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Edited Transcript of STRONG.OL earnings conference call or presentation 12-Feb-20 7:15am GMT

Q4 2019 Strongpoint ASA Earnings Call

STRØMMEN Feb 26, 2020 (Thomson StreetEvents) -- Edited Transcript of Strongpoint ASA earnings conference call or presentation Wednesday, February 12, 2020 at 7:15:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Hilde Horn Gilen

StrongPoint ASA - CFO

* Jacob Tveraabak

StrongPoint ASA - CEO

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Presentation

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Jacob Tveraabak, StrongPoint ASA - CEO [1]

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Okay. Welcome, everybody, to this wonderful Friday -- I'm sorry, February, 2020, the fourth quarter results for StrongPoint. But not least, also the unveil of the strategy update session that we're going to have immediately after the quarterly results. So with me today, I have Hilde, our CFO, who you'll get to -- get some more acquaintance with. But yes, ready to start?

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Hilde Horn Gilen, StrongPoint ASA - CFO [2]

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Absolutely.

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Jacob Tveraabak, StrongPoint ASA - CEO [3]

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We're ready to start. Okay. So normally, we do a little bit of an introduction of StrongPoint. This time, we're going to keep the intro extremely short and rather put more emphasis on that when we go through the strategy update. Nevertheless, we'll take some time to go through the highlights and key figures for Q4, and then also open up for some Q&A in the end for the Q4 results. And then again, immediately afterwards, we're going to have a broader and longer session with our strategy update.

Okay. Ready to jump in. Overall, we're seeing a very strong performance in the Retail Technology business area. Overall, however, in Q4, it's more or less flat on the top line, not because Cash Security did very poor, but rather because Q4 last year was extremely good. So all in all, a good overall performance or flat overall performance in terms of top line and good performance in bottom line. We're going to talk a bit more about customer breakthroughs and also some important product developments that we'll touch upon.

Okay. Again, as I said, the quarterly revenue is relatively flat, but it's pretty difficult to make a lot of sense out of a minus 3% top line decline. We're not really dwelling into the details of what's behind it. So I'd like to sort of skip to this page, which shows the different business areas: Retail Technology, Cash Security and our Labels business area. And as you see, the Retail business area is growing quite nicely with a 12% all organic growth. The growth here is stemming primarily from Sweden and the Baltics. Baltics continue to do very well, both growing in the upper 30s, and it's all organic. Norway, again, did a very strong Q4 last year and continuing with that performance and delivering now a 4% increase.

In addition to that, we're seeing that Spain is continuing to grow at double digit figures, and the only thing really holding back is the restructuring of a number of offices, obviously not contributing that much to top line, but rather on bottom line. If you cut across the geographies and look at what are the different segments doing, e-commerce is growing very rapidly. Again, although, from a small base, but it's growing more than 40% versus the earlier quarters.

Cash Security, again, we delivered actually in Q4 now, we delivered the SberBank order of 885 cases. So that's very good, isolated, but last Q4 in 2018 was extreme -- we had 2 very big orders being delivered at the same time. And hence, it looks pretty harsh with minus 37%. But actually, the level of NOK 47 million in Q4 is quite nice.

Labels, almost like per definition, it's more of a stable business and not that much movement there. If we look at the EBITDA, we have a NOK 9 million increase. We're seeing a slight improvement in the heading, and that's given the IFRS effects. In the NOK 31 million it's a NOK 6.3 million IFRS effect. So there is a NOK 3 million increase in -- or the factor increase in the profitability. Again, I think the real juice is when you start understanding what's -- where is this coming from, the business areas. And again, I'm very pleased, provided that we are putting such emphasis on Retail Technology to see that it's growing very nicely from NOK 11 million to NOK 22 million. Again, there are some IFRS effects there, NOK 3.6 million. But nevertheless, we're looking here at an EBITDA margin improvement from 5.7% to more than 8%, so 8.4%.

The sources of this increase is stemming from: Number one, the earlier announced cost reduction initiative of NOK 30 million, which primarily was in Retail Technology, but it's also stemming from a better product mix on solutions mix when we deliver that. And the reason why we're also pretty proud of this number is because we're in quite -- we're doing quite some investments. We've been investing for the entire year and are continuing to invest in, what we called, E20, which is our picking solution. We're going to show more about that in the strategy update session, and we've also invested in sales resources in Spain. So all this increase in Retail Technology is coming whilst we're doing these investments.

Cash Security is doing -- again, it looks pretty harsh when you compare with this exceptional quarter in 2018, but it's a pretty nice quarter. And again, Labels is also more stable. So pleased again that Retail Technology is driving both top line and bottom line, not least.

So I wanted to highlight some of the customer breakthroughs and deliveries that we've had in Q4. The first 2 here are really on Click & Collect lockers. We have the e-commerce fight, so to speak, is picking up in Sweden. COOP invested in additional 20 lockers that we're installing later this year on -- i.e., 2020. And Axfood is now doing the first pilot for Click & Collect on wheel or mobile Click & Collect.

I'm going to talk more about why this sort of mobile Click & Collect is a big thing for us. Beyond that, it's important for us to get our e-commerce solution also out of Sweden. We've now had the first customer in Spain on our Pick & Collect solution. So the picking solution, we've had in the past and have in the past, customers from the Click & Collect, so the Click & Collect lockers. We're very pleased that Plusfresc, probably a grocery retailers that the Norwegians and Swedes haven't heard that much about, but it's a typical midsized grocery with 74 stores. So again, there is lot of opportunity in Spain beyond the Alimerkas and Carrefours of the world.

Also at the end of the year, we signed an agreement with FNB through our partner, Bullion, for 500 CashGuards in South America -- South Africa. So Bullion has had a very good year. And -- but of course, this order of magnitude is very pleasing to see. And this is actually a service that FNB is going to deliver to their customers again.

And lastly, in terms of delivery, we delivered the 885 cases in the Q4. And as some of you might remember, the Q3s were affected by the fact that we moved those deliveries into Q4.

Okay. So exciting, both customer breakthroughs and deliveries. I'm going to do rather quickly now on product development in this quarter, and again, use more time in the strategy update session. However, we are now getting to a finalization of the beta version of Pick & Collect. That's not to say that we don't have a picking solution now because we do. This is our third generation picking solution that we'll be unveiling at EuroShop next week. So we're very proud of that. We're going to show you a small video of that later.

Secondly, we're also, together with Harting, getting to a finalization of the integrated Self-Checkout solution with Harting's checkout zone. So I've been to Espelkamp in Germany and seen the solutions, and it's a solution where you basically either fully use our solution or partly use our solution together with Harting. And with Harting's strong position with the German grocery retailers, we have -- yes, we're excited about the month and years to come with Harting.

And lastly, is the launch of Click & Collect lockers on wheels. Doesn't sound like a big thing. You're basically taking our lockers, putting it on wheels. But for our customers, that's an important thing. It means you typically don't need the permits to set out lockers as you do with normal lockers. So it enables you to test out to a much larger extent, will lockers work in this area or that area. And furthermore, it also opens up for the possibility to have interim Click & Collect locations. You can imagine going to Hemsedal in Norway or [Åre] in Sweden. That's where you want to have the Click & Collect lockers in the winter. And vice versa, in the summer, you want to go to (inaudible) in Sweden. Excuse me, apologies for the poor Swedish there.

Before leaving or getting over to Hilde, I wanted to just take a short pause and summarize 2019. So we have a revenue increase of 4%, all organic for the company as a whole. And as you've seen on the previous slides, we have a business which is put together our Retail Technology; Cash Security, which is almost, by definition, a very volatile business; and a pretty stable Labels business. But as a Retail Technology-focused company, I'm very pleased that in this -- in these numbers are a 12% organic growth in Retail Technology. And this is coming despite the fact that we have converted both Malaysia, Belgium, France, the Russia or the retail part of Russia, and lastly, Germany into partner offices. So despite this and despite all the other focus -- focused initiatives, we're seeing this sort of organic growth.

It must be said also that some of you that have been following us, we have been launching this cash management as a service in Spain. And although not correct, but nevertheless, if you do believe that the 300 units that we have out there would have been sold, this number here would actually not have been 12%, but a 15% organic growth. So we're pleased with that.

EBITDA, NOK 31 million improvement. Also that, thanks to, I would say, Hilde or IFRS. So funny money, but even taking out the NOK 23 million in effect, we have a 8% growth in EBITDA. And again, I think that's pretty strong when you consider not only the changes we've done in offices, but also the packages or severance packages that typically follow that, along with investments in both e-commerce and other solutions.

So it's a short roundup before I leave the word to you, Hilde.

