Earnings call transcript: ITAB Shop Concept faces challenges in Q2 2025

ITAB Shop Concept AB reported its Q2 2025 earnings, revealing significant operational and financial hurdles. The company experienced a 20% decline in adjusted EBIT and negative operating cash flow, contributing to an 11.65% drop in its stock price. The market reacted negatively to these results, reflecting concerns over ITAB’s financial health and operational challenges in France. According to InvestingPro data, ITAB maintains a "FAIR" overall financial health score of 2.44 out of 5, with particularly strong scores in growth (2.92) and profitability (2.71).

Key Takeaways

• ITAB reported a 20% decrease in adjusted EBIT compared to the previous year.
• The company’s stock price fell by 11.65% following the earnings announcement.
• Operational challenges in France are affecting performance.
• ITAB is focusing on retail technology solutions and cross-selling opportunities.
• The company is a leader in the European retail solutions market.

Company Performance

ITAB Shop Concept AB, a leader in the European retail solutions market, faced a challenging second quarter in 2025. The company reported SEK 13 billion in pro forma sales, but its adjusted EBIT fell by 20% compared to the same period last year. The EBIT margin stood at 6.9%, highlighting profitability pressures. Despite these challenges, ITAB continues to focus on innovation and cross-selling opportunities between its legacy and H&Y product lines.

Financial Highlights

• Pro forma sales: SEK 13 billion
• Adjusted EBIT: SEK 388 million (down 20% YoY)
• Pro forma EBIT margin: 6.9%
• Operating cash flow: -SEK 53 million

Market Reaction

The market reacted negatively to ITAB’s Q2 earnings, with the stock price dropping by 11.65%. This decline reflects investor concerns over the company’s financial performance, particularly the decrease in EBIT and negative cash flow. Based on InvestingPro Fair Value analysis, ITAB appears fairly valued at current levels. Analyst consensus remains cautiously optimistic, with price targets suggesting potential upside, and multiple ProTips indicate the company’s underlying strength, including profitability over the last twelve months and anticipated sales growth.

Outlook & Guidance

Looking forward, ITAB plans to develop a new group strategy by the end of 2025 or early 2026. The company aims to update its financial targets and focus on bottom-line profitability. ITAB expects to realize synergies from its acquisition of H&Y over the next 2.5 years, which could improve financial performance.

Executive Commentary

CEO Andreas Ellegard highlighted the transformative state of the retail sector, stating, "Retail is really going through transformation... both in terms of COVID, inflation, and increasing consumer expectations." He emphasized the need for agility, saying, "We need to become much more agile."

Risks and Challenges

• Operational challenges in France could continue to impact performance.
• Macroeconomic uncertainty may affect consumer spending and retail investments.
• The company’s negative operating cash flow poses a financial risk.
• Competition in the retail solutions market remains intense.
• Realizing synergies from the H&Y acquisition may take longer than expected.

Q&A

During the earnings call, analysts questioned ITAB’s operational challenges in France and the impact of market uncertainty on customer investment decisions. Management addressed these concerns, highlighting their focus on cross-selling opportunities and the potential for synergies from the H&Y acquisition.

Full transcript - ITAB Shop Concept AB ser. B (ITAB) Q2 2025:

Conference Moderator: Now I will hand the conference over to CEO, Andreas Ellegard and acting CFO, Andreas Helmerson. Please go ahead.

Andreas Ellegard, CEO, ITAP Group: Thank you very much, and thanks to everybody that is tuning in live or that will listen to the recording afterwards. So today, we present the interim report for the second quarter of twenty twenty five. And, as usual, I will start by reminding everybody a little bit about who we are, if there are newcomers to the call. So at a glance, ITAP Group, if you look at the pro form a for 2024, we have 24 production facilities in 17 countries. We operate in more than 40 countries, and we have almost five and a half thousand employees summing up to a revenue of just above 13,000,000,000 Swedish and with an adjusted EBIT in 2024 of $918,000,000 and that gave a margin of 6.9%.

Our main customer groups are grocery, do it yourself, fashion and then basically all aspects of retail, all sectors within retail, we have some activity, small or large. And I will come into that a little bit on the next slide. And what we offer the market is really we work with the physical stores. So we help retailers to realize their brand value and their and and display that to consumers in the desired way. And that is mainly through retail interiors, but also through technology, through lighting, and services that we put together in solutions that helps them to achieve their outcome.

ITab today and and and maybe I should just why do we talk about pro form a? Of course, we talk about pro form a because we have made a huge acquisition where we acquired one of our largest competitors, and and that deal went through, the February 1 year. And and that’s why we talk about pro form a for ’24, and we also talk about pro form a in our reports and so on. We are now the clear leader in Europe, and we have a global reach. So we are active on all continents.

And we even if our main footprint is in Europe and our main business activity is in Europe, we also have activities, across all continents. And we follow our customers where they want us to go. Grocery is by far our biggest sector, which with a little bit more than half our of our turnover, and these numbers are the pro form a numbers. Do it yourself home improvement is the second sector with a little bit more than with around 11% of our sales. And then fashion comes close behind due to self and home improvement.

