Relais published Q2 figures this morning, and with me here is CEO Christian Gebauer. Welcome.

Christian, thank you very much.

Let's kick off with the second quarter. What are your key takeaways from the year?

We posted really strong cash flow in the quarter and if we look at the first half of the year. It was record cash flow from operations, we never had such good cash flow and the cash conversion was 100% in the quarter, which is very high. So that is the highlight. That also shows that the focus that we have talked about since day one, about making sure that we have discipline of the cash, is working. Now we have released a lot of cash, and we have avoided building new working capital in the acquired businesses. That is really a strong point, that our focus is making an effect on the balance sheet and cash flow statement.

Let's go deeper into the figures, there are a lot of things behind them. If we start with the organic growth, 4%, which for me seems like a good pace, can you describe the drivers? Is it certain business areas, businesses, geographies, and what is the driver? Is it market growth, are you winning market share here and there, or what is behind these figures here?

I think in general you can say that the market is stable across the three business areas and the markets. So we are outperforming the market when we have 4% organic growth, which is really encouraging to see. The technical wholesale is strong in this sense, that we do the organic growth investments. We see that the sales is coming. We expect even higher sales in the coming quarters to make sure that we get the profitability that we expect, but it is good development in technical wholesale in terms of sales organic growth. In commercial vehicle services it's stable, and in product and solutions there is also an organic growth driven by Strands, which is performing exceptionally well in this slightly lower market. Now product and solutions business areas are also benefiting from new trucks coming into the market and I think the trend where the truck manufacturers get higher order books, and we can expect more new trucks coming into the market, will be beneficial for product and solutions business area. If that happens.

So there are some good things in the market, but you're also outperforming.

Yes, that's the overview, yes.

Let's jump into the profitability level looking at the headline figure. It is clearly lower, the margin, but then I believe there is a factor, or a point now, that is behind this. Can you do a breakdown of the profitability development?

Yeah, of course, looking just at the margin in the quarter is a disappointment, that you need to read more detailed in the report, seeing that we have a 1.2 million expected credit loss swing, meaning last year. It had a positive impact of 600 thousand and this quarter a negative effect of 600 thousand. So that is a 1.3% explanation of the margin. Delta between this quarter and last quarter. Then we are doing the organic growth initiatives for the future too. The margin improvement is there, the amount is coming, but it's still not at the level where we are expecting them to be when they are fully ramped. That is of course for the time being impacting the margin, but in the long run. It's gonna be a positive contributor versus before the growth investments.

So that is mainly the ones. Also remember we had one of Europe's largest workshops in Raskone that we put live second quarter of this year and that is well received by the customers. We have good efficiency improvement due to this new workshop, but there was temporarily, you know. Lower sales or shutdown period that is impacting both top line and the profitability. So those three factors should of course be considered and then we haven't talked about all the companies that have good development and improved profitability in the quarter, but that is also the case even though it's not seen in the numbers.

This quarter, I guess, this is a reminder that you have a large group of companies under the Relais name, so there are a lot of things happening. I'll touch on that movement you saw in Raskone. So the new workshop, you talk about the efficiency, but can you describe how is it the bigger? Workshop, do you see growth potential due to the change and how is it, is it up and running, the new workshop, and has the transition been completed here?

It is one of Europe's largest workshops. You can head out to Tuusula and have a look, it's a fantastic facility and as I said well received by the customers. We expect to, even though the size is not so much bigger than the previous one. It's a more efficient layout. Meaning we can process and get a higher throughflow in that facility versus the previous one. So clearly there is an opportunity to improve the sales and profitability through this new workshop and it's done, it was in Q2. Now we are fully up and running and we have full effect from Q3.

Then let's go back to the efficiency thing you touched on. You have talked about efficiency improvement a lot since you started at Relais. Can you give an update on where we are currently with this efficiency improvement and the actions that have been done? What is visible actually in the figures and what are the next things you're focusing on here?