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Hilde Horn Gilen, StrongPoint ASA - CFO [4]

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Our Chairman says, please stop talking about IFRS. So hopefully, in 2020, we will stop doing that. Also, you didn't mention that we had the Alimerka deal in 2018, which influenced our figures quite substantially. Our earnings per share grew nicely in the fourth quarter. If we look at the fourth quarter last year, it was below minus, which I think was a negative result and mainly due to some tax cost that we had to do in Q4 last year, which was linked to our subsidiaries. But this year, it's of course, all taken care of this year as well, but we have a nice increase. As you remember from last time, I showed the 2 versions of EPS, earnings per share. One is kind of the net profit divided by the number of shares. In the other, I deduct the amortizations for the intangible assets because that doesn't have any cash effect on our earnings per share. And that led up to a NOK 0.25 effect in Q4. If you look at the year on total, we have -- it's NOK 0.72 per share in the regular way of doing this. And in the adjusted, it's NOK 1.03.

If we go into the cash flow for the year, of course, we had the good results, adjusted for the IFRS. We did invest a bit in inventories due to the fact that we have some deliveries in Q1 that we need to prepare for. But I can assure that receivables are well in place, and this is actually -- it's a normal season when it comes to us picking up the 2020 production. As previously also noted, the CapEx is not -- is linked almost in total for the rental agreements, the Hardware as a Service that we have in Spain. That's where we have created this solution, and it's really working well. So we have approximately 300 systems now rented. And it's -- it has kind of created a new market for us with the, what we call, mom-and-pop stores or the small restaurants, bars, et cetera, that finds our product very interesting by that. But it shows in our cash flow overview.

NOK 24 million in dividends were paid in 2019, and we ended up with a cash position of NOK 39 million. One comment on cash flow and that's related to the BaneNor. We have announced that we have received an offer from BaneNor relating to the move of the Tangen facilities. It's stated in the notice that we were to receive the first payment of that in the first quarter of 2020. BaneNor had done some reallocation on their project focus. So they have postponed the projects that will influence our facilities. So the Board of Directors in BaneNor has postponed also the final decision on this agreement. So we will -- we do not still know when they will handle this as an item on their agenda, but we will inform you as soon as we know more, but we will not receive any cash in the first quarter, that's for sure.

So following the cash position is, of course, our debt position. And it still is -- we use our cash to also pay our debt, which, I guess, our banks representatives are quite okay with. We have also, in 2019, added IFRS on the debt side, which was not done previously years. That's NOK 60 million on our balance sheet. And then we have NOK 43 million of bank, or interest-bearing debt. So in total, we have net leverage multiples or covenants of 1.03. So it's even improved in Q4. This gives us a headroom that we are happy to have with our -- in strategy that we will go into it -- later.

The board has decided to propose a dividend for 2019 of NOK 0.6 per share. Yes. Financial calendar is on our website and also on Oslo Børs. So are there any questions on the Q4 results? They are very eager to get in to the next...

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Jacob Tveraabak, StrongPoint ASA - CEO [5]

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Very eager to get in to next one.

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Hilde Horn Gilen, StrongPoint ASA - CFO [6]

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Good.

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Jacob Tveraabak, StrongPoint ASA - CEO [7]

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Okay, if not, then we're going to do a very quick change. Okay. Then I suggest we get on to the next part of the session, only person leaving the room is the analyst from ABG covering us, that's great. But that's -- you're there. Thank you about that. I saw your associate leaving the room. Okay.

We have been waiting for this day for some time, our strategy update session. We've had a quite intense fall with the board, with the broader management to set out, not a new direction, but a more clear direction for, where StrongPoint will be heading for the next few years. And this sort of summarizes most of that. I also want to take though the opportunity to do this more educational in a way to show really the breadth of solutions that we offer, a little bit about the background for the market, 2 things that we typically don't cover in a Q4 or a Q presentation.

So with that, and I promise you, we made this before Gresvig dived under. But yes, I mean, it's -- to some extent, it's a bloodbath out there. Things are happening in the retail space, in particular, for the brick-and-mortars. And to some extent, we've been shielded in most of the markets that StrongPoint operates from Amazon. However, I like to call Amazon almost our best friend in a sense that it sort of really urges retailers to take a stance at what's happening. Amazon is dominating online in the U.S. and starting to make their way into retail -- retail's brick-and-mortar. So that's definitely something happening. So a lot's happening here. And what the end result is, nobody really knows. The only thing we know is that change is happening. And it's -- if anything, it's accelerating in change -- or in size.

And for a company like StrongPoint, this is great news. And I've said it before, and I probably will again: there is lots of changes in the retail space. E-commerce is probably the most prevalent change that's happening. But in terms of grocery retail, there is also other changes. We're eating more out. You have Foodoras of the world affecting implicitly the grocery chains. You have category killers such as (inaudible) and others that are cherry-picking the categories with high margins. But generally, for e-commerce -- I'm sorry, for retail, whether it's grocery retail or other retail, e-commerce is creating a double opportunity for StrongPoint.

And on the one hand side, it puts the pressure on the brick-and-mortars. You're basically moving consumption or sales from the stores online, that puts margin -- margin pressure on the retail stores. And for us as StrongPoint, this a great news because we believe that the technology solutions in store is going to be a very important part of solving that margin pressure. On the other hand side, you have incumbents, to some extent, some of them have moved online, others have not. There is new competition from pure players, typically private equity or venture capital funded that are operating with different KPIs. Not necessarily a bottom line for the very few years, making life very difficult for incumbents, but that's something the incumbents have to react to. And again, moving in from your store offline and moving it online, it's more than just setting up a web page. And we'll look at the solutions that StrongPoint deliver, but we believe that we have some of the world-class solutions, both for picking and delivery, which are the key operating decisions you need to take when you look at moving online.

So again, we believe we have some strong market fundamentals for StrongPoint. And to avoid sort of any consumption or assumptions about what StrongPoint is doing, I want to take a little bit of a tour explaining you what are the key solutions we have in stores, and what are the key solutions that we have when it comes to our e-commerce offering.

So the first solution, I'd just like to highlight is Self-Checkout. The Self-Checkout, obviously, is gaining traction. On the one hand side, to make life easier for customers. There is nothing more troublesome or un-convenient than getting in a line when you really can go and do the Self-Checkout yourself. And also for stores providing Self-Checkout solutions rather than having manned tills makes sense from a point of view of looking at labor cost. StrongPoint levers both hardware and software for Self-Checkout solutions. We're also pragmatic in the sense that we deliver our software on third-party hardware and also vice versa. And the development we've had in the Baltics on our Self-Checkout solution has been really amazing, and we're looking forward to take that elsewhere as well. So that's Self-Checkout.

The other thing is ESL, or Electronic Shelf Labels. StrongPoint has had a -- and have a very good relationship with Pricer for many, many years. And as Norwegians, it's easy to think that -- well, isn't this old news, but the matter of the fact is that Norway is one of the countries in the world with the highest penetration of ESL. And if you think about it, it makes very much sense because the labor cost is very high.

So the business case for something like ESL is two-folded. On the one hand side, you want to make sure you have the right prices on the shelves. You also enable price -- not discrimination but price optimization. But on the other hand side, if you remember in the good old days, in Norway, and this, by the way, is the fact of the matter in countries like Spain, you have people with big stacks of price changes running around changing them manually. So again, in a country like Norway, and Sweden with high labor costs, this makes very much sense.

You also saw us announcing a partnership with Sunrise Technology, a real giant. No -- and yes, pun intended for those of you that saw the picture. Sunrise is providing us with, what we call, EDGE. And rather than sort of competing with Pricer, we argue that it is a supplement or a complement to Pricer. These are typically ESLs that you put on end caps. Yes, changing prices and all that, but also providing a commercial content to enable upselling in the store. So very interesting first solution from Sunrise there, and I'll talk more about Sunrise later.

The third solution that we have illustrated here is Vensafe. So this is for the tobacco, snus, other high-value items that you want to have in a protected area to primarily avoid shrinkage. These items are very attractive amongst the people who want to put something in your pocket. So Vensafe is also a very important solution for us in Norway and Sweden. And with the European plain packaging tobacco laws getting into effect, this is also an area in which we have further potential.

The fourth solution, which is actually pretty poorly illustrated by someone sitting in a back room -- because the point is, they should not be sitting in the back room, but rather be operating on their mobile or iPad device -- is workforce management. In Q2, last year, we announced a partnership with Reflexis. Reflexis is a U.S.-based workforce management and task management system specialist that really focuses on retail. So not all industries, but retail specifically. Reflexis had some very impressive reference cases, both in the U.S. and U.K., and we're sort of honored to be Reflexis' first partner in Europe. And there is not going to be a lot of them, covering the Nordics and Baltics. And again, if you think about it, I mean, if you think about the margin pressure in store, I mean, how can you really, really, really make a dent to that. In particular, in a country like Norway and Sweden with high labor cost? Well, this is the way to go about, right? Removing COGS across Europe, labor cost is the big single -- single biggest cost item. So enabling a better utilization of them, both from a cost perspective and also from a customer perspective, is very important.