And then we have all the other sectors where consumer electronics, pharmacy, or or some service stations slash petrol stations are quite important for us, also travel retail and so on. So we work basically with all retail sectors. So before we go into the report, if I just do some highlights of the first six months of 2025, of course, 2025 has been just like the ending of ’24 has been dominated by the news that we intended to acquire H and Y and that then went through. So as of February 1, we are one group. We are all under one umbrella.

But but it means that we have a lot of homework to do. People need to get to know each other, so we focus on our people first. We we focus on our customers, so we secure business continuity. And we do that, of course, under quite uncertain macroeconomic preconditions, but it’s very, important to stay close to our customers and don’t get distracted by the integration efforts. And then, of course, getting to know each other, leveraging the best from both groups is what will deliver the synergies.

So we have a very clear plan for the future where the promises we made when we announced the deal of synergies in the area of €30,000,000 have now been confirmed through our bottom up process when, when we have access to our new colleagues. So the synergies, are are confirmed, the amount of synergies, and and the plan that we have to to realize that. If you look at the numbers for the first six months, pro form a numbers, I want to emphasize that. We have had sales growth mainly coming from the first quarter. We see some hesitation in the market, especially from customers that maybe have a bit more difficult balance sheet.

They they are a bit hesitant. They want to see where the macroeconomic winds are blowing, and that is affecting us in the second quarter, I would say. In the first quarter, we were not that affected because decisions were already made and execution was is the result of that. So what we see in the second quarter is the hesitation that has been in the market since November, I would say. But and we delivered an adjusted EBIT of 388,000,000, which is if you look at pro form a numbers when we had an all time high both in legacy HNY and legacy ITAB, That is a decrease of 20%.

If you look at ITAB alone, we are increasing the EBIT, which is good for our shareholders. And by that, I hand over to Andreas to give us the numbers from the interim report.

Andreas Helmerson, Acting CFO, ITAP Group: Thanks, Andreas, and good morning, everyone. To give as Andreas said, to give a representative view of the development of the group, we have mainly focused on the pro form a development in this presentation. In the interim report also published, you will find, of course, all the details, including reported figures with HNY consolidated from the February 1. Zooming out on the historical performance, you can clearly see the significant impact of the recent acquisition of HNY, doubling our size and reaching now above 13,000,000,000 in sales. In Q2, after a very strong start of the year from a growth perspective, we can see sales are slowing down somewhat with minus SEK six relative pro form a last year.

However, if we remove the currency effect, it’s actually 1% minus in Q2 and plus 7% year to date. In Q2, EBIT adjusted for nonrecurring costs and also amortization of acquisition related intangible assets amounted to 179,000,000, equaling 5.5%, slightly down compared to the rolling 12 adjusted EBIT of 6% margin. Zooming in on the financial highlights for Q2, we can see that although net sales is stable, especially if excluding the currency effect just mentioned, adjusted EBIT is down 40% if comparing to pro form a figures. Although if we only look at the reported figures, it’s up 19%. Q2 twenty twenty four was a quarter where both legacy iTub and legacy HNY had larger rollouts across several markets, including a favorable sector and product mix.

Although we do have a large share of recurring business and long term relationships with our customers, there is a project element to our business, which can hit us differently across quarters. Focus onwards is to continue executing on synergies, which are now also bottom up identified. And we are also focusing on improving cost efficiency and improving operational efficiency, especially in France. If we look at our net sales by customer groups, including currency impact of minus 5% pro form a, and obviously, this is something we’d like to adjust for onwards as we come further into the integration with H and Y, we can see that grocery, after a very strong start of the year in Q1, is now down 7%. Instead, for Q2, we see fashion driving sales with several larger rollouts in both Central Europe and Southern Europe.

We also note that the market interest into the group’s technological solutions, like loss prevention and operational efficiency solutions, is still high, and we continue to see growth in this area. We would also like to highlight that the acquisition of HNY has further diversified our sector exposure. If we look at the combined group’s market exposure, we can see the complementing nature of the acquisition of HNY, where market exposure shifts somewhat from Northern to Southern Europe through HNY’s strong presence in countries such as Spain, France and Turkey. In Q2, net sales for Northern Europe has declined with 20, and here, the currency effect is limited. It’s driven by customers delaying some of the projects we’ve been planning for, but also somewhat hesitant to committing to plans.

And we believe that, as Andreas mentioned, that a slight uptick in the macroeconomic forecast will release some of these plans. It’s also great to see the growth in UK and Ireland now, impacted by the rollout of smart gates for one of the largest grocery chains in UK. Our operating cash flow for Q2 is minus SEK 53,000,000 and the rolling 12 development at SEK $456,000,000, which is not pro form a, the only slide here not pro form a. It’s impacted negatively in the quarter by net working capital development. And net working capital is impacted by normal seasonality, where Q2 sales goes up and Q3 outlook is normally slightly up as well and the sales growth impacting accounts receivables, especially in some of our major markets.

We also experienced some one off impacts from the integration work with H and Y. Our rolling 12 monthly cash conversion declines to 59%, with the target being at 80%, and it’s mainly driven by the net working capital development just mentioned. If we zoom out a bit from the Q2 results and return to what we have previously published about our plans with merger with HNY. We do see that during 2023, legacy ETHAB had an EBIT margin of 7% and legacy HNY around 5%, leading to a combined margin of around 6%, which is very similar to where we are today year to date and rolling 12 pre synergies. And although we had a good start in a new group on realizing these synergies, they have not yet started to materialize in any significant manner.

