CEO's Comments

We will continue to develop the concept in order to create more effective and attractive shops

January to December 2017

The retail sector is changing and the non-food segment in particular is cautious in several markets. A number of major chains, primarily in Scandinavia, have invested less and are evaluating new solutions. We have initiated a number of measures to adapt the Group to the current market situation. 

In the longer term we have a positive view of the change in the sector, and in recent years we have invested considerable resources in product development and our working method in order to strengthen ITAB’s position in the shops of the future. We have doubled our sales of self-checkout solutions during the year.

FOURTH QUARTER

During the fourth quarter, sales decreased by 7% compared to the same period last year. Currency-adjusted sales fell by 6%. Sales have improved in the UK, Central Europe and Southern Europe, while NorthEast has not developed as well and Scandinavia has been much worse.

The Scandinavian market has been cautious in the non-food segment, which has affected our sales. In particular, a number of major non-food chains have invested significantly less. This also applies to our lighting sales, which have not developed as well due to the cautious attitude on the part of some of our major customers.

Operating profit includes a revaluation of the additional purchase price in relation to the acquisition of La Fortezza, as well as structural costs that have had a net impact on profits during the period amounting to SEK 35 million.

The trend in steel prices has had a negative impact on profits, as have slightly higher sales and administration costs.

 

JANUARY - DECEMBER

During the year, sales increased by 18% compared to last year, while currency-adjusted sales rose by 17%.

 UK, Central Europe and NorthEast have  developed better while Scandinavia has not developed as well. Lighting sales have not developed as well as last year due to cautious demand in certain markets. Within La Fortezza, sales have been slightly below our expectations as a result of a weak start to the year.

In the Scandinavian market and within lighting, this is mainly due to a number of major customers rapidly cutting back their investment programmes. It is clearly noticeable that the sector is undergoing a period of change and new solutions are being evaluated. It has been difficult to compensate for this in the short term. We are currently witnessing the same pattern in Scandinavia that we saw in the UK a couple of years ago.

The food segment is continuing to invest in line with our expectations. Here, more and more chains are selecting more efficient checkout solutions, and the majority of markets are witnessing a number of different installations of self-checkout solutions. We have doubled our sales of self-checkout solutions during the year. We believe that the market will achieve even higher growth as regards self-checkouts in the years ahead.

In the UK and Central Europe, we are continuing to advance our position from a strategic perspective. In the UK, where we consider that the change in the retail sector is at the cutting edge, our sales increased markedly. The shop experience is becoming increasingly important, and several of our existing customers are choosing to utilise a larger proportion of our offer in order to achieve a more efficient and more attractive shop environment. Sales in the UK are increasingly project-based, resulting in shorter lead times. Sales of this type fit in well with our skills and organisational model, with local, flexible units close to the customer.

In Central Europe, and above all in Germany, we have also witnessed strong growth during the year. The companies we acquired in Germany have developed according to plan, and we are achieving the anticipated synergies.

 

MARKETING ACTIVITIES

Over recent years, considerable resources have been invested in product development and initiatives aimed at ensuring that the organisation will be well prepared for the development that is taking place in the retail sector. We have launched a lighting range with linear products, mainly for the food segment. A digital all-inclusive offer for the physical shop has been conducted, for example including checkout arena, piri, endless aisle and click & collect*. The shop experience is becoming more interactive, with the focus being placed on the consumer experience. The level of interest in our digital offer is strong among both national and international retail chains. Increased digitisation in the physical shop is driving forward our sales and development. Installations are taking place in combination with the rest of our offer.

 

THE FUTURE

La Fortezza has now been part of the Group for more than a year and we have been working to integrate the operation. We are now intensifying this work by offering ITAB’s product portfolio to its customers, as well as streamlining the operation in order to adapt it to ITAB’s strategy and to position the companies for the future. La Fortezza’s customers are positive towards ITAB’s acquisition of the companies, and many discussions regarding extended collaborations are being conducted with both existing and new customers.

The market in the Scandinavian non-food segment is still cautious. In the UK market, project-based sales are becoming increasingly important, with rapid, flexible delivery methods being required. Our organisation, with local, flexible units close to the customer, is well equipped for sales of this type. We believe that this will become increasingly common in more markets. At the same time, several of our customers are expanding across large parts of the world, and our global presence is becoming even more important. We have commenced the construction of a new production facility in China during the year. The facility is expected to be in operation during the second half of 2018, and we will primarily be supplying our European customers’ establishments in Asia and, in the long term, other customers in the Asian market as well.

The efficiency measures that were conducted last year, with particular focus on Belgium and Finland, have still not produced the planned effect. These measures will provide a good position in future, but in our judgement this will take longer than anticipated. We will continue our long-term work within the Group aimed at streamlining all parts of the operation, in order to improve our offer. We are continuing to closely monitor the trend in steel prices, rapid exchange rate fluctuations and the general political situation, which can change our conditions in the market.

Investments in product development and our position in the shop of the future are continuing, in order to further strengthen our offer to the customer. We will continue the work throughout the entire Group aimed at offering existing customers a larger proportion of our product portfolio. However, the changes in the sector mean that the market is difficult to judge in the short term. Our all-inclusive offer comprising many innovative solutions, alongside our working model and geographic presence, will lead to better business both for our customers and for ITAB.

 

Jönköping 6 February 2018

Ulf Rostedt    

CEO, ITAB Shop Concept