Then we have cash management. Mostly -- you will in this crowd know about CashGuard, and CashGuard is the most selling cash management system we have. We have added 2 other systems, Unico and Compact, to serve or to better serve the mom-and-pop stores that Hilde referred to earlier in Spain. The cash management solution, why is that interesting for retailers? Well, first of all, it's a contained cash system that ensures that there is no handling of the till at the end of the day. So basically, you're saving money both from doing the till at the end of the shift, but they're also avoiding theft, both internal theft, so to speak, and external. I will talk more about cash management today, actually.

Pick & Collect. Here illustrated by a person doing picking in store. So most of our customers are incumbents in the grocery retail space. And one of the ways you can distinguish yourself from a pure player is by actually leveraging the stores that you have and doing the picking in store. We have a very well-functioning picking solution working today with 14 different clients around Europe, and that's before launching the third generation. And we're also doing some pretty interesting integrations with the other solutions. One example being the connection or the integration of Pick & Collect and ESL, enabling what we call Pick by Flash. So you can imagine getting in front of the shelves, and you're supposed to pick up a pasta Bolognese sauce with extra garlic and it's down there. When you get the flash, you would typically retrieve that item faster. And it's these sort of small steps that will enable faster picking.

We also have some other highlights on our third generation that I'll get back to later. And lastly, what you have here is our Click & Collect solution. And again, Norway is probably the most boring country to talk about exactly this. NorgesGruppen has moved with our solution very slowly with regard to Click & Collect. In other countries, namely Sweden, also in the Baltics, we're seeing this really picking up speeds. And having been at the NRF, where, the National Retail Forum, in New York, we also saw a lot of attention around our solution on Click & Collect.

Was that okay to have a short review of the key solutions we have? I mean in addition to this, there is a number of other solutions. I haven't mentioned though, for instance, ShopFlow Logistics, the order management system that we have, and we got through Cub. I mentioned the fact that in the Baltics we're selling LS Retail POS. We're Microsoft Dynamics consultants. We have wrapping systems and scales. So there is also additional solutions and products that are suited for the specific markets beyond this, but these are the most important solutions that we have in stores.

And I think also, it's very important and actually part of the value proposition that StrongPoint provides is that we're not just selling these solutions. I mean we're talking presale, sale, installation, service, support, everything. That's really what's compelling for, first of all, for clients and customers, but secondly, for companies like Reflexis, like Sunrise. The business case for setting up a separate organization in Norway versus strengthening your Lower Manhattan presence, it's pretty easy. But for us, as StrongPoint, that has a position already, it's a great position to be. So this was very quickly about the current positions we have in the stores to help retailers withstand the margin pressure.

There is one more page I want to show you and that requires some explanation. And that's to pick up the operational considerations you need to do when you move into online within groceries because there are really 2 big cost items: One being picking and the other being delivery. And when you're doing picking, you principally have 2 options, as at least as an incumbent. Either you can use the stores or you can build own warehouses or dark stores to do the picking. And in the stores and the warehouses, again, you can choose to either do picking manually or you can have it automated in the store with what you call the micro fulfillment centers, and in the warehouses with central fulfillment centers, this is Ocado. StrongPoint have a number of these solutions. So again, this is the illustration of the manual picking that we're doing. And this is an illustration of the route optimization tool that we're using to support home deliveries. And also on delivery, typically, you have home delivery, but you also have pick up in store. That's our Click & Collect lockers. And lastly, you have pick up, call it, away from stores with the mobile lockers or enabled by the mobile lockers, which allows retailers to expand the catchment area, typically by putting out these mobile lockers in areas in which they don't have stores, and in areas in which there is a lot of traffic, typically gasoline stations.

StrongPoint covers very many of these areas. We cover very many of these areas. Notably, we don't really cover the automated areas yet, but I'll get back to -- because it's very easy to think that well, automated or robot assisted that's really superior to manual. And the answer isn't that black and white. And later today, I will show you why. So stay tuned. And for those of you that wonder about what is NM mean, it means not meaningful. It doesn't make sense to pick up or do picking in a warehouse and then deliver it to a store. That was a short intro for why it's so exciting to be with StrongPoint. And if you want to apply jobs, then go to our web page.

Beyond that, we have a very exciting agenda today. I'm going to do a recent development of StrongPoint, I'm not going to do a history lesson back from PSI Group days. Hilde will then show some figures that we haven't shared with you at all earlier, that we're very excited to finally show you. We have recognized that having a business area called Retail Technology becomes a little bit of a black box because we really don't understand the drivers behind it. So we're really excited to share that. And so from that starting point, we're going to show you really the juice of today, so the strategy update part of this. So both the ambitions, the whats of -- the whats in that and the hows, how M&A fits into this, the path to 2025. And then we'll open up for Q&A. So it's a very exciting day today.

Okay. Recent development. Honestly, I just have one slide. I don't want to do this history lesson. But I think it's fair to sort of just pause for a second on what StrongPoint has become and is becoming. And it's natural to sort of start with the latter half of 2018 and into 2019, simply because I started August 1. With me, I have this brilliant CFO, Hilde, which is a very important part of the leadership that we have with StrongPoint. And in the back bench over there, you should see -- they're real people. We have Julius Stulpinas, who is our new SVP of Technology, doing an amazing job in and amongst others, getting Sunrise to get the attention of a company like StrongPoint. And I can assure you that guy is persistent.

We have the SVP of E-commerce, Göran is not here, but we have Amanda who will be -- who is coming from Cub or the company that was acquired late 2017, actually -- who will be leading a very important part of driving our e-commerce solution outside our core markets today. We also, very quickly, employ a SVP of People & Organization. We can't be a Retail Technology company and not take a very structured approach to people. There is no -- nothing to hide. We have lots to learn, and we -- as our customers have to reskill our resources and with the ambitions that we have, we absolutely need to have the best recruitment processes in place to attract and retain the very best people. And also on the corner there is Leif -- Leif the Labels, the Labels guy. We'll talk more about Labels also today, why that is interesting.

Okay. What are some other things that we've done in this 1.5 year with -- under the headline focus? Well, number one is, is really restructuring our organization. On the one hand side, we have put focus on Retail Technology because we are a Retail Technology company. The revenue and the profits principally comes from Retail Technology, and that's where we're going to be the world champions, which means that we have most of the people in my leadership team is Retail Technology oriented. You have Labels and Cash Security as separate business units.

In addition to that, in the latter part of 2018, we also introduced a cost reduction program, which was necessary. We needed to focus the business. That meant removing headcounts both in the headquarter, but also in some areas of what used to belong under the technology umbrella but that really was moving into sort of sales position. So it was all about roles and responsibilities, enabling a NOK 30 million saving. And I'm very proud to sort of say that we've done that from day one in January 2019.

And beyond that, we've also had a geographic focus. I mentioned very briefly that we have converted our offices in both in Malaysia, and in Russia, and that being the Retail part of the office, not the Cash Security. Belgium, France and Germany, and that's simply because we cannot get the full attention and credibility with big retailers. If you have 5, 10 or 15 people in a country, it's just not possible. So instead of spreading thin, we have and are focusing these resources in the areas in which we can be relevant, both geographically, in Norway, Sweden, Baltics and increasingly Spain, but also into technology development, mostly for the in-store solutions, but also e-commerce solutions.

Because if we just pause back, and again, not making this a history lesson, we have expanded our proprietary solutions. We moved into mobile Click & Collect lockers. We have integrated our Self-Checkout solutions with other solutions. We have, with Vensafe integrated -- our Vensafe solution with Yoti, which is an age verification tool. All things to make our solutions stand out versus other solutions.

We've also introduced Unico. We've introduced Compact, the cash management solutions. So for all of those that were sort of somewhat skeptical about cost reduction, that hasn't hampered our development of own solutions. And also in-licensed solutions, very interesting. Reflexis being one of them. Sunrise being one of them. So we're not stopping by in-sourcing solutions that can add to the existing portfolio we have. And again, this is all under the heading of focus, and it will be under the heading focus going forward. We're not going to have 10 partners. We're going to have a handful of partners, and really, really work with those partners to make their solution a success in our geographies that we represent.

Okay. Hilde, do you want to do this?

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Hilde Horn Gilen, StrongPoint ASA - CFO [8]

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Yes.

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Jacob Tveraabak, StrongPoint ASA - CEO [9]

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Show some more figures.

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Hilde Horn Gilen, StrongPoint ASA - CFO [10]

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That's -- it's almost exactly one year since I joined the company, and it's been an exciting year. It's obviously, who should talk about StrongPoint today, that's me, who has the shortest experience. A lot of you in the audience knows more about the company than I will ever probably do, but there is a link back to the PSI, which of course, is where we are -- we come from. And we have seen during this past 18 months, for Jacob, and a year for me is that when we talk to new people about StrongPoint, they say, who is StrongPoint? And we end up saying, do you recall PSI Group? Oh, yes, CashGuard. And then they say, that's kind of not interesting for me because cash is declining in Norway. So from a Norwegian focus, it's kind of very, very fast that we get into what is -- why is cash interesting for me as an investor to invest in StrongPoint.