There is a strong strategic rationale for this acquisition as well as it being financially attractive, With synergies identified at €30,000,000 increasing our net income with 90%, with only a 16% share dilution, all other equal indicates significant earnings per share growth. And with that, I’ll hand over to Andreas again.

Andreas Ellegard, CEO, ITAP Group: So thanks, Andreas. And this part here is something that we like to just remind everybody about, that retail is really going through transformation. We all know that. And recent years, both in terms of COVID, inflation, and increasing consumer expectations have accelerated a lot of those trends. And it means that if retail is transforming, we have to follow, and our whole industry have to follow.

And I think ITAM have been leading the way here. And we started doing our own homework, of course, before we could then become more ambitious about the future. Really, what it comes from, what we’ve been doing the last couple of years has been to become more consumer focused, understanding what’s happening with consumers, understanding how the new consumer expectations are challenging retailers in new ways and off offering opportunities that the retailers have not had in the past. All of this creates a need for retailers to invest in in areas that they have not invested in before. It changes their spend.

It also means that they need to invest in new capabilities that they’ve not had before. But all of this means that it’s just accelerating. If you’re relevant, if you meet up to the consumer expectations as a retailer, you are thriving in this environment. If you’re not, you’re really struggling. And it means for us as an industry and for iTab as a group that we need to become much more agile.

We need to be really laser focused on capital spend, the profitability, making sure that we are efficient from day one. And and this is a big trend shift from the way the market was before where it was more long term. You could plan in advance. The programs, they they ran over several years, and now it’s a short decision making, short execution time, more project based, and and that’s really something that has changed. For the retailers, they really have a dilemma that they have to invest in experiences, and at the same time, they have an increasing cost pressure.

And that leads them to being super focused on making sure that they only execute on business cases that give them a strong return on capital. And that’s why we have, for the last couple of years, been very focused on working on delivering outcome based value to our retailers. And we have changed our value proposition. We are gradually changing our way that we address the market in order to secure that we deliver the desired consumer brand experience that the retailers want. And that is no longer enough, to to build fantastic, beautiful, inspiring stores.

They also need to drive increased sales and conversion. And they need to deliver improved efficiency and improved service to the to the consumers. And at the same time, if you can do those things and reduce the operational cost for the retailer, you have a really strong value proposition. And I would say that when we are in that sweet spot and we have a couple of our areas in our solution portfolio that really does this. We we see, no hesitation in decision making, but it takes a long time for the retailers because they need to they need to understand what the operational effect is, and it’s no longer procurement making all the decisions like it was in the past.

Things are changing. But this has helped us to transform and drive profitability up, and this is also the ambition for us to do in the combined much larger ITAP group is to continue to focus on driving tangible outcome for our customers that will deliver outcome also for iTAB and our shareholders. The consumer journey that we are affecting today, this is maybe a bit of a special slide. It has two sides. The left side is how we influence retailers today, and on the right side, it is how we will influence retailers in the future.

So on the left side, our solutions, our interiors, our lighting, our retail technology, our our services, and our solutions, we influence the consumer journey, both the if it’s inspiring, if it’s efficient, etcetera, but we also affect the retailer’s whole fleet of stores. And in the future, we need to continue to influence those aspects, so the the buying experience, the consumer experience, and and how efficient you can operate a fleet of stores. But the retailers, they have this cost dilemma. They need to be able to invest and at the same time take out cost. In order to do that, it will no longer be enough just to take it out from your stores.

You have to also take that out from your value chain. So you need to leverage data that you collect from all your channels as a brand, including the physical store. So we see an increasing need of data, technology, connectivity, and that you then share that insight across your supply chain as a retailer so you can drive efficiency also with your suppliers and through that, lower your costs. It means for us that we need to invest more in technology. We need to invest more in services.

We need to become stronger in data and connectivity, and all of these things cost money. We need to have traceability. We need to be environmental friendly and know where our goods are coming from and our ingoing material. And all of these things require a certain size, and that is a big part of the rationale why iTab decided to grow through this acquisition of H and Y. Together, we become much stronger and we’ll be able to afford to live up to the expectations that retailers will have of us going forward.

We’ve had a strategy that has really served us super well the last couple of years, the one item strategy. It has delivered on on when we had to stabilize the company and simplify by restructuring our costs. We put a tick box on that. We then wanted to amplify that base by investing in new capabilities and offering new solutions and change our go to market model, update our inner workings, so to say. That work is a small tick box on because it’s still ongoing.

We’re still we’re still kind of driving efficiency through changing ways of working and the IT tools that we have internally. And then expand, that was the purpose of our strategy to not just focus on restructuring and investing, but actually delivering growth and expansion and and sustainable profitable growth. That is a big tick box due to the acquisition of H and Y. But it also means that we need a new strategy for the future. And we have just started up that work, and we are going to come back to you towards, I would say, either the very end of the year or the beginning of next year and communicate our new strategy once it has been developed and then later approved by our board of directors.

In conjunction with that, we might update also our financial targets, but that is not decided yet. And by that, I stop talking and I hand over to questions and answers.

