisitions. So I think that mirrors quite well what ITAB was looking for. Before this, I spent 12 years with a company called Rekid within the FMCG business. So delivering things to grocery retailers, primarily in Europe and North America. So in total, 23 years of grocery retail experience, which is a core business for ITAB. So I think this gives a little bit of background to why i'm here talking to you today but let's focus on what we have in front of us q2 a quarter of stability probably a small step forward versus both last year and q1 looking at the earnings in line with last year some strong development in nordics france good from a lube base last year and also u.s good from a lube base in general but a few shining stars more challenging business in italy uk and of course middle east from a macro perspective. When it comes to EBITDA profitability, slight steps forward versus last year, both on EBITDA and profitability. Synergy realization from the H&Y acquisition is generally on track, and I'm quite confident that we will deliver on the synergies we set out to deliver. That That is partly offset though by a little bit of volume decline and price adjustment delay. So clearly we had input price increases in the first half of the year and the delay between getting the price adjustment from our suppliers and reflecting with our customers. We see now both in Q2 and we're going to see it partly in Q3 as well. But both from a top line perspective and a profitability perspective, this breaks a little bit the negative rolling 12 trend we have so we are you know cautiously happy with that looking at the cash flow this looks to be challenging but this is really driven by the change in sales volume between q1 and q2 this year on top of that we had a fairly back heavy q2 which reflects exactly this cash flow difference so looking at working capital it's in line where we were last year so not so much drama as it might as it might look like on on that aspect

so that's really the fly into the quarter i'm gonna leave for a cfo andreas to try to put some more meat on the bones here andreas take it away thanks good morning everyone and finally i have to say hmy acquisition is now fully analyzed and we are only using formal numbers when going back to Q1 2025 or earlier in our historic comparisons. Zooming in on Q2, we do see a stable sales and profit development as mentioned. Adjusted EBITDA in Q2 at 180 million, see it relative to 175 in Q2 last year. Despite sales being down versus last year, and we experienced some cost inflation on the market, we have managed to sustain margins due to synergy execution. Net profit is significantly up from 21 million C last year to 61 million C this year, driven by lower restructuring costs, lower financial expenses, and more optimized tax rate. Net debt has been lowered by 553 million C since last year, but is up since Q1, driven by higher sales impacting accounts receivables and working capital negatively as mentioned by Bjorn. Looking at the quarterly development over time, sales in Q2 was stable and sales has been stable with Q1 as the exception impacting our rolling 12 figures. Although a majority of this effect and the decline in rolling 12 is related to currency and especially euro impact processing. Cross margin has improved improved slightly in Q2 and also a beta margin despite the recent cost increases and lower volume into attractors. Net sales by customer group in Q2, adjusted for currency, show strength in a core segment growth in home improvement. And this is a trend that is also confirmed when looking at market and retail statistics. Grocery is normally more stable and holding up better in times of market uncertainty. And we do see the US-Iran conflict still causing some uncertainty in the market on cost inflation, but also from an economic outlook perspective causing project commitments to be delayed at the same time efficiency and loss prevention solutions are driving growth in pockets for us and we see strong interest into our offerings in both guides and gates and self checkouts where we see that our pipeline of opportunities in cross-selling these solutions to legislation wise also growing we continue to see a mixed development in sales across our key markets northern europe with especially nordics sustains its strong performance from q1 southern europe is now also up in q2 which is great to see very strong development from a from key markets such as spain and france despite italy remaining negative across across most customer groups although we did see some positive signals in the future the french market is more due to local dynamics in the grocery market where we've been able to capitalize on this due to local production capacity and customer relations while Spain is more driven by recent wins in specialty retail but also that key customers in the grocery segment are investing UK which is down is a market where we're exposed to project fluctuations a bit more than other regions and some of our key projects on this market has been pushed into two three people looking at our Vita bridge quarter and quarter we see that sales volume is impacting a slightly negative that procurement synergies are mitigating recent cost increases on price energy and select categories such as powder and SG&A synergies are pushing back labor inflation and having a positive impact on profit. Next wave or SG&A synergies are planned for execution during Q3 and Q4 later this year. We expect to see a larger impact from margin mix onwards as some of input cost inflation we have seen has not been possible to handle internally through rerouting or efficiencies and will result in price increases starting to have effect in Q3. Our operating cash flow for Q2 came in at minus 112 million while rolling 12 is positive at 914 million. This is impacted negatively in the quarter by working capital development and especially accounts receivable due to a sales increase of 272 million between Q1 and Q2. No growth in old years. It's more similar to the seasonal pattern we normally see in this business. Although we expect working capital to be higher in Q2 and Q3 due to this seasonal pattern, we see that the strengths of our new group will help us to maintain a higher capital efficiency over time through procurement power, financial market attractiveness, and consolidation of inventory and supply chains. Net debt now at 2.4 billion, down 553 million since last year, but up from last quarter driven by working capital increase of 340 million, as just mentioned. In Q2, we estimate that we are circa 50% into the execution of our synergy program. The total synergy potential remains, where we have communicated 30 million euros per year on an annualized basis with full effect in 2027. Synergies come 20 million from cost efficiency and 10 million from commercial systems. We have planned for the next waves of our SG&A cost savings initiative to take effect during Q3 and Q4, further lowering our cost base in front of 2027. And the commercial pipeline for cross-selling has also gained traction, where we see that order levels are growing in line with expectation for Q3 and Q4. And with that, I hand over to Bjorn Warden.