There, what we have seen is that the current reporting that we have done is -- then is not sufficient because we are much more than Cash Security -- cash management, sorry. And what we have done is then to cluster our products and solutions into different segments. If a segment is going to be reported as on its own, in our quarterly reports, it has to be kind of big enough. So the segments within Cash Security and Labels is more for your information about what type of products do we actually have. We are not going to change the way we present their figures. They will continue to be completely separate business areas. But for the Retail, who is 75% of our business, we have decided to divide the products into these 4 specific and 1 nonspecific segment.

So it's important for us that you know what this is actually consists of, the in-store is our, then back to Jacob's presentation of the store, it's our ESL solution with Pricer. It's ShopFlow logistics, scales and wrapping, and workforce and task force management, the Reflexis. Cash management, obviously, CashGuard, also our Unico and Compact solutions, which are physical products to CashGuard. Check-out efficiency, Self-Checkout, Self-Scan and Vensafe, which is then you think about automated checkout also. And then we have our e-commerce, which is the Pick & Collect solution, software based, primarily. The Click & Collect lockers and any delivery solution we have within e-commerce. On the other segment and such will be our POS, our ERP solutions, mostly in the Baltics.

This is how we look today. Back to the cash management comments that we normally get from people not knowing us so much, it's very good for us to show that cash management is relevant, is important, but is 20% of our business. It's not 50% or 70%, it's 20%. Our in-store productivity is then the -- mostly the ESL, the scales and wrapping systems, is a bigger chunk of our total business. The e-commerce and Self-Checkout or checkout solutions consists together of relatively small business segments. But if you have then seen our quarter presentation, you see that our e-commerce business is growing. And I will show you more later on about our profitability.

Cash Security and Labels are still 27% of our business. So they're really important also for the size of the company and also the profitability. Jacob will come back to how we look -- how the segments will look going forward. But what we are aiming for is to present the Retail Technology going forward in these segments on revenue.

We have also done an effort in 2019 to show the profitability of the different segments, it is also a question we get, which one is actually consisting most to your profitability. And it's almost the same share. Cash management, 21%; in-store productivity, 36%. What's really important for us in this slide is that e-commerce, which on the previous slide was 5% of the revenue, consists of 8% of our profitability. So if you wondered why we were focused so much on the e-commerce, this is one of the reasons. It's more profitable. So growth in e-commerce will be important going forward. Unfortunately, this is not a very easy way of showing the figures because we have resources that are shared between the different segments. So we will not deliver -- present our figures this way on the profit side, it will be on the revenue side.

We have products -- and over here has said, recurring revenue. That's not completely correct. Recurring revenue, the repeating part, how much of that is that of your total business. We have service agreements and that is monthly, quarterly, yearly paid by the customers; also includes support. So it's kind of nothing to do like -- take the part of that, that is license fee. How much of 17% service agreement is actually licensed.

We are working on gathering the correct data here, and this is kind of not too easy today to have a clear picture of it. But if you look at it anyway, 70% of our product is nonrecurring. It's something that we need to sell all the time. We have 17% of our revenue that is steady, ongoing service agreements. We have 8% today that consists of service to people -- to customers that has not a yearly service agreement. But they need to give us a call anyway because the product needs service. And we also are actually working quite a bit on installation, that's 5% of the total revenue.

Lastly, here, expressed as rentals. It's very small today. We started with the rental solutions to Spain in 2019. So it's only a very small chunk. But the more CashGuards or other products that we deliver to the market, the higher that will be and that will run for months ahead. Typically, we have 2 solutions today within the rental. It's one that is higher price, but you can deliver it back. And the other one is more firm, for a fixed amount of months, you can rent it. So far, we don't get any of the systems back. So it seems that the customers really enjoy this type of solution. So the more installed base, the more this will increase.

This is the overview that we have today. We are sharing today how we are doing in the different countries. Within Retail Technology, you see that Norway and Sweden is still the most important part of our business. Fantastic 2019 with over 25% growth. So it means that we continue to be relevant in Norway. Sweden is almost flat, but very stable and very good business in Sweden. The Baltics, fantastic growth, about 45% growth in 2019 and has -- and also then grows as a part of StrongPoint. Spain, 6% of our business. We will continue to -- we will report Spain as a segment as its own or a country as its own because it's really important for us. Growing to a 6% relevant share is important. If you add to that, also the rental solution, if that had been sold already, we'd actually be 8%. So Spain is increasing, which was part of the focus areas that we have talked about every quarter in 2019. So we really are happy with that.

Labels and Cash Security. Cash Security did not have a very good jump on the revenue side, but it's really increased its profitability. We have reduced the quality issues that we had in 2018, very, very good.

So these past slides, what does it say? For me, it's important that we are a diverse company. We are not depending on one customer, one product, one country. We have focused areas. We have key markets, and we have different products that is relevant for our customers.

We also get questions about which products are actually providing the most cash. And we would say that that it always depends. And we are bundling the offerings to be attractive to the customers. So we have cash management. We have hardware sale as such. We also add installation. We can add service. We can add support. So it's kind of depending on actually the true contract will give us the cash flow. But I think we are doing quite a good cash flow anyway. So this is just the basis of the nature. It's not one product that is delivering all the cash, it's a mixed picture. But now you have it as investors, and you can go in and look at it if you wonder when we talk.

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Jacob Tveraabak, StrongPoint ASA - CEO [11]

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That's it?

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Hilde Horn Gilen, StrongPoint ASA - CFO [12]

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That's it for me, for now.

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Jacob Tveraabak, StrongPoint ASA - CEO [13]

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For now. Thank you. Okay. So more on sort of where are we, where is StrongPoint today. And I think in that aspect, it's also relevant to see where are we present, where do we have our offices. So we've moved from having our global map where you can show Malaysia on the one-hand side, into a more European focus. We are in Norway, Sweden, the 3 Baltic countries and in Spain, with -- where we have 3 offices. In total, we're a little bit more than 500 people. And the reason why Sweden comes across as so much bigger than Norway here is partly because we have a bigger Labels production in Malmö. We also have the Cash Security production up in Skellefteå and then also our full-service force in Sweden. Between Sweden and Baltics, we also have shared the technology centers. So we have our software engineers, mechanical engineers, et cetera, split between those 2 countries.

And lastly, on where is StrongPoint today, before we get into the juice is the leadership team. It's my leadership team. Well, you met me and Hilde. Erik is heading our people and organization efforts. We will be, as you will see, investing a lot in people going forward. I mean we need to do the right recruitments going forward. In Norway, we have Per Haagensen with long tenure from Tomra, amongst others, heading up Norway. For those of you following the company, we recently put Göran Thörn in charge of Sweden. Göran was the MD of Cub when we did that acquisition. And one of Göran's really key skills, I'd say, is to be able to attract really good people around him. He has built a fantastic environment in e-commerce, and now he's doing the same in Sweden for -- as a whole.

The Baltics, we have Rimantas. When Julius took over as Head of Technology and Supply Chain, Rimantas was moved up in the Baltics. And when you do these changes, you're always somewhat excited about what's going to happen. Rimantas and his team has done amazingly well, grown out of proportions like never before. Of course, we have a very good foundation from Julius. And then in -- as Hilde said, Spain and EMEA is being headed by Trond Kongrød. Trond has very relevant experience, both from THORN, for those of you that are old enough to remember the THORN commercials on having sort of a different kind of appliances as a subscription service, but also from ICA, where he was heading Norway at some point. Amanda, as earlier noted, will be heading our e-commerce expansion, and we'll talk more about why that is important. And lastly, Technology and Supply Chain is with Julius.

Lars-Ake and Leif had been with StrongPoint for many years as well, and they are heading the Cash Security and Labels divisions, namely.

Okay. Then we get into the -- to the future. So let's talk about StrongPoint, what are we going to do going forward? And the first picture, before moving or dwelling into ambitions, et cetera, is helping you understand why we have chosen the customer segments we have. I think you've come to note that I'm a big fan of focus. And when it comes to clients, we're also focused. We're focusing on grocery retail clients primarily. So why do we do that? Well, there are 3 reasons within the retail space why we focus on grocery: Number one, it's the biggest, right? In the countries in which we have our core presence, 2/3 of the turnover is in grocery retail space.

Number two, it's also a more resilient type of customer group. I showed the first page with lots of bankruptcies, et cetera. It's not that often that a grocery chain can run with a deficit for very many years. And there is a reason why some of the most wealthy people in the world stem from families from the grocery retail space. So it's a resilient type of business.

And number three, is when you look at forecast of where is money going to be spent in retail technology, 80% is in retail technology. Why is that? Well, I mean, it's a very more type of professional retail business than other types of retail businesses because you can afford it, not because that you have high margins because you don't, but you have very big volumes. So it's a very professional type of business. And you see this in -- as with ESLs, for instance. So ESLs came to Norway with, amongst others, REMA, when I was working there, in 2011, 2012. And now you're seeing that happening in the other retail sectors as well. So grocery retail is the focus. There is, however, very important spillover effects because if you're not just good but great here, you'll be noticed there.

