Key messages and Q&A on Interim Report Q2 April-June 2024

Alligo published its Interim Report for April-June 2024 on Wednesday July 17, 2024, at 8:00 am CEST. Here are the key messages and Q&A on the report.

General & market environment

The market continued its weak development during the second quarter, which had an impact on sales.

The slowdown in demand during the quarter applied to most customer segments except for oil and gas in Norway, which continued to develop well. It is predominantly small and medium-sized customers that have been affected by the weaker economy, while sales to some larger industrial customers have increased.

However, the company’s cost adjustments have paid off. We have been able to cope well with the challenging market situation.

Revenue, sales and operating profit

Revenue increased by 1.8 per cent to MSEK 2,432 (2,388). Acquisitions made, an additional trading day because of Easter occurred during the second quarter last year, and positive currency effects had a positive impact on revenue and overall compensated for negative organic growth in Sweden and Finland.

Revenue from like-for-like sales, measured in local currency and adjusted for the number of trading days, decreased by -3.5 per cent compared with the corresponding quarter last year.

Acquired growth amounted to 3.1 per cent.

Operating profit amounted to MSEK 147 (183). Adjusted EBITA (operating profit excluding items affecting comparability and amortisation of intangible assets arising in connection with corporate acquisitions) amounted to MSEK 166 (201), corresponding to an adjusted EBITA margin of 6.8 per cent (8.4).

The decline in profit was the result of weaker demand on all market (except the oil and gas customer segment in Norway), and pressure on margins driven by a smaller proportion of small and medium-sized customers, while sales to some larger industrial customers increased. 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 establish a more favorable customer mix as well as to strengthen the sales and assortment management to improve margins.

Q&A

Q1. This is the second quarter with a weak development in sales – can you summarise on-going mitigating actions to handle the challenging/weak market?

• We continue to focus on what we can influence ourselves – sales and assortment management, to make profitable acquisitions and to strengthen our offering – so that we are ready for profitable growth when the market turns.

Q2. Can you provide some more information on the market outlook for 2024, have you seen any signs of a turnaround in Q2? If not, when do you expect to see signs of a turn around?

• We can sense a cautious optimism among our small and medium-sized customers. It is difficult to predict, however, when the weak market trend will change.
• In Sweden, a combination of lower interest rates and the ROT tax deduction could support a turn-around and have a positive effect in the market for SME customers.
• Alligo is well-positioned in a weaker market and ready when market returns.

Q3. Could you elaborate a bit on the difference you see in demand versus small-medium customers versus your larger customers out there, both within the construction and the industry as a whole?

• The slowdown in demand during Q2 applied to most customer segments except for oil and gas in Norway, which continued to develop well.
• As we have said before, it’s small and medium-sized customers that have been affected by the weaker economy, while sales to some larger industrial customers have increased.
• We can sense a cautious optimism among our small and medium-sized customers. It is difficult to predict, however, when the weak market trend will change.

Q4. Can you mention something positive that you have gained from large customers the last quarters?

• We definitely have a stronger relationship with larger industrial customers today and have an extensive on-going activity list to convert larger customers to other assortments and brands
• One activity is the new launch of workwear and PPE under the 1832 brand that will offer more basic products at attractive prices without compromising on quality or our margins.

Q4. Alligo signed 7 acquisitions in the quarter – how is the acquisition pipeline going forward? Is it possible to specify interesting sectors?

• We still have a strong acquisition pipeline and have identified our growth sectors, as welding. It’s our ambition to continue making profitable acquisitions of well-run businesses – within our growth areas.
• Alligo has a strong balance sheet and an effective integration model that provides good conditions for continued acquisitions.

Q5. Could you elaborate on the cost savings – how much have you saved so far and how much do you expect so save in the coming quarters?

• The cost adjustments we have initiated so far has paid off and are equivalent to approximately MSEK 100 per year.
• We will continue to adjust our costs as long as the market remains weak and uncertain.