Thank you, Andreas. And I think the last thing you elaborated on that the order book for cross-selling synergies looks really strong for the back end of the year. And I think that's reassuring on the sales synergy side. If we step into a little bit of reflection on my first two month with the business. A few things clearly, you know, stepping into these kinds of roles is always intense. It's been a very intense onboarding, visiting all the major sites in Europe, meeting employees, customers and visiting more than 200 stores together with our teams and together with customers. So really good base to understand the business. What is reassuring with what I find here really engaged experienced team across the group an impressive local customer focus and I think this is one of the key strengths of the group long customer relationships and great reviews from our key customers when I meet them so this we should be reassured about also the strong and future-proof strategic position I think is really you know gives me a lot of confidence there are two pillars here of our strategic position I would like to stress to stress first one and this is building on the legacy item strange strengths leading shop fitter with position of strength in retail tech to support stable grocery market and there are a few things here that are important leading shop filter from a size perspective we are the biggest shop filter in this space from a position of strength having a position of strength in retail tech and loss prevention is really important because in the future grocery stores will contain more tech and loss prevention will continue to be a group or will increase as an investment area for grocery retailers and then the grocery market to conclude this is a stable market growing in line with gdp so to have this position is really really good from a business perspective secondly coming in to a large extent through the hmy acquisition we have a unique market coverage and design capabilities to support what i call here branded specialty retailers examples like ralph lauren Pandora, Victoria's Secret, retailers with few stores per market running global execution. So clearly these customers want to have international concept and design support and then local project management and installation delivery. And here the new ITAB group can offer this like no one else in the market. Competition here is usually local or fragmented. So this is a strategic pillar that we, thanks to the H&Y acquisition, will continue to build into the future. So I think here we should be really happy. Looking at opportunities, there are significant opportunities to be better together as a group. We have local sub-optimization in this business. Many of our markets are run to a large extent in isolation. and clearly this leads them to higher cost but also low utilization given the project nature of the business we have. So big opportunities to bring this together by lowering our cost base and creating a more flexible cost structure to be able to support this fluctuating business much better. And then what I see when I've been out in the market that there is a potential to increase are focused on profitability and capital efficiency. We have quite a lot of volume focus locally to fill our local factories and if we can decouple this, you can also make much better decisions and have much better focus on profitability and capital efficiency. So that's a little bit of the learnings I have for the first two months. Where does this leave us in the midterm and going into the second half of the year clearly from a group perspective we will have focus on profitability ahead of growth this is across both the commercial operating operation our supply chain and also on a group level there are selected things we need to do in all these pieces to address profitability in in a stronger way and then I think linked to that we need to lower the cost structure to mitigate this project fluctuation I spoke about which will also give us the opportunity to challenge low profitability business we have in pockets in the group and if we do this at the same time as we leverage the mix effect in line with our positional strength and strategy to develop retail tech loss preventions and service offer which we need to drive hard this will also strengthen our profitability and lastly to continue to have laser focus on delivering the 30 million of stinities from the acquisition this should get us in the midterm close to our targeted seven to nine percent ebit margin so that's that's the focus from a midterm perspective clearly as we do this we need to continue with balanced investments to further strengthen and our leading positions in retail tech and the global specialty retailers so that's a little bit of an overview of the focus we have when we go into the fall and start to plan for for 2027 but i'm going to wrap up here thank you for your attention and i think from here we go to questions if you wish to ask a question please dial pound key five on your telephone keypad to enter the Thank you.