So the Click & Collect, we have for grocery retail, where you need the ambient, the chilled, the frozen. It's very easy to have that as an ambient locker. And when you think about cash management systems, which initially was used here in Norway and Sweden, et cetera, yes, we see that in Spain in grocery chains such as Alimerka, but we also see that in the mom-and-pop stores. So being good and great here, means we're going to have great spillover effects to other retail segments.

So with that, and you will probably see the numbers out there, but we have some ambitions for 2025. And we're going to grow from a NOK 1.1 billion company to date to NOK 2.5 billion in 2025. So NOK 2.5 billion in 2025. That's on the top side -- or the top line.

In addition to that, we're going to improve our margins. So in 2019, we had an 8.8 -- 7 or 8? Thank you, 8.8%. You see that's why we have Hilde here. That's good. 8.8% EBITDA margin. We're putting up a target here of getting that to 13% to 15% in 2025. So growing this company to NOK 2.5 billion in 2025 and improving the margins significantly going forward. And yes, I will explain how. The first picture, which is kind of important is this one, the build-up to the revenue ambition of NOK 2.5 billion. There are 2 big items here: Cash management and e-commerce. I'll dive deeper into those. But I can very quickly say that, for instance, on cash management, the reason why you see this dotted line below is, of course, because we have an installed base in Norway and Sweden. And as you know, cash is not increasing in Norway. So we are expecting a decline in the installed base. So to be seen how big that is, but we're expecting that to happen. And also, it comes as no surprise that we're expecting our e-commerce solutions to be a big part of the revenue growth. And both of those 2 areas that we'll focus more on later in today's presentation.

It should be said here, checkout efficiency. Today, we're selling our Self-Checkout solution, the hardware and software in the Baltics, primarily. We see a great opportunity for that, both in Norway and Sweden. Admittedly, we've been late to the market, but we also have a solution which is second to none, which is also why we have been getting the attention of Aila and Mad Mobile. Those are Apple partners, which showcased our software solution at NRF. We also have the partnership agreement with Harting. They will be selling our software and hardware solution on Self-Checkout in Germany. So very exciting area in the checkout efficiency space.

In terms of in-store productivity, that's where you have the ESLs, amongst others. So when you talk about in-store productivity, you also need to take into account the revenues that we expect from companies such as Sunrise Technology. And then there's the Other bucket here. And that's not just to make the numbers add up to NOK 2.5 billion. But we are -- although, we are disclosing much more than we have in the past, we don't want to reveal all the plans. So these are not just undetermined, but determined focus areas for us going forward to help the -- helping more relevant for the retailers going forwards.

Labels, we expect to step up our efforts to penetrate both the Norwegian and Swedish market further. I'll talk more about that later. And also Cash Security, we'll talk more about. It's an exciting market outside the narrow spaces of Europe when it comes to IBNS, or Intelligent Banknote Neutralization System.

Hilde, did I forget anything very important now.

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Hilde Horn Gilen, StrongPoint ASA - CFO [14]

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No.

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Jacob Tveraabak, StrongPoint ASA - CEO [15]

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Feels like it. Okay. When you sum this all together, we are going to try to help you understand how we've been thinking about getting there. So we have the 3 pillars, which we call the what pillars. And we have 2 how pillars. The 3 what pillars is: Firstly, using our strong local expertise and presence in key markets, being Norway, Sweden, the Baltics and increasingly so Spain; rollout of proprietary technology solutions, in particular, where we'll be dwelling into cash management and e-commerce; and then lastly, is being the market access platform, in particular, in the Nordics and Baltics for external solutions. And we've seen this with Reflexis, Sunrise and Pricer, for that matter.

And then lastly, we'll talk about how we get there. First, me doing people and then Hilde doing numbers. So let's jump right into it. Strong local expertise. I think it's very important to have the sort of picture of where we're coming from. I mean we're not a start-up that don't have a history. We have a long history. We've a proud history. We have a very, very motivated workforce. And we're -- as I said initially, we're doing not just sales and that's it. We're doing sales. We're doing field service. We are doing support. We're doing the project working. We're doing all the things that you need as a retailer to make these solutions work. We're the trusted -- we are the trusted, and we will increasingly be the trusted partner for retail -- retailers and grocery retailers, in particular, going forward. I guess I can say there are 2 ways in which we will increase our efforts here: One is on making sure that we get the full breadth of the portfolio we have to existing clients, both in Norway and Sweden, Baltics and Spain. We have -- as you've seen, we have a tremendous portfolio of solutions today. We serve in Norway, Sweden and Baltics. We serve all the -- maybe one exception, but we serve all the major grocery retailers, but we can increase the depth of partnership with them to a much larger extent.

The other bit of this is Spain. We're just scratching the surface. I mentioned Alimerka and Plusfresc, and I'm willing to bet pretty much that you hadn't heard about them or haven't heard about them in any other setting than StrongPoint. So the point is that the Spanish grocery retail market is big. And it's not just big, it's increasingly taking in and taking on technologies that we take as granted in Norway, Sweden, increasingly so in Spain. That goes for ESL, it goes for checkout efficiency and even cash management. We'll get more into that.

As for Labels, which is also, if you think about sort of the presence we have in Norway and Sweden. And yes, that presence is in Norway and Sweden, it's not going to be elsewhere. It's an overall solid market. We're providing primarily labels to the FMCGs, the fast-moving consumer goods. Those sort of labels are there to make the products appealing. It's not going to disappear. And the sort of the requirements to these labels is, if anything, increasing.

In addition to that, and we've talked about this at earlier quarterly presentations. RFID. I mean, it's been out there for probably more than 20 years, and everybody has been waiting for it to take off. We believe that now is potentially such an inflection point. We're not really talking about the sort of big bricks, given that that's not a Norwegian English term, but the small -- the big tick -- tags. They did look like bricks any longer. These are being printed now, and we're running 2 pilots in Sweden with clients to ensure that they can do the -- for instance, the inventory, in a matter of seconds rather than closing the store and bringing in students to do the inventory. The other bit is on security printing, which is also a very, very hot area. And in both these areas, we have the client and relations with FMCGs in Norway and Sweden, but we also believe we have the skills and competence to succeed here.

Then you have the pillar number two. Through this strategy process, in the fall, we have been doing a lot of analysis, and we worked extensively with both the broader management team with externals. And coming out of that is, I would say, a very good confidence in the fact that we have 2 solutions, which we believe are ripe for world class, if not domination, at least the world arena, that's e-commerce and CashGuard. And I'll talk more about why we believe that and how this looks. And to prevent me from talking too much, we have put in a video. So bear with me for 2.5 minutes.

(presentation)

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Jacob Tveraabak, StrongPoint ASA - CEO [16]

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Okay. So I think that was a short video of (foreign language). I think it's important to recognize that, again, when you want to do picking, you want to do it as efficiently as possible. That means how many items can you pick per minute, which means how can you, for instance, have our software combined with several devices, enabling dual or both -- picking with both hands, doing multi-order picking, doing integration with not just flash, but also as you saw with the head-up displays that gives you the information on the -- on your glasses. So the world have thought that we're going to all go around as consumers with the Google Glasses, that didn't work. But perhaps, we'll see this actually in this environment. And also doing integrations with the auto -- for age verification. All these things, the flexibility with our Click & Collect solutions or other solutions is going to be very important. And the reason why we have invested some money, although not on the balance sheet, that's to be said, it's all expensed, is because we want to make this really a software solution, which is scalable and possible to sell also outside the borders of the Nordics and Baltics without a big crowd of people selling it. So I'll explain more what I mean with that.

But to take a little bit of a stance at e-commerce growth in grocery retail. Sometimes, when you see the press, you think that maybe e-commerce is 20% or 30% of the turnover. That's not the case at all. But it's a market with big revenues, which means that even 3% in the U.S. quickly becomes 300 billion. That's, of course, the biggest market. But as you see in all the key markets that StrongPoint operates, we're looking at 20% growth per annum. And now is the time when these players are taking the decisions, what sort of picking solution are you going to use. What sort the delivery solutions are you going to use. And I recall back from the days when I was a professional consultant and also working with both REMA and Kolonial, that U.K. is often being picked up as the market in which e-commerce has come the furthest. But I can assure you that the solutions they had in the early 2000s, they were really rubber bands made from scratch in their own IT department. We're seeing now the sort of second wave of change happening there, which we think is very interesting. So I think this is interesting from both the aspect of -- you have all these geographies moving into online and being competed with pure players digitally born. There's a new skill set that's needed, and we're there to support them.