Conference Moderator: The next question comes from Karl Johan Bonnevier from DNB Carnegie. Please go ahead.

Karl Johan Bonnevier, Analyst, DNB Carnegie: Good morning, Andreas and Andreas. Difficult quarter. And I guess it doesn’t it become easier for us to understand given the very, very strong profitability both units, as you pointed out, had in Q2 last year. So maybe we could start then. And when you now looked at the numbers for Q2 last year, particularly on the HNY side, Andreas, do you feel they are representative, so to say, of things?

And do you feel confident then also going into the second half with looking at what the H and Y did on a pro form a basis last year? I always find it difficult to relate to pro form a numbers as nobody really has a commitment to them. So it would be good to get your feeling for it.

Andreas Ellegard, CEO, ITAP Group: Yeah. I I would say that in in q two, both for iTab and for H and Y were all time high. So that needs to be, kept in the memory when you compare when you just look at comparability between the two quarters. And I think Andreas was onto something when he presented that a rolling 12, we’re we’re basically spot on between where ITA were were before the acquisition and where H and Y were before the acquisition. So I think that we’re quite spot on there.

What we see I mean, how to judge? I would say that H and Y is very similar to to ITAB, that the project nature of our business means that if there is a big rollout and and I know there was a there was a huge rollout of high margin products in q two both for ITAB and for HMI last year, then that affects. And once that job is done, that is not recurring. But what is recurring is, of course, the customer relationships. We we hardly lose any customers.

But, of course, these customers’ needs vary a lot over time. So I expect us to be able to be more stable quarter by quarter going forward, but we will continue to see these fluctuations. But our larger footprint will make us maybe fluctuate slightly less than before. The the macroeconomics are playing in somewhat, but I would say it’s more the the comparability that is playing in. And then, of course, we knew when we acquired H and Y that we we had we knew the homework that we had done on the ITAP side, and we knew that we had some homework to do also in the combined group.

That’s why when we come when we communicated the the synergies and the intention to acquire, we also communicated that we needed two and a half to three years before we could have full realization in the p and l and also that we would need costs to realize that that we need we need transformation costs in order to release the synergies. So I would say that we have no need to to change any of our outlook for the future based on what we promised back then when we announced the deal. On the contrary, we have seen that the synergies are there. We we we have started working on them, but it takes time, and it takes some time before they are visible in the p and l. But we we have no yeah, we’re really optimistic about the future.

The integration work has gone between people, I would say, on a cultural and people level have gone better than expected. Of course, there are some some some obstacles, some getting to know each other that we need to do even more. But all in all, it’s it’s overwhelmingly positive. We mentioned in the report operational issues, and and we specifically point out France. And we we can say that, that we we are disappointed by the performance of France so far this year.

It has been a clear deviation from what we expected. We have been able to understand why, and we have taken corrective measures. Some of them will be able to be corrected quickly. Some will need some more time. But then already in our plan to to drive efficiency, we we knew that we had a work to do, not just in France and not just in in legacy H and Y, but across the group in order to release those synergies.

So sorry for the long answer, but I I think that maybe gives you some flavor on where we are in the quarter. So, of course, we would have if France didn’t have some of the issues they had, we our comparability would have been clearly better. But we are where we are with that, and we have identified what we need to do, and we’re doing the work.

Karl Johan Bonnevier, Analyst, DNB Carnegie: I very much appreciate all the color, Andreas. And I thought you mentioned or the other Andreas mentioned that if you look at the legacy item, profitability year on year was up. Was that the LTM number? Or is that H1? Or is that because obviously, it can’t be Q2, let’s say, in that respect.

Andreas Ellegard, CEO, ITAP Group: You want to take that?

Andreas Helmerson, Acting CFO, ITAP Group: Yes. I think we referred to reported numbers. So comparing Itagroup last year to this year, there was an increase in EBIT, which we pointed out on one of the slides also.

Karl Johan Bonnevier, Analyst, DNB Carnegie: Excellent. And then I guess that at least crystallizes the challenge, as you pointed out, Andreas, to maybe France and the legacy H and Y operation. And I appreciate very early in the integration and all these kind of things. But when you now then look at, as you said, the proactive measures needed to be taken, how much help do you have of the toolbox that you created for yourself in the one ITAP process? And what could we then, yes, expect being corrected short term?

What is something more for maybe for a question for ’26, ’27?

Andreas Ellegard, CEO, ITAP Group: I think, I mean, we should you guys don’t need to wait until ’27 before you see the effects. I mean, we are going to also report the, I mean, how we are how we are performing, how much of synergies that we have identified, how much we have executed upon, and how much that have been realized in the p and l. We are going to have that type of reporting when it’s it’s too early to start that now because we are starting up a lot of activities, so it’s a bit too early. But we’re we’re going to come back with that. I would say that is part of the tools that we used in ITAP.

We were really focused on driving, identifying where the biggest value drivers were and then focusing on making them happen. Then in in legacy ITAP, it was not always that we succeeded, but we were always then looking for for complementing actions. So and in the end, we delivered on all our promises. And it’s exactly the same now with with a bigger, larger ITAP, but we have identified where these synergies are. And I and I want to be super clear to to shareholders and everybody listening to this, but also the employees.