If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Eric Sandstedt from Kepler Shuvru. Please go ahead.

Hi, I am Eric Sandstedt with Kepler. Thanks for a very good and informative presentation. A few questions from my side. First, Björn, you mentioned that you're emphasizing profitable customer projects in your prepared remarks here and I know you elaborated on it but but where do you see perhaps the biggest sort of upside over the coming one to two years is it should we think about it as a further penetration of retail technology or stronger service offering more selective approach to bidding for projects or anything else I'm just a bit interesting to hear more about that no but i think we have a lot of capacity production capacity across the group

we are working hard to fill this capacity and by doing that we get into small fragmented projects that that is not very profitable and adds a lot of complexity into our business if we can manage our cost structure in a different way this was would allow us either to win some of these projects at better profitability or choose to run other projects and exactly as you say grow within retail tech and loss prevention which is our strategic focus.

And then you mentioned in the report that you see potential for more synergies rather than fewer relating to the H&Y acquisition where would that come from?

Yeah I think we spoke a little bit about the commercial synergies today that we see that the outlook for half two when it comes to cross selling looks promising. But then I think it's also natural when you make an acquisition like this, that you know, you put synergy targets up front, but then now we are almost a year and a half into this, we learn a lot of things. And clearly there is, you know, there will over time be more synergies identified as well.

But you know, we are not at that stage yet. understood and follow up on that and this is subject to me understanding your comments correctly here but but you mentioned that the order book for cross-selling opportunities in the second half looks quite promising at the same time you talk about customers remaining in a bit of a wait and see mode given the geopolitical backdrop how should I reconcile those two comments it's a cross-selling opportunity then specifically relating to the H&Y acquisition rather than a broad-based outlook in terms of the order book.

That is correct. We wouldn't make this comment if it had a broad impact of the business. This is connected to synergies and clearly the sales synergies and what we see is that our H&Y part of the business are more successful in selling the item part of the assortment we look at for them to cross sell then you know we we had we had hoped for and especially looking into into the second half of the year great thanks and then just a couple of final questions more relating to the quarter here um also just wanted to confirm that i got it correctly but but you are you talking about the timing lag here between higher input cost and pricing adjustments and if so that q2 took more of a hit here but you look at it more favorably for the second half of the year i.e the timing between pricing and inflation yeah and i think you know we don't like this but this is the world we live in the timing between when we get cost increases into our business and when we're able to reflect it with our customers there is a lag here that somewhere between three and six months so clearly you know q2 is is hit by this if we will see some effect of this also in q3 when we come to the end of q3 we should have reflected this across our customer base thanks and then just finally a bit specific perhaps but in terms of the tax rate it remains

quite high. I know we've spoken about this on earlier calls but could you just help us how to think about the path to a normalization here?