I promised you also that I'll talk a little bit more about sort of the characteristics of e-commerce market and why sometimes you could -- it's easy to think that, well, isn't a robotic solution system that's the solution to everything. The truth of the matter is that the answer is not so black and white. This is one of the reasons why. And looking across different geographies, this is typically the demand pattern you see for groceries online, not most retail, but grocery retail online. Monday is the single biggest item and on order day. The average basket on Monday is 3x to 5x bigger than the average basket if you go into a store. And why is that? And I'm sure a lot -- many of you can relate why is that. That's because you shop for the week, right? Which means this is repeated. This is repeated. What happens it dramatically reduces to the Saturday, and then you have the weekend shopping again, and then it declines again. So what does this mean? Well, I've seen lots of people moving up here with investments -- fixed investments in robotics, early robotics or even hire, because of course, you're growing, right? So you need a lot of headroom. So what does it mean? Well, it means that your unit cost that you were promised by the suppliers up here with a full utilization, of course, or maybe 50%, that's not really the case. Is that not going to be the case going forward? No, it's not. I mean robotics are both coming down in terms of cost, but it's not that solution to everything, in particular for grocery retail. So we think there is a window here and more than a window for manual picking because if you look at both picking and delivery and the typical maturity you see is that you start by picking in-store manually. You move into picking in dark stores manually, and then you move into or you're starting to move into. It hasn't happened. But we're starting to move into automated solutions. And of course, if you start out with an automated solution without any demand, you're going to have a very long time, a very long runway where you have lots and lots of capacity. So this is the reason why we're seeing, depending on the evolution over time and with market maturity, this is going to prevail. This is going to prevail, and then you move into here.

And then another very important characteristic is also well, where are you delivering? Are you delivering to a city, urban or rural area. Because if you do in Norway, as an example, it's really the Oslo area in which you're doing e-commerce now. And yes, I mean, when you get to a certain size of the market then a central fulfillment center might make sense. However, what about all the rest of the country, the Bergen, the Stavanger, the Trondheim, the not least Bodo of the world. What's going to happen there? So what you're typically going to see, we believe, is you're going to see a combination of this. And the same goes for deliveries. We deliver software solutions for this and hardware and software solutions for these [2]. That's going to be working now in the city centers. But as you move further and further into the suburbia, urban and rural areas, at some point in time, even the most capital-rich private investors and venture capitalist funds are going to say that well, home deliveries in a rural area is not going to make sense because the density is not going to be high enough ever. That's what you're betting for now, right?

So there is no silver bullet. There is no one simple answer to achieve profitability in grocery retail. I can say, though, I've seen one profitable player and that was in Switzerland. LeShop, acquired by Migros. What did they do? Well, they -- this is Switzerland, right? So it's not that big. But they did dark store manual picking and home deliveries with the Swiss Post, not very flexible, but you managed to make it work. And you're seeing different kinds of models working around. You have sort of a milkman principle working in the Netherlands as one of the things. The point being that there is not one single solution that's going to be the answer to online groceries. It's going to be a multitude of them. And we're in most of them, here, and of course, we're also looking into what sort of offering we can be doing down the line on robotics or micro fulfillment centers.

So again, to summarize, we're doing the Pick & Collect. The combination of our software and hardware from third-party providers such as Zebra. We have our own proprietary Click & Collect lockers, stationary, mobile and also for -- now for nonretail, so far to the spillover effects.

We're right now working, of course, with -- or have been and are working with getting our solutions out in the core markets that we have. But now is also the time to step up our international expansion. We have some partners here already. We are working with OPI or Optical Phusion in the U.S. We're working with Doddle in the U.K. we're working with emmasbox in Germany. We're going to do that increasingly so, meaning we're going to increase the number of countries we work with, but primarily through partners. And with the software solution that we have developed now, we will make it very easy for our customers or customer prospects to simply download the picking solution on your mobile phone, right, to have a test, a trial period, if you want before moving really seriously into e-commerce.

So that was e-commerce. CashGuard. Okay. I said and Hilde said as well, right, that this is one of the areas in which we as -- when we meet investors are being met with, well, CashGuard is -- what about cash? Isn't that kind of -- isn't that kind of dead, at least in Norway and Sweden? Well, we'll show you why we believe that CashGuard have a very prosperous future in certain countries. So first of all, CashGuard, it contain cash management system to prevent theft, but also to prevent spending lots of time and resources to do the till at the end of the day. That's principally what it does, right? And the beauty of CashGuard is it's been around in the market for many, many years. High reliability, high speed, which is very important, of course. So I'll get back to sort of some competition comparisons, but I wanted to start with a macro picture, which is like this. So again, this is Norway and Sweden, right, relatively -- rapidly declining cash use. All right. This is the page -- of course, I mean, nobody here is -- very few of us that carries around cash. But it's pretty nascent. This is -- I know some of our competitors talk about sort of total amount of money out there in the market, which is not relevant. The relevant thing is what's the cash that's being used by consumers in business. And you're looking at now, yes, it's all declining, but you're coming from an area of 90%, 80%, 70%. Look at South Africa there. We did the 500 CashGuards through FNB as one of the orders. So there is a lot of potential here for CashGuard, in particular, in some of these countries. I will show you why. And I must say also, it's very -- you're sitting in Norway and Sweden and you meet people, and we like to think that we are so digitally knitted that's why we use cards. I'm sorry to disappoint you all, but part of that reason is also because we have a very well-functioning bank system. BankAxept in Norway and similar in Sweden that have really pushed the debit costs or debit card costs down to close to 0. So you as a store you sort of want to drive card use. That's not the case in many of these other countries. We've talked about the Italian or German bank market, that's a very, very fragmented market. It's very difficult to see that you can have similar kind of bank corporations. So what did we do? Well, what you just saw is just one out of very many inputs in a very thorough piece of analysis that we've done to sort of review the attractiveness of different geographies. So one being sort of the cash usage is a cash usage development and also the size of the economy, and that's sort of just scratching the surface. What you then need to do and that we have done for you is to look at what's the business case, right? In Norway, and Sweden, as initially said, we have very high labor costs. And there is a great thing about having high labor costs because it also means we typically have automation faster. So for -- when we sold CashGuards to Norway and Swedish retailers, it was primarily for this reason. You don't need to pay the 50% or 100% overtime at the end of the evening to do the till, very easy to make that business case. There is, however, another business case, which is the mitigation of theft, both internal and external. And without being too stereotype, I mean, if you look at the reasons why are FNB and Bullion IT, our partner in South Africa, why are they selling so many CashGuards. That's, of course, because all of you that's been to South Africa, you know that the crime rate is very high, very, very high. That's the business case, primarily. And why the mom-and-pop stores and other retailers in Spain buy CashGuards. Well, I mean, not the same level of crime rates, but there is a lot of internal theft. I mean we've had installations where customers come back to us and say, listen, there is something wrong with your system. It tells us there is too much cash. There is too much to turn over. Like, no, it's not. It's just stopping the leakage you had in the past. I think those things are important to recognize.

And then lastly, we've done a country-specific risk assessment, looking at the MDR, both the absolute numbers, the development of that. The purchasing power. Doesn't make sense to come up with a solution if that -- If there is no business case whatsoever. And based on that, we have an attractiveness -- priority, if you want, where Spain comes out very attractive. We already knew that, but it's always good to get that confirmed. Italy and Greece is sort of next in line for us to explore the opportunities in the cash market. We've had very much success in Spain. We're both selling, but also running [a revolve drillers] program. So we're willing to expand and explore what the opportunities are primarily in these markets first.

For the second priority, again, it's nice to see that a country like South Africa appears here. This does not mean we're going to set up a Nigeria office. I can pretty much almost guarantee you that's not going to happen. But the point is that we've been using partners here, and we -- most likely, we'll be looking for other partners as well.

And then lastly, we have Austria and Germany. Those are different animals. And we know that because we've been in Germany for quite some time with own resources not succeeding. But with partners, it's a different ball game. So we believe there is a great opportunity for cash management solutions. We also believe that there is a great opportunity for our solution, which really not -- makes sense. And of course, we've had some opportunity to test this in the market. We are the fastest, most reliable cash management system out there. There is no doubt about that. That's what we see from our clients when you typically have lunch hours and which is important in the (inaudible) segment. You can't stop the queue or the people from coming, you need to serve them quickly. And this is actually a lot faster than doing the manual handling. And along with this is also, of course, the sort of how do we handle service, how do you handle integration. And whereas we are at par with our competitors, it's really the performance of the CashGuard that is strong.

The last thing I want to mention on this pillar is Cash Security. As you know, some years back, we didn't serve Russia. We serve Russia now, and it's a very, very big market for us. We're seeing more and more, first of all, increase in market share in the IBNS market. So with competitors such as Spinnaker and Oberthur, we are increasing our market share. We have the safest solution out there. There is no doubt about that. We're not the cheapest, but we're the safest. And this is kind of the reason why you have this in the first place. So we are -- we have been increasing our market share here, but we're also very excited to see what comes next, which other markets are going to open up for IBNS because you need some regulation in place for that to happen. And we're not pinpointing which markets. We can't disclose everything. We have very interesting dialogues, both in the Middle East, North Africa and Central America for this. And again, we're not going to start any offices there. So rest assured, we're doing this through partners.