It is not just within legacy H and Y that these synergies are being found. They they are found across the board, I would say. But, of course, we knew that there were operational issues before we we stepped into the bigger group, and and we knew that we had to address them. One of the things that we did successfully in ITAB was to make sure that focus is not on top line, which is not always what the stock market wants to hear, but the focus is really on the bottom line. That profitability comes first.

We should not go after new sectors or new customers or new deals that drives turnover but doesn’t materialize on the bottom line. That has been a big part of our toolbox in ITEM, and that and we are applying the same toolbox now. That it will take time because this is it’s behaviors that need to change, it’s mindsets, and it’s insights that needs to be understood. So that’s one thing. The other thing has been capital.

H and Y are quite strong in their capital, but we need to make sure that we leverage the combined purchasing, the combined power, and that the the combined, I would say, capabilities as a group to continue to drive capital efficiency even further. That is something that we’re really focused on. And the reason why we have a little bit negative cash flow this quarter, I would say it’s it comes from growth. It comes from inventory. It comes from several things.

Some of them are indications that things will be better. Some of them are indications that we that we’ve had growth behind us. So that so we will use all the tools, and there and there’s plenty of tools also on the HMI side that we’re also applying. So it’s it’s really, yeah, learning from both companies.

Karl Johan Bonnevier, Analyst, DNB Carnegie: Excellent. And and just on the working capital side, there is no reason to believe that we are not gonna see, they’ll say, the same kind of normal seasonal pattern where a big cash flow relief comes in in q four. It’s gonna be geared to that this year as well, Or?

Andreas Ellegard, CEO, ITAP Group: I mean, that’s a forecast that we are not given giving. So, I mean, we are we are we know that we have a seasonality in the business, but we also know that depending on the macroeconomics, if if things change, if we get a certain burst of growth, we might need capital. So we are not I think that there’s so much uncertainty in the market that we we refrain from forecasting. But we but we feel confident with our plan that we have for everything that we can influence in terms of integration, realizing synergies, and so on. But but the world around us, we just need to manage.

Andreas Helmerson, Acting CFO, ITAP Group: And I can just Very logical. Add to that as well that this I mean, we we are in the same business with the same type of customers. I mean, there’s slight shift of exposure from Northern Europe to Southern Europe, which which impacts capital efficiency to some extent. But there’s no reason H and Y should differ on sort of the normal pattern of our business. And then we can always say, looking back at the years I’ve had so far here, that a certain rollout in a couple of big projects might impact what you normally see as a seasonal pattern at that in the shopfitting business.

So there’s always exceptions in the project side of business.

Karl Johan Bonnevier, Analyst, DNB Carnegie: Thank you for the clarity. And one final for me. Looking at joint sales initiatives, I see that you in the report threw out things happening on the Lightning and the Tech Solutions side. What is your feeling, Andreas, when you now can expose your whole portfolio to a larger amount of potential clients? Are there easy sales to be had here that, as you point out, the higher return on investment, say, phenomenon, all these kind of things that could help you, say, in the next six to twelve months coming out of those kind of joint sales efforts?

Andreas Ellegard, CEO, ITAP Group: I I would say that, I mean, we are in a market that is having fierce competition, and there’s no lack of people that want to offer our customers their services. The the good thing, though, however, then, is that we very rarely lose any customers, and we have strong customer relationships in all our units, I would say. And we have seen a lot of curiosity and openness from our new colleagues when it comes to, especially, solutions or products that they don’t have within their portfolio previously. So right now, we are really we’re we’re educating our new colleagues on on how to sell and what the benefits are from some of our solutions. And we have already seen some of the first sales happening on both lighting and, I would say, gates mainly.

But there are also other things that we are exploring that we can do more of going forward. So I don’t think there will be any lack of of, buy in from from our Salesforce. It will more be that we need to make sure that our customers, see the benefit of testing testing us on new solutions because it means that they need to exchange some of their their current partners. But but we really we really have strong customer relations to leverage, so that’s why we have put in. I I think of the synergies that we have reported, we have said that approximately €10,000,000 will come from commercial upside.

And and and that is the majority comes from our high margin products, Inita, but HNY don’t have. But, of course, there will also be sales going in the other direction, customers that H and Y has where they have not had a strong market coverage in some parts of Europe, for instance, where we do have that coverage now together, that will also help to drive commercial upside.

Karl Johan Bonnevier, Analyst, DNB Carnegie: Excellent. Sounds encouraging. Thank you very much for all the glaring extra granularity, and all the best out there.

Andreas Ellegard, CEO, ITAP Group: Thanks. Thank you.

Conference Moderator: The next question comes from Erik Sandstedt from Kepler Cheuvreux. Please go ahead.

Erik Sandstedt, Analyst, Kepler Cheuvreux: Thanks. Erik Sandstedt here with Kepler. A few questions. I mean, mentioned the problems in France here in the quarter, but could you share some more details on what you’re referring to?

Andreas Ellegard, CEO, ITAP Group: Yeah. I can I can be very transparent that there’s there’s been a couple of, I would say, operational issues, not to go into numbers, but some of them comes from new customer agreements that was made during the autumn based on a new calculating model where it was believed that the cost had gone down, but it was wrong? So the cost had not gone down. So there has been some wrong assumptions, and then some agreements have been made. And we are then correcting those stepwise.

