Key messages and Q&A on Interim Report Q3: 1 July-30 Sept 2024
Alligo published its Interim Report for July-Sept 2024 on Thursday Oct 24, 2024, at 8:00 am CEST. Here are the key messages and Q&A on the report.
General & market environment
Alligo’s result in the third quarter followed the trend from the previous quarters of weak demand and reduced organic sales.
The slowdown in demand during the quarter applied to most customer segments with the exception of oil and gas in Norway and the public sector in Sweden, 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.
To drive profitable growth even in a weak market, Alligo will continue with cost reductions but also invest heavily in developing and strengthening our offering, improving sales work and implementing strategic acquisitions.
Revenue, sales and operating profit
Revenue increased by 1.0 per cent to MSEK 2,143 (2,122). Acquisitions made and an additional trading day had a positive impact on revenue and overall compensated for negative organic growth in Sweden and Finland as well as negative currency effects. Organic growth amounted to -3.0 per cent, with a slightly positive contribution made by three new store openings. Acquired growth amounted to 4.8 per cent.
Revenue from like-for-like sales, measured in local currency and adjusted for the number of trading days, decreased by -3.4 per cent compared with the corresponding quarter last year.
Operating profit amounted to MSEK 115 (175). Adjusted EBITA (operating profit excluding items affecting comparability and amortisation of intangible assets arising in connection with corporate acquisitions) amounted to MSEK 137 (191), corresponding to an adjusted EBITA margin of 6.4 per cent (9.0).
The decline in profit was the result of weaker demand on all markets and pressure on margins driven by a smaller proportion of small and medium-sized customers, at the same time as sales to some larger industrial customers increased. Cost adjustments are offsetting the weaker sales to a certain extent.
Q&A
Q1. You continue to report reduced sales due to a weak market – Could you summarise what mitigating actions you have initiated to handle the challenging market?
- We adapted our cost structure at an early stage and it is frustrating to see our development in the third quarter following the trend from the previous quarters of weak demand and reduced organic sales.
- To drive profitable growth despite the weak market, we are currently investing heavily in developing and strengthening our offering, improving sales work and making strategic acquisitions.
Q2. You mention that you see positive signs on the market. Can you elaborate on these signs and when you expect them to be reflected in sales?
- We can sense a cautious optimism among our small and medium-sized customers, but it’s more a hinge than something that is reflected in their orders. Based on this hinge, it is difficult to predict, however, when the weak market trend will change.
- We are confident that we are focusing on the right things, and we are ready to take advantage of an improved economy quickly, 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 Q3 applied to most customer segments except for oil and gas in Norway, which continued to have a stable development.
- The reduced demand from small and medium-sized companies is offset to a certain extent by increased sales to larger industrial customers, but this means lower margins.
- Even though the market in Construction, especially housing is challenging, we are targeting sales in those areas where we see potential, such as infrastructure and service business.
Q4. Alligo closed 4 acquisitions in the quarter and has so far signed 8 acquisitions in 2024 – how is the acquisition pipeline going forward? Is it possible to specify interesting sectors?
- Despite a weak market, we have been able to deliver on our acquisition strategy. In 2024, we have so far signed 8 acquisitions, adding ≈470 MSEK in annual revenues, as well as 100 employees and 15 stores.
- 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 super well-run businesses – within our growth areas.
Q5. Understanding that the market is tough, but how is Alligo’s market share developing compared to your competitors?
- We’re doing well in terms of volume, but we’re being hit by reduced demand from small to medium-sized companies. If we analyse the available market statistics for construction, hardware, etc., we can conclude that we are maintaining market shares.