Okay, bear with me. We have the third pillar, the market access. And this is just one slide. So you're going to thank me for that. These are really 3, both testaments of exactly that point, but also proves the importance of that point. So Pricer has been -- it's a Swedish company, as most of you know, Swedish-based, producing and selling ESLs primarily through partners. And StrongPoint has been a partner and is a partner in Norway, Sweden and the Baltics for the entire retail space. And in Spain, we're doing so also in pharmacies as per today, and we've had great success with that. And I think that's also the reason why we have companies and giants like Reflexis and Sunrise Technologies, wanting to partner with us. And for also those that are hoping -- waiting for that sort of hockey stick to come as a result of this, I mean, we have to bear in mind, the Reflexis solution that we launched the -- or we announced the partnership in Q2, now we've done this sort of -- sorry, first recruitments that are on the ground to work with clients and onboard them. And Sunrise was just announced now, we have tested that with some clients already, the digital shelf. And there is lots of excitement around that. But I think it's also very important to say that one thing is digital shelf. If that was the only solution that Sunrise was providing, we probably wouldn't have done the partnership, but it's the whole road map of solutions coming. This is with Kroger, the biggest grocery retail chain in the U.S. Walmart is bigger in terms of general retail, but grocery retail, $100 billion turnover with Microsoft and also Nuro as one of the partners. Nuro is providing last-mile deliveries with autonomous vehicles. So we have been able to get that really a giant in the back here to provide us with solutions not just today, but also for the future. So we are very enthusiastic about these partnerships and what they can provide for us going forwards.

That was the what. Then how -- okay, we're going to spend a little bit of time on how. I'm not going to -- yes, I'm going to spend a little bit time on how. Because clearly, I mean, this really -- I mean, one thing is the solutions. We talked a lot about solutions now, but it all boils down to having the best people. We have today, in Retail Technology, different focus on that, we have out of the 500-plus people, 380 in Retail Technology. Those 380 are going to grow. They're going to grow, and they're going to upskill. So I've said it before, I'll be happy to repeat again, but it's not just about hiring an SVP for people and organization, it's taking the upskilling, the development of people, the attractioness of people and leaders to StrongPoint up to a new level. If you want to play in the major league, we also need major league players. So as examples of recent hirings is the person heading or the recent -- most recent recruitment for Reflexis, is the former Nordic Sales Director for Equinix, the biggest competitor. When it comes to improving our supply chain because we're going to have a lot more of both also hardware in there, we've done recruitment of a former IKEA Supply Chain Manager. So if we are going to play in the major league, we need the best people as well. And we need some money as well, Hilde? Or do we -- what can we give? Can we still give money?

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Hilde Horn Gilen, StrongPoint ASA - CFO [17]

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No, I'm not sure. Can we? Thank you, Jacob. Profitable growth, cost control and a solid balance sheet, that's kind of substantial for the growth that we are facing. Profitable growth. One thing that really impresses me with StrongPoint when I joined is the way we are dealing with our customers, but also thinking about how -- who is actually paying our money -- our salary. So there is a strong culture already in StrongPoint when it comes to having good contracts with the customers, having the right price level on the contracts. We are monitoring this, and we are dealing with the best negotiators because we have the big chains as our customers. But yet, we have profitability as we have shown today. We also have a very good governance model. We are monitoring the business substantially with local management teams, with departments. We are monitoring the progress that is in every corner of the business. We are working on KPIs, not only the one you are seeing, but also how many calls do we have? How long time it -- takes it before -- from the moment customers are calling our support until we actually pick up the phone? So we are working with our governance model and chasing that. But what I also want to say is that we have a quite lean and short distance when it comes to decisions, and we are agile. So if we have meetings where we see a deviation to our plan, we have the opportunity to make the right decisions going on. Not everything will go straight ahead, we know that. So it's important that we have trusted managers that knows how to manage within decisions.

We had this cost control or cost initiative in 2018. We are not launching any more cost reduction programs. What we are saying is that we are going to use the cost more wisely, meaning that we are using them on the resources that has the right competence. And what I say, stop cost waste and increase cost benefits because it is needed to have the costs that we have.

We'll come back to the balance sheet. When it comes to ESG, that's a new term from StrongPoint, but I know that U.S. investors are really focusing on environmental social governance. We are absolutely focusing on both environmental, social aspects and governance with our business, but we haven't structured this into a report. We will do that in the annual report for 2019. We will take basis of 2019 measures when it comes to [cycle], when it comes to carbon measurements and start on 2019 level and start to make ambitions on that level. We will not be greenwashers at all. We will be quite humble for this huge area, but this is -- this needs to be part of the DNA of our people and in the everyday decisions, and I think that's important.

When it comes to the cash in this strategy that we have presented to you now, we struggle finding what will influence the balance sheet in a different way than what we have today. We will continue to cost our technology. So we don't plan to increase intangibles. We take development in the time that we can do, so month by month, year by year. We will invest in a few machines to Labels. I know Leif really, really wants a couple of new machines, so we will do that. The only thing that will affect us, but which is doing it today as well, is the hardware as a service or the rentals in Spain and in other areas, if we choose to do that. We know that that will drive our CapEx.

Today, we are doing this on our own equity. We will, of course, look at financing aspects of that, but that's the same as we have today. We think that with the current growth, we are covering it well with cash flow from the other operations. So we just say the boring thing, cash conversion rate will -- we are expecting that to increase the same way as it is today.

Also, on the dividend, the Board of Directors has made assumptions, continue to increase the dividend going forward based on the trend that we have seen. And you see a steady but with small changes year-on-year, but it's still a quite steady dividend policy in StrongPoint. So that's kind of something that we can -- that's the ambition today at least.

So M&A. Jacob is kind enough to say that we are putting M&A on top of what we have presented today, that is, small-scale acquisitions. We will not change the total strategy, with large-bolt on M&A. Of course, we will review both the financial figures and the road going ahead. But if we choose to acquire a company in Italy to move that part faster, we will do that and we will not change the presentation.

In '19 -- in 2019, we have really worked on M&A, and I know some of you are really eager to see why haven't something happened. We have looked at -- we had a deep dive of -- dive so more than a handful of companies. We have [58] targeted companies today. Some of them goes in; some goes out of the pipeline. And we see it's a quite high price expectation today on what we see.

Coming from my background in 2 large companies, I want to see that they have actually delivered before we start to pay for the company. While the smaller companies really look ahead and say, well, next year will be much better, well, let's wait a year then. So that's the point with the target list.

We will focus on all 3 pillars. So we will focus on how we can strengthen ourselves in the local -- in the key markets that we have today: Norway, Sweden, Baltics and Spain. And we will also see what does it take to roll out our proprietary into selected markets if we need some acquisition in that as well. So it's -- it will be something that we'll continue to focus on, but we are going to do the right move and not waste the money. Good.

Path to '29 -- '25 -- '29.

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Jacob Tveraabak, StrongPoint ASA - CEO [18]

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You bought us 4 more years.

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Hilde Horn Gilen, StrongPoint ASA - CFO [19]

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I bought us 4 more years.

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Jacob Tveraabak, StrongPoint ASA - CEO [20]

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We don't need that. But I think just to -- if you click one more, just to summarize, just to summarize it all, we're going from the figures of top line NOK 1.1 billion that we presented today for 2019 into a NOK 2.5 billion company in 2 point -- I'm sorry, in 2025, and that's organic growth. And again, as Hilde said, that's not to say that we are not going to do small-scale M&A if that's what it takes to be smart about the new move. But -- so that's organic move. And then, yes, I've given you the task of having larger-scale M&A on top of that at the right price at the right -- for the right reason. Beyond that...

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Hilde Horn Gilen, StrongPoint ASA - CFO [21]

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Is it linear?

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Jacob Tveraabak, StrongPoint ASA - CEO [22]

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I'm coming to that...

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Hilde Horn Gilen, StrongPoint ASA - CFO [23]

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Okay.

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Jacob Tveraabak, StrongPoint ASA - CEO [24]

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It's not -- don't draw lines in your Excel sheets. It's not going to be linear. I mean I hate to quote Mike Tyson, but he is the one that said everybody's got a plan until you get punched in the face. And I can assure you, we aren't going to get punched in the face, but we are going to get to the target and ambition. So things will not be linear. That's the one thing I know for sure. But we'll be growing our business organically in the way it's presented, going deeper into clients in Norway, Sweden, Baltics and Spain. Taking our -- as we see now today, 2 very strong solutions, both e-commerce and CashGuard solution out there in particular, and also leveraging the fact that we have been able to -- and we are attracting the attention of some really giants out there, it's -- I feel really humbled and proud to say that.