And you all understand when you have somebody on the other side of an agreement, need to do that in partnership. So that is one part of it. So it’s very I mean, it’s very clearly identified. Other things have been I mean, there have been some maybe bookkeeping technicalities. But then there has been also a couple of new customers in new sectors that has been won.

And when they have the first number of projects have been executed, there has been operational and quality complications that were not good. And that means that you have to you have to take things back. You have to produce again. You have to send your installation crews again. So it drives a lot of costs additional cost without adding any turnover, of course.

So it has been those types of operational issues and that have impacted us. Then I would say also maybe one change that in France I mean, I think we all know that last year, France was really booming, the first half of the year. And then the second half of last year, France were struggling. That’s also to be taken into account. I mean and we know that France was booming before the Olympics.

And then after the Olympics, there was kind of a settlement in the in the French economy. There was also some quite a lot of political turmoil in in France that have caused some of this. But all in all, we, I mean, we are the market leader in France by far. So we have a very strong position. We just need to get our ducks lined up and make sure that we have good teamwork and that we understand what we do.

So we’ve also done some some there’s been changes in management, and there has been changes in the regional management after the merger, some before and then majority after. And and there we have strong strong confidence in in the team that is now working on this. I don’t know, Andreas, if you want to add something to what I said.

Andreas Helmerson, Acting CFO, ITAP Group: No. I think a good summary, we can just also say that there’s been actions taken in the last during q two and that we do see an effect from some of those actions.

Andreas Ellegard, CEO, ITAP Group: Yeah. But Already where it continues. Yeah. Already in June, we have seen some effect of that. So we are we we believe that we will be able to improve the situation short term, but then we also have a long term work to do.

Erik Sandstedt, Analyst, Kepler Cheuvreux: Okay. Thanks for that. And then also in terms of cross selling activities between the legacy Itau and H and Y, can you give any examples of where this has already happened?

Andreas Ellegard, CEO, ITAP Group: Yeah. I will not go into customers, but we have we have succeeded in selling lighting products to existing legacy HNY customers. So thanks to the good customer relationships, these customers have agreed to to try the the new products that comes from the combined group. So that’s one example. There has also been H and has had collaboration on gates with one of our competitors.

So that is, of course, changing now. So there are some some sales coming there. Then H and Y have not been super focused on gates like we have. So we are now educating the teams, and we are the switching then the competing products to our products. And and step by step, we are we are going to see an increase of that sales.

Then we need to realize also that Southern Europe doesn’t have the same tradition as, I would say, Central Or Northern Europe when it comes to using gates in stores. But we have seen the same trend in Southern Europe when it comes to shrinkage or theft in stores, and that’s is just a big problem in Southern Europe, but as as it has been across, I would say, Northern Europe and in Australia and North America. And we see an increasing curiosity from retailers in these regions to explore what our solutions can do and how they can help them. But but I want to remind everybody that usually those sales process are quite long because it impacts not just the entrance and the exit of the store. It then it it impacts the experience.

Sometimes it becomes better. Sometimes it it some consumers think it’s it’s different. But but you also need to then adjust the flow of the store, and you need to do several other things. It’s not just to put product in. You need you need to really buy into the solution.

So, usually, the big orders comes after quite long periods of discussing and testing, piloting, and then the orders come when they feel confident that this is something that they will be able to operate within their fleet.

Erik Sandstedt, Analyst, Kepler Cheuvreux: Thanks. Actually speaking of that, what share of your business is loss prevention? Are you ready to sort of give any details here? I think you’ve earlier said

Andreas Ellegard, CEO, ITAP Group: And year. So it’s it’s interiors, it’s gates, it’s digital capabilities, it’s sometimes also checkout solutions. So it is a mix, and and it’s very it’s different from customer to customer. So I don’t think we are going to communicate a percentage of that, but we’re we are I’m not sure if we have communicated the retail tech percentage in this report, but that’s something that we can come back and and do going forward because it is something that we have. I know that you guys have enjoyed following that in the past.

So we can we can try to come back to that also going forward.

Erik Sandstedt, Analyst, Kepler Cheuvreux: Yeah. Thanks. And then finally, a few sort of more detailed financial questions perhaps. But in terms of the amortizations of acquisition related intangible assets, how much were they in the quarter?

Andreas Helmerson, Acting CFO, ITAP Group: As we have communicated earlier, we need to come back during the autumn on that. So we need to fully complete the acquisition when it comes to completion accounts, and then we need to do a purchase price allocation exercise and then come back to an exact figure.

Erik Sandstedt, Analyst, Kepler Cheuvreux: Yes. Fair enough. And also, financial expenses were somewhat higher than I had expected at least in the quarter here. You do mention currency effects and hyperinflationary accounting. Were those sort of latter effects materially in any way?

Or how should we think about that number going forward?

Andreas Helmerson, Acting CFO, ITAP Group: Yes, that’s true. We are impacted by we were impacted by the acquisition. We’re impacted by hyperinflation, as you say, and currency impact. So all in all, we are sort of seeing financial expenses and net financial items in sort of according to plan. And as these sort of one off effects will settle, we’ll be able to come down a bit.

Erik Sandstedt, Analyst, Kepler Cheuvreux: Yes. And then just finally from me. I also noted that other operating expenses in the income statement showed a larger loss here compared to the same period last year. I think it was SEK 19,000,000 now. Was there anything specific on that line?