Andreas? Sorry I missed your question, was it the tax rate? Yeah the tax rate remains quite high and we've spoken about the path to normalization in earlier course just wanted to get a recap of that yeah I think I mean historically we have been around 30% and I think we are we are closer closer to that although we know that quote-unquote we are positively impacted by some of the profit we have in countries where we've been loss-making historically and have and have tax assets I think you should look at this optimization on tax over a sort of two-year period where we need to optimize our debt structure and that takes a while you shouldn't do that too quickly and so so we take it step by step and we're taking a big step in 26 relating to versus 25 which which is visible in the numbers so at least this is in line with our expectation and with some further improvement which will remain for the coming sort of 18 months thank you very much that's all i had thanks thank you thank you the next question comes from carl johan bonavir from dnb carnegie please go ahead yes good morning john and andreas a

couple of questions from me as well please uh continue to do very well in the grocery segment is there any particular things going on there that that is driving it or is it just a more natural as you describe its ongoing business with that kind of customer no i think it's it's a strategic position of strength for the group we have the really strong products in retail tech and loss prevention that is primarily for grocery or near grocery customers it's it's you know we expect to see growth in this space ahead of growth for the group going forward as well notice in the presentation pack you talked about say grocery retailers increasing their scope of

sales post the euro shop maybe give us an update of what you really felt that you got out of your shop and and how your positions have maybe changed or strengthened after you know i think your shop was a big investment and was fantastic you know i hadn't joined the business but to to see how the new ita group came together and showed the leading position in the market i think was was really impressive when it comes to results out of euro shop you know the sales process for these things is quite long it can be you know six months to a couple of years so clearly the short-term result is going to be limited what you do is you kick off projects then you do pilots then you do small store role small stores testing and then you get into rollouts where you really start to see the the effect but looking at where we are we have a little bit more than 300 active opportunities uh coming out of your shop that we are tracking currently this is you know when we when we assess them today this is about 50 million euro of uh of additional business so clearly there's a strong focus from from the group and a hard work to convert this over the next you know six to you know 36 months i would say which is the realistic timing it it takes to really get this into scaling in real scale rollouts and when you look at those opportunities is that what you describe in the grocery segment that maybe the the customers are making use of your looking to make use of your in more and more segments rather than maybe just one or two verticals or is it new customers that you see behind it it's a little bit of both but you know clearly we have contacts and business with almost every grocery customer in europe so you know it's not new business but it's new areas in the store and especially i think in in the checkout area where there's a lot of labor cost sitting and where a lot of the loss prevention work is is done where where we see significant interest and this is clearly in line with our strategic focus as a group as well excellent i see you talk about measures for long-term profitability enhancement in the uk italy and turkey in the report so i guess turkey you have talked about before some extent uk and italy are new to this this framework what are you targeting and is there something we should be worried about here no not not at all i think this is a part of ongoing business, but clearly as we are bringing H and Y into the business and as we made acquisitions in the past, you know, how we consolidate the businesses and how we address different markets. This is ongoing work always. Right now we have low sales performance and impacting profitability in these two markets, but it's not primarily linked to short mid-term actions.

And I guess with HNY now you have really a point of strength if you combine Italy, France and Spain. Is that a huge opportunity for further optimization when you're looking at from a group structure or looking at maybe your sources of potential future cost synergies and these kind of things? So there are mainly towards maybe optimizing in smaller markets where you don't really have the critical mass in the same way.

No, I think we need to address this on a group level. But I think in general, clearly to work better together between markets and making sure that we lower our cost base and be more flexible when it comes to where we produce and how we support projects will will have good impact both on our ability to scale and deliver but also the profitability of the business and and when you try to sum that up it sounds to me that you are talking more about continuous improvement than maybe driving group-wide efficiency programs is that the way a good way of looking at it i think you know there are things we need to do on a group level to consolidate this but you know my key focus in these businesses is

that you know business needs to be run close to customers and that's where we need to do a lot of this a lot of this work perfect and andrea just a question on the the working capital cash flow as well is it fair to assume the same kind of working capital back cycle as we saw last year where you really had the big release in q4 secure the cash flow in this year as well it's going to be very much he had to go to for yeah that's a reasonable assumption yeah this is a pattern we've seen across both legacy from the legislation y and our sector colleagues so it's it's it's part of uh a seasonal pattern uh starting with the retail trade being very low in december and uh

hence all the projects or many projects uh are peaking in september october leaving us with cash producing in December.