What we see already after six months is the impact on the cash flow. Once is the impact on the cash flow. We have a slight increase in absolute numbers of working capital versus end of last year and Q2 last year, but then it has to be remembered that we have grown the sales by 13% in the quarter. So then that should come with, if we keep the same amount of working capital as percent of sales. We should have quite a big increase, but actually we haven't had. Meaning we have been able to avoid tying up new cash.

We have been able to release a lot of cash from specialty technical wholesale companies, and we have a strong focus in each of our companies on return on operating net working capital. We put targets on their own management teams there and they are really focusing on this. So it is excellent to see the results coming through in their results this quarter and then of course. We are working on the efficiency measures in the companies. We haven't talked about this, but we have established a new focus on AI. Improvement in the companies that we will drive during the second half of this year that we also believe will have a positive effect on the profitability in the companies, and we actually hired a person to Relais that is responsible for accelerating our AI focus across the group. So really looking forward to see what opportunities we can find there and their results in the coming quarters.

That's interesting, there is a lot happening in the AI space. Get back to this maybe later this year. Then let's jump to capital allocation, you continued your strategy execution acquiring ABR. Can you tell us something about the company and especially, obviously, you probably have plans for the future in terms of growth, maybe international areas. What are the thoughts behind that?

Yeah, Tobias has been with his team building up a very strong brand in Sweden. If you're interested in vehicles and taking care of your vehicle. You for sure know about ABR Signs as a brand and the fantastic products that they are offering. They have now reached the position where they have a strong presence in Sweden, but they see that other countries are also asking for the products and they haven't done the international growth journey themselves before. They know that for example in Strands. We have done exactly this journey in the product and solutions business areas. There are other companies that have done this. This development and Tobias came to the conclusion that this is the best place for me to be able to continue to develop my business and that is really encouraging for us to see that we are able to attract the best companies, the niche-leading companies. Those are the ones that we are gonna bring into the group going forward.

So your takeaway is that your value proposition for companies like that is attractive currently.

That is most probably the conclusion.

Then let's jump to the market situation. I think everyone in Finland is very happy with the recent news about the GDP growth, not sure that is the whole Nordics, but I think there is some kind of sentiment about improving outlook. Can you describe the market environment, are you seeing any more activity when it comes to commercial vehicles and demand overall?

Let's go through maybe business area by business area, so in commercial vehicle services. We would say that across both Sweden, Finland and Norway demand is quite stable, and that is also one of the benefits with our focus of vehicle after-market, it's a stable business. So they are operating in a good and stable demand situation. Coming to technical wholesale, of course that is also, if the workshops are on a stable level, the distributors in technical wholesale are also most likely on a stable level. Then we have our growth investments meaning we're taking market share in technical wholesale, which is good to see. Coming into product and solutions. It's a slightly different mix of companies, several of them. Actually benefiting from new trucks and vehicles coming into the market and looking into the report from Traton and Mercedes and Scania and the likes, Volvo, they have high order intakes at the moment and this is gonna convert into new trucks coming to the market and that should benefit the companies in the product and solutions business area.

Lastly you mentioned some price competition in Finland in the service businesses. Is this something that happens every now and then or is it some new change in the market?

There are some initiatives for more commodity products to have some online sales and with the price pressure. You might remember in the first quarter with the strategy adjustment of Startax focusing more on the products where we have unique proposition and where the customer really value our offering and our technical knowledge, and that is to be able to go away from the commodity assortment and the price pressure. But we haven't really fully done that transition and transformation yet and for the time being we see that these online players could impact the price and put pressure on our kind of commodity assortment as well, so that is something that we are monitoring closely going into the rest of the year.

But it is the right takeaway that this is just normal competition in the markets that happens everywhere.

Sure, and that's why it is so important for us to have the positions that are unique, that are niche, that are focused on really bringing added value to the customers, then we can avoid price pressure and being in the tough competition with the kind of low-cost delivery. So that's why our strategy is like that.

Thank you Christian and all the best for the rest of the year. Thank you.