Andreas Helmerson, Acting CFO, ITAP Group: No. Not not that I have an answer on now. No. I need to look into that.

Andreas Ellegard, CEO, ITAP Group: Can we look into see and come back to you?

Erik Sandstedt, Analyst, Kepler Cheuvreux: No. It’s it’s it’s fair. Yeah. I just wanted, you knew it, sort of on top of your head, but not a big deal. Thanks a lot.

Andreas Ellegard, CEO, ITAP Group: Thank you.

Conference Moderator: Next question comes from Karl Johan Bonnevier from DNB Carnegie. Please go ahead.

Karl Johan Bonnevier, Analyst, DNB Carnegie: Just coming to back on the PPA amortization question. I note in your pro form a calculation, you have done some sort of at least approximation that seeming to be EUR 20,000,000 related to PPA. Is that maybe your best guess at this moment, given that you haven’t finalized the numbers? Or how should we see that?

Andreas Helmerson, Acting CFO, ITAP Group: Yes, there’s no we haven’t seen any reason to adjust what’s previously communicated.

Karl Johan Bonnevier, Analyst, DNB Carnegie: And maybe you can then refresh me on the on the previous communication because I haven’t heard you communicate anything on that.

Andreas Helmerson, Acting CFO, ITAP Group: No, I think I mean, you can see the difference between the pro form a, what we call EBITA communication and and what’s reported. So so we are we are doing an approximation so far, which you can calculate. But when with regards to what the final number will be, we have to come back following the summer here.

Andreas Ellegard, CEO, ITAP Group: We we’re still in

Karl Johan Bonnevier, Analyst, DNB Carnegie: And and and Yeah.

Andreas Ellegard, CEO, ITAP Group: Sorry. I I was just like Andreas said before, that we’re still in discussing the closing accounts with the with the seller. So there might be some small adjustments coming out of that. If there are any adjustments, they will they will be positive for us, I think. So there are no there are no negative surprises that could come out to that.

And

Karl Johan Bonnevier, Analyst, DNB Carnegie: best guess on on PPA amortization would be about 80,000,000 a year or something like that, Dan. Yeah.

Andreas Ellegard, CEO, ITAP Group: What I think what we have put in is is our approximation for now. And and then we have that caveat that or disclaimer that we where the work needs to be finalized before it can be before we’ll come with further details. But we can also we can we can look into this question and see if we can provide some more flavor. So we need to take that back and come back with some more flavor.

Karl Johan Bonnevier, Analyst, DNB Carnegie: That’s fine. That’s fine. Just on integration costs, given what you now see in the operations, so to say, on opportunities on both sides, do you still think earlier guidance for integration cost is still valid? Or is there bigger opportunity?

Andreas Ellegard, CEO, ITAP Group: I mean, with bigger opportunities, you mean that they could be lower?

Karl Johan Bonnevier, Analyst, DNB Carnegie: Or yeah. Or higher than you than that because you see bigger opportunities as well on, I guess, the Yeah. Side. I

Andreas Ellegard, CEO, ITAP Group: think that is too early to say. That what I speak to now is that the promises we have made when it comes to the synergies is is what I’m really aiming to keep or what we are aiming to keep. So and we have no reason to change or, I mean, in either direction, these numbers. And and we put in quite a healthy amount of costs as well. And I just want to remind everybody that those are the costs to do to realize the synergies.

We also have some some costs that we are adjusting for one offs that are more connected to the transaction. So transaction related costs, they are not part of that, the synergy realization. That is more of an operational character, I would say.

Karl Johan Bonnevier, Analyst, DNB Carnegie: Excellent. Thank you very much. All the best out

Andreas Ellegard, CEO, ITAP Group: there. Thanks.

Mats, Unspecified, ITAP Group: Okay. So we don’t have any more

Conference Moderator: questions. Yes.

Mats, Unspecified, ITAP Group: Thank you. We have one written question. And it reads, were there any larger orders in either ETHUB or HNY in q three or q four of last year?

Andreas Ellegard, CEO, ITAP Group: Yes. There I I think we communicated that. I don’t Matsu, maybe you can help me to remember here when we communicated those. Maybe they were maybe they were because some of that came in then in q one and q two in in the, I would say, profit and loss, but I don’t remember if the orders were taken. We we always have high I mean, we each deal that we do needs to be won, but we only communicate them when they are, I would say, €8,000,000 or above in size.

That’s when we communicate them to the market because then we think it it it has a a broader interest. But I don’t maybe, Mats, if you’re looking if we had something that we communicated of that nature.

Mats, Unspecified, ITAP Group: Yeah. We we didn’t we didn’t present any major deals. Maybe it was on

Andreas Ellegard, CEO, ITAP Group: maybe it was in q one that those presentations

Mats, Unspecified, ITAP Group: were made. Yeah. We we had we had a couple of of deals in in the that we presented in August and September. One was for a shop in shop concept, and that was for €20,000,000, in total. And the other one was for a financial, player in in in The UK.

But looking at the shop in shop concept, for instance, that was €20,000,000 over four years. Yep. And the financial service provider, that was also €22,000,000 over four years. So it’s not specifically for these two last quarters in in 2024.