And as a consequence, our e-commerce share is -- we've always said it's at a low number but growing fastly, and it's been growing 40% last quarter. It's now 5% of the revenue and more so on the EBITDA. We're going to grow that to 25% of the -- for the company in 2025. Our margin from 8.8% going to the 13 million to 15 million -- I'm sorry, 13% to 15%, not million, thank God. And the reason for that margin improvement is partly what you showed earlier today that we have solutions that are -- have a very solid profitability for us today. But it's also, for us, again, not to spread the resources thin but rather go deeper, or can go deep. There's a significant scale effect from having that same sales personnel technician having a broader portfolio of solutions to bring to the table.

And then lastly also recurring revenue. Slightly larger increase than the overall revenue is what we have put in as the ambition for 2025.

And with that, there's probably no questions. But now is the time to open for questions. We have a microphone here as well not just for this room but for people listening in on video.

So any questions?

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Questions and Answers

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Hilde Horn Gilen, StrongPoint ASA - CFO [1]

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Well, they are exhausted.

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Jacob Tveraabak, StrongPoint ASA - CEO [2]

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Exhausted?

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Hilde Horn Gilen, StrongPoint ASA - CFO [3]

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By energy.

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Unidentified Analyst [4]

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Thanks for a very good presentation. I have a question on your guidance but also on the short-term momentum here. You say it will not be linear obviously. But if you, let's say, split up NOK 2.5 billion, it would correspond to roughly 15% growth yearly. Can you say something about the momentum in the business entering 2020? And have you seen 2020 developing?

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Jacob Tveraabak, StrongPoint ASA - CEO [5]

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So you used the word guidance. We're not changing that policy. We're not providing any guidance as such. But I mean, as you see, the momentum is good, going -- or throughout 2019. We've had some changes in particular on the restructuring of offices that also happened in November and December. That, to some extent, impacted the Q4 results, but still, we've had a good momentum. But we're not going to provide any guidance as such, but we have a good speed going into 2020 is what I can say.

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Unidentified Analyst [6]

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Okay. I have some other questions as well. Can you say something about the risk on this partnership contracts you have in particular then with Pricer? What's the risk of they suddenly taking over Norway and Sweden and the Baltics themselves?

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Jacob Tveraabak, StrongPoint ASA - CEO [7]

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Well, so -- I mean, I think as with all partnerships, the best way to maintain a good relationship with these partners is delivering, and we've done that over years. Further to that, I mean, that goes for both Pricer but also reflects this and Sunrise is the fact that for these companies focusing on a very, very slim solution, the ESL or it be workforce management, you have a global presence. And there's no way even those -- even though, they're bigger, there's no way they're covering these markets with their own resources in particular, not in smaller economies that, frankly, Norway, Sweden and the Baltics are. So I think on paper, there's a risk. That risk has been there for 10 year -- for the 10 years we've had Pricer. So I think the -- our success will continue to have the partnership that way.

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Unidentified Analyst [8]

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A follow-up with the last question, and that is on e-commerce, the subsegment that you expect solid growth rate going forward. Is this driven -- can you say some -- I mean, you talked a lot about your position here. But can you also say something about which products you expect to see strongest growth? This is it from click-and-collect lockers? And is it a higher penetration in the countries you already are in? Or is it new countries?

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Jacob Tveraabak, StrongPoint ASA - CEO [9]

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I can say this much, today, our picking solution -- our current picking solution is with 14 clients in different -- or in the key markets predominantly. We have more than 10 customers today with the click-and-collect. To differentiate it, I think it's important to recognize that when we install and sell our picking solution that we get paid on typically a paper pick or paper order, right? So you're not going to have the huge increase 1 quarter and -- but rather a steady increase of revenue and profit as the clients work with our picking solution. So that's sort of a more stable increase.

As with click-and-collect, as long as we sell those solutions, those are going to be more jumpy, right? But we see -- we have seen and are seeing a lot of interest in those click-and-collect lockers, both, of course, in Sweden and the Baltics, less so for the reasons of Norway being -- yes, don't get into that, but the Norwegian market is very small in the sense you have 3 major players that really affect any development of e-commerce, [Coop Norge] playing together with REMA 1000. So that's a bit of a different animal.

But when you look at the click-and-collect lockers we have in the Baltics and Sweden in particular, we're seeing a lot of attention around that also in some of these geographies that I earlier referred to. So that's going to be more jumpy whereas the Pick & Collect is expected to have a more nice increases over time.

Other questions?

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Unidentified Analyst [10]

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You talked about a couple of new markets within cash management today, in Greece and Italy. Is this more a long-term ambition to move into these markets? So could we -- is that something that you will do more short term?

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Jacob Tveraabak, StrongPoint ASA - CEO [11]

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You're going to see us starting to explore those countries in not the longer term, in the long term role there but in the short term. And that is readily because these economies -- well, one thing is going through the very detailed analysis, but the other thing is there are some aspects of the economies which are very similar to Spain and the success we've had in Spain, one of them being the much bigger density of smaller businesses, which means that when you go into a bakery or pharmacy, you're really talking to the decision maker doing the sale over the counter, either with their own resources or with partners or roadrunners. And we believe that potential is also there in Italy and Greece. So for us, it's about exploring, can we take the success -- the early success we've had in Spain and also move that into these countries.

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Unidentified Analyst [12]

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And a question on the home markets. You -- we saw that you placed one of your...

(technical difficulty)

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Jacob Tveraabak, StrongPoint ASA - CEO [13]

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lockers, right, really big. And it's reasonable to believe that similar types of developments will happen also in Norway, Sweden and the Baltics.

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Unidentified Analyst [14]

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And lastly on the EBITDA margin target. You said that you wanted to improve the product mix but also that this should come somewhat from operating leverage. Could you say what type of effects do you think will be the most significant?

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Hilde Horn Gilen, StrongPoint ASA - CFO [15]

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So our -- it's a mix of reasons for why we had that, and I can't go into which part of them that will contribute the most.

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Jacob Tveraabak, StrongPoint ASA - CEO [16]

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Do we have one in the front here?

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Unidentified Analyst [17]

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How much of your products -- total products

(technical difficulty)

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Jacob Tveraabak, StrongPoint ASA - CEO [18]

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efficient because that's our solution. We are taking more of a consultative approach. We're saying, well, "What's your problem?" We have a full range of solutions that can help you with the issues you're facing. So I'm not going to give a number now on what that split is, but I can say this much, it's a pretty nice balance.

Other questions? Do we have one on here?

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Unidentified Analyst [19]

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You say a lot about the growing in Baltic. Can you say -- can you diverse it a little bit between the countries and -- the 2 countries? When you look at the map -- and I think the retailers go beyond true borders from Poland and also Belarus to Baltic -- why aren't you in Poland and also Belarus?

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Jacob Tveraabak, StrongPoint ASA - CEO [20]

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So the -- so to answer the second question first, it's all about focus. It's all about focus. We are only a NOK 1 billion company. We're already in Norway and Sweden. I say the Baltics, but it's actually 3 countries, 3 different languages, somewhat different legislation and spend. So 6 countries which we're really focused on. So that's -- focus is one reason. The other reason is, of course, when you -- or when we have done these product market fit analysis for different products, I mean, these countries don't get up to the same level of attractiveness as other countries.

So that's -- that was the second question. The first question, how to do learning. Yes, I think the Baltics for me is probably the most fully fledged type of serving we have for a country. As a reference, right, we have -- twice a year, we have retail forums attracting the biggest retailers that they actually pay. So it's actually a revenue -- source of revenue for us without that being the primary reason. But the reason being, we attract the biggest retailers to come and listen to us and the retail solutions we offer as well as other solutions.

We have a very, very high standing in the Baltics. And I think the rollout of the self-checkout solutions that we have in the Baltics, just to some extent, have been disappointing, we haven't been able to achieve that in Norway and Sweden to date. But I'm certain that over time, we will both be able to deliver on the different geographies that we have as well as work on sharing best practice examples across.

I think though, in that respect, it's important to recognize that if you look at grocery retail, there's a reason why there's not that many grocery retailers that succeed outside our own borders. Coming from REMA 1000, probably one of the very few companies that have succeeded in Denmark, I mean, at that point in time, we used to say, the only reason why we were successful in -- or REMA 1000 was successful in Denmark was because Norway didn't interfere. It is different. I think ICA in Norway is another example of that.

And so I think it's very important to respect the fact that although from a desktop or PowerPoint view, a country may look similar, there are subtle differences that really differentiate the companies. But of course, we will be sharing best practices and solutions across borders going forward more than we have done.

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Unidentified Analyst [21]

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The growth is 15%, in every 3 countries (inaudible). How do you see the drivers?

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Jacob Tveraabak, StrongPoint ASA - CEO [22]

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So the question was -- is how the growth is in the different countries. Well, we haven't split it out. I can say this much that there's size differences in the different economies. So Estonia, for instance, would be a little more up and down, but in general, for the Baltics, it's a very nice and steady growth. More than steady, it's a very rapid growth actually.

Okay. I think with that, we'll conclude today's session. Thank you for listening on video. Thank you for being here and questions. And we're, of course, available for further questions if there is any. Thank you.