Key messages and Q&A on Interim Report Q1 January-March 2024

General & market environment

The slowdown in demand on the market continued during the first quarter. The Swedish market experienced weak development, in accordance with what we have seen the past year, while the slowdown in Norway and Finland also continued.

The weak sales trend can be seen in most of the Group’s industry segments, except for oil and gas in Norway. Easter fell during the first quarter this year, providing an unfavourable calendar effect. Sales in Finland were also adversely affected by a strike that paralysed logistics functions and industrial facilities.

During the first quarter, Alligo continued to offset the underlying changes on the market by making adjustments to our cost structure, while also continuing to work to strengthen our offering and position. Alligo is well equipped to handle the conditions on the weaker market and our focus is on what we ourselves can influence.

Revenue, sales and operating profit

Revenue decreased by -5.2 per cent to MSEK 2,169 (2,287). Acquisitions made had a positive impact on revenue, but this does not compensate for negative organic growth on all markets, negative currency effects and there being one trading day fewer.

A significant Easter effect and a strike in Finland had an estimated impact on sales of around SEK 75 million.

Operating profit amounted to MSEK 65 (112). Adjusted EBITA (operating profit excluding items affecting comparability and amortisation of intangible assets arising in connection with corporate acquisitions) amounted to MSEK 84 (127), corresponding to an adjusted EBITA margin of 3.9 per cent (5.6).

The decline in profit was the result of weaker demand on all markets, as well as the negative impact of Easter and a strike in Finland, which are estimated to have affected adjusted EBITA by around MSEK 25. Improvements and cost adjustments are offsetting the weaker sales to a certain extent.

Work is under way to increase the level of activity in sales work and to strengthen margins within the industrial segment through improved sales and assortment management, as well as to make further adjustments to the cost base.

Q&A

What could potentially make you more concerned about not increasing profits in 2024?  Now, leaving Q1 behind us, what could surprise us potentially going forward?

• We are progressing with whatever we have said we should address. Besides a general upturn in the market, the inflation challenges we have had in the past, is not there anymore, and not in our assortment.
• Our shipping needs to go around the Suez Canal. This drives costs and takes a bit extra time, pushing the inventories up.
• However, besides that, what is known so far, it is nothing that should affect us.  Alligo has a good set of warehouses, a good integrated model, so no other internal investments or risks.
• Going forward, Alligo will continue to focus on sales, operational efficiency and acquiring profitable companies that are aligned with our business. 

Could you explain the difference you see in demand vs small-medium customers vs larger customers, both within the construction and the industry as a whole?

• We have an unfavourable mix at the moment, as our smaller customers are suffering more, but the top-line drop is not so dramatic. Alligo is also supplier to the largest industries in our countries and they grow a lot.  Normally the bigger the customer, the lower the margin.
• Alligo’s strategic direction remain – we need to increase the share of small- and medium-sized customers. Marketing activities are aimed at achieving that.
• We need to increase the traffic to our shops in all our countries – where we have our strong assortment and knowledgeable and service-minded colleagues serving our customers.  

Regarding acquisitions, can you quantify the pipeline – can the market expect the same acquisitions volumes as in 2022 and 2023?

• Alligo has a quite strong acquisition pipeline at the moment, with better companies in defined growth sectors. 
• The Finnish acquisitions that we communicated on April 24, are exactly the type of acquisitions Alligo would like to make in the future – well-run businesses with a good customer structure and suppliers to the defence industry and in goods.  

How will you position the new brand in fasteners, INNO in the market?

• Quality-wise INNO is the same as any other brand in fasteners.
• However, it is more interesting for our sales organisation to talk about own brands, we also have a more modern shelving system in the shops.
• To summarise, it’s our ambition that INNO will improve the Group’s profitability on existing customers as well as gain new competitiveness to take new market shares.