Andreas Ellegard, CEO, ITAP Group: But but maybe we can comment and give some more flavor to this question because I assume that somebody is trying to understand what to expect going forward. And and we don’t give forecasts. But but, of course, the first half of twenty four for iTab prior to the acquisition was outstanding. It was really outstanding. And and and I tried to remind everybody back then that you cannot expect this going forward.

You should expect this now and then, but not in every quarter. That being said, the start of ’25 have been, I would say, good in in many aspects, especially the deal and the integration. But we have met we have been up against really, really high comparable figures. When we look forward into the rest of the year, we, if you look back to ’24, you those of you who were around, you remember that, ITAP didn’t have the we didn’t repeat the strong start of the year. We had we had a more normal finish of the year.

So those are the figures that we’re meeting on the iTab side. And then, of course, now we have we have we are a combined business. So I need to remind everybody that we are we, of course, have HNY with us in in all the figures now. But pro form a, we are meeting figures that we have a a chance a a good chance to be compared against. But, of course, if you just look at item stand alone, the reported figures, I mean, we we are already now delivering more value, than before.

And I so even though we have that extremely strong start. So I I think that’s zooming out. I’m really happy what we have done, and I think that, two and a half years from now, those of you that hang in there for during that period, you’re also going to to see that, we are a much stronger company, when we’ve gone through all the things that we need to do.

Mats, Unspecified, ITAP Group: Okay. Thank you. We have a few more questions coming in now. Are you experiencing the same sales affecting market environment attitude in q three as in q two?

Andreas Ellegard, CEO, ITAP Group: I mean, we we don’t give forecasts about q three. What we are what we are communicating in our reports, and we have since, I would say, since fourth quarter last year, is that there is hesitation in the market. And and that comes not from us or our performance or from our it comes from the the general confusion in the finance markets, and what to expect, what what to plan for. And even though we are not have a very high exposure to tariffs to North America to US, of course, we have we have sales in US, but we are not that affected in in in a large scale. But the whole general uncertainty that people don’t know what will happen with them with the interest rates or with the consumer confidence, those things makes large many companies, not just within retail, but many are hesitant about the future.

And that’s that hesitation is affecting us just like everybody else. But I don’t think iTab is hit, in any worse way than our competitors. I would say, on the contrary, we have a larger footprint now, so we are probably going to be able to be more stable. But but I would say that is affecting the market is hesitating. And, I mean, one week ago, most experts believe there would be maybe 10% tariffs, and now we get, the European Union is is facing maybe 30% tariffs.

So it’s this will affect the general economy more than anything that iTab can influence. But, everything we are doing, we feel quite confident, about. Yeah. Yeah. But we don’t we don’t give forecasts, for the future.

So sorry for that, guys. And and the reason for that is not that we don’t know what’s going on or that we maybe wouldn’t be able to, but it is the nature of our business being very, first of all, seasonal, but also being then very project driven. And depending on how our customers make their decisions, it can fluctuate a lot. And and we don’t want to be spend all our reporting time explaining why our forecasts are deviating positively or negatively. So we believe in, doing the job and delivering the results, and then you guys need to, value us based on that.

Karl Johan Bonnevier, Analyst, DNB Carnegie: Yeah.

Mats, Unspecified, ITAP Group: Maybe a follow-up on that then. Assuming, the market uncertainties are eased in the near term, could this lead to a back loaded year, I. Assuming orders not made in q one, q two will be made later?

Andreas Ellegard, CEO, ITAP Group: I mean, if the general economic climate improves and hesitation goes away and consumer confidence returns, that’s fantastic for retailers. That means that they will have confidence to invest as well. So, I think that we are all it’s all guess working what will happen. But if we get more stability, then that is good for everybody, I think. But, those things we cannot influence, so we focus on all the things that we can influence.

Mats, Unspecified, ITAP Group: Yeah. And the final question is, I mean, irrespective of the project based business that affects quarter on quarter comparison, looking specifically on on Itau standalone, would you expect that the sales mix in 2025 will reflect the one in 2024 on a full year basis?

Andreas Ellegard, CEO, ITAP Group: It’s also a forecast question, so I will not answer that. But what we write in the report is that so far this year, legacy ITAB have had a strong performance, I would say. So that’s what we have written. And so I will not give kind of, I will not reveal what we see in our crystal ball because also for us, it’s a bit shady. So we I will not give the forecasts.

Mats, Unspecified, ITAP Group: Okay. Thank you very much. That was the last question. So I’ll hand over to to you, Andreas, to conclude the meeting.

Andreas Ellegard, CEO, ITAP Group: Thank you, Mans. So I just say a big thank you guys. And maybe the main takeaway from the report is that compared to I mean, pro form a compared to last year where we had exceptional results in in both groups, not the combined comparison is maybe not so impressive. But when you zoom out as a shareholder, there is EBIT growth on on Niteb. We the integration work have started really well, and we have we have seen now bottom up that the synergies are there, and we will go for them.

We have started that work. And and we’ll continuously report back to you guys. Maybe towards the end of the year, we will start that work so you can have some transparency on how our synergy realization is progressing. Okay. Big thank you for everyone that have listened, and hope to have you with us also when we come back with the third quarter.

Bye bye.

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