And when you look at the working capital, what happened in say Q2, is there a lot of delayed projects in there maybe affected what's happening in the Middle East or something like that that is impacting it as well or is it just normal businesses usually in and out?

Yeah I would say if you look at our Q2 sales versus our Q2 sales we're up 272 million across the quarters and I think that's what's also reflected in accounts receivables. If we're assuming on inventory and accounts payables, we normally have a strong peak sales period in September and October, so there's a build-up of inventory prior to the vacation periods in July and August, but that's currently paid for by accounts payables, so the real impact is in in accounts receivables going from sales quarter on quarter and then what's normally happening in q3 is that the prolonged sort of manufacturing cycle of the vacation periods to be able to handle the project peaks in september october that results in a negative sort of impact on working capital for for q3 or at least normally in line with q2 but that's what you see and then you have the release in q4 but we're obviously working with the sort of tools to try to mitigate these peaks and uh and so all the time excellent so so basically an ongoing project rather than some sort of structural headwind hitting you that's correct excellent thank you very much and all the best out there thank you the next question comes from anton lund from sb1 markets please go ahead uh hey guys can you hear me yeah very good uh congrats on your first report beyond um

just one question for me southern europe grew six percent i believe year over year but you mentioned that production was impacted by the summer heat can you just tell us whether this had a material impact on sales in the quarter no i think it's not a material impact it's a small impact in uh in june but clearly as we see the heat the wave in southern europe is continuing and when we start to get above 40 43 degrees we find it difficult to run summer factories during daytime especially where we have powder coating capabilities which are you know really 50 to 100 meter long ovens that creates uh you know unbearable working conditions that and we need to take action so i think it's a small impact to the quarter but we are struggling partly with this also into into july okay so this might have a big impact on q3 numbers and yeah i don't think you know i don't think it will have a massive impact but you know if if we have heat waves going like this across july across august then you know it has an impact to the business, yes.

Very good. Thanks.

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

Yes, we have a couple of written questions. The first one is on the synergies. You've now realized 50% of the targeted synergies. What are you targeting by year-end, 2026, in terms of percentage realisation?

I think what we've said is that in Q427, we will have an annual impact of 30 million, and we're currently in Q226. We're now halfway into the programme, and we're halfway into the synergy realisation. And I think that's the guidance I've been given historically as well, that you can expect the synergy realization to come sort of linearly across this period of implementation and there's no reason for us to change that.

Can you quantify the upside potential to the synergy chart given in your comment Jörn that you see more synergies ahead rather than fewer?

No but I think this is linked to the sales aspect of things you know it looks promising for the fall but i think you know the sales synergies can come and go but i think the cost synergies is what really stays with the with the business and my comment is primarily linked to sales synergies in the back end of the year and i think andrea's comment is more linked to how we realize cost synergies up until level 2027. okay and then the final question that we have gotten So regarding the timing aspect of cost inflation versions, price adjustments, I think you've answered it to some extent, but the follow-up there is will the net effect be negative or

do you expect to turn net positive in Q3 and Q4?

No, I think we will gradually close this gap during Q3 and then it will be neutral for Q4, then as alluded to, we need to have a stronger profitability focus and clearly pricing is an element of that.

Okay, thank you. Then no further written questions. So I'll hand over to you, John, for any final remarks.

No, I think just thank you everyone for your attention. And we wish you a great summer and looking forward to have you back for Q3 reporting. Thank you very much.