Back to normal levels for Q1 – growth plan for 2024 remains firm

• We see a lightening in the recession

• Growth of approximately 4%

• Easter effect affects the quarter

First quarter January 1–March 31, Group

• Net sales for the period amounted to SEK 73,818 thousand (SEK 72,254 thousand), which corresponds to an increase of 4%.

• Gross profit (agency income) decreased by 3% to SEK 19,171 thousand (SEK 19,749 thousand), the gross profit margin also decreased to 25,1% (26,8%).

• Operating profit before depreciation EBITDA amounted to SEK 900 thousand (SEK 4,204 thousand).

• The EBITDA margin for the period decreased to 1,2% (5,7%).

• Profit after net financial items for the period amounted to SEK -1,348 thousand (SEK 2,077 thousand).

• Net earnings per share after tax amounted to SEK -0,08 (SEK 0,13).

• Cash flow from operating activities amounted to SEK -5,709 thousand (SEK -3,508 thousand).

• Equity as of March 31, 2024 amounted to SEK 45,670 thousand (SEK 56,327 thousand).

• Cash and cash equivalents as of March 31, 2024 amounted to SEK 11,147 thousand (SEK 16,328 thousand).

Important events January 1–March 31, 2024

• Empower invests and opens an office in Stockholm.

• Thinc begins collaboration with media agency LikeHouse with an option to become a partner.

• Thinc Collective acquires an additional 14% of Safir Communication.

• Löfbergs, together with Thincbolaget Context Media and the communications agency +1, wins gold in the prestigious 100-watt advertising competition.

• Nowa Kommunikation wins assignment from the Swedish Transport Administration for communication services and advertising. The sales value is estimated at approximately SEK 20,5 million annually for two years with an option for a further two years.

• Thinc Collective's board of directors presents new financial targets for the period 2024–2028.

• Thinc company KKM wins communications assignments regarding the labor market and new arrivals. KKM estimates the value of the assignment at SEK 3,5 million.

• Thinc Collective enters into partnership with The MISSION Group.

• The board of directors proposes a dividend to shareholders of SEK 0,25 (SEK 0,20) per share for the financial year 2023.

Important events after the end of the period

• Nowa Kommunikation wins assignment from Region Skåne. The company estimates the value at approximately SEK 9 million annually over a four-year period.

• Thinc Collective introduces the new Jetty X, the next generation of event tools.

• Thinc Collective begins collaboration with advertising agency Granath. The plan is for the collaboration to lead to ownership cooperation, as the parties have agreed on a letter of intent to become co-owners.

• Thinc Collective secures contracts regarding media strategy, media brokerage and advertising services, together worth a total of SEK 8 million, through subsidiaries Nowa Kommunikation and Context Media.

• Thinc Collective acquires 30% in the communications agency BANG.

Seasonal variations

Sales vary across quarters. The subsidiaries' sales fluctuate over the year in line with total media and communications investments in the market, with historically the second and fourth quarters being the strongest periods.

CEO has the floor

Growth plan for 2024 remains firm

It is pleasing that we have a total turnover of SEK 76,4 million (73,8) in the quarter, which corresponds to growth of approximately 4% and agency income (gross profit) of SEK 19,2 million (19,7). EBITDA remains at SEK 0,9 million (4,2).

Normally, the first quarter is our weakest period of the year. This is because demand from our customers is lower at the beginning of the year and especially in January. In addition, this year there is an Easter effect in comparison with 2023 as the number of working days was three fewer this year than last year, corresponding to approximately 5% of the working hours in the quarter. Despite this, we have delivered a positive EBITDA, although it does not reach the level for the corresponding period in 2023. Some individual effects that affect the result are our investments in a new office in Stockholm and newly started assignments for Nowa Kommunikation and KKM whose settlements have not yet had time to positively affect the result. Since the result is not an effect of reduced turnover or reduced demand, I am convinced that we will be able to bring back results in the coming quarters. We can already see how we had better profitability in April than in April 2023.

The Market and the Thinc Collective

We have now reached a stage in the recession where we are seeing a lightening, closing more contracts than before and preparing for a boom but where everyday work with assignments is currently a little more postponed and cautious. Not much and we are still growing more than the market but we recognize the signs. It is always a little tougher just before the economy turns.

And how do we know it's turning around?

Well, interest rates are said to be on the way down after the Riksbank's cut, and so is inflation. We are noticing this, among other things, in the fact that the construction industry has started to ask us for help again and that the number of requests is increasing. Together with newly won contracts for both the public sector and private industry, we have a higher order value than before. We know that all of this is positive for us, but as always, the work with new contracts comes first and the revenue later. We are not least pleased about our new colleagues and partners in LikeHouse, BANG and Granath, which means that we now have a total of 135 employees at our offices around Sweden. The combined turnover of the companies that are on the way in is SEK 150 million per year. They will provide a nice addition, both in terms of turnover, results and skills.

Developments in our various business areas

AO Performance is strengthened through agreements with the right to acquire the media agency LikeHouse, new agreements with the Swedish Transport Administration, Region Skåne, Region Dalarna, Colorama and others. We have also acquired 30% in the brand experience agency BANG (Brand Arena Group Nordic Agency AB), which has had a good development in recent years, has 15 employees and will bridge the event company Prodekor with the areas of Strategy and Creative. Here we expect 1+1 to be at least 3.

AO Digital Solutions continues to grow and our AI development is taking leaps and bounds internally. The new version of Jetty X, a SaaS system for events and festivals, has been launched and the reviews from our customers are very promising. The new version enables us to enter new markets and target groups.

AO Strategy is growing steadily, not least by Empower celebrates new customer assignments. Also Safir Communication has very strong development but is also affected by the Easter effect, which has a positive effect in Q2 instead.

AO Creative is growing with the letter of intent to acquire the advertising agency Granath Reklam, a well-established agency with 18 people located in Stockholm and with well-known clients. Granath will strengthen our creative team and allow us to take on even more and even larger clients. The brand experience agency BANG also has a creative team that together with Granath, FAB Agency and KKM Now create a group large enough to take on the next level of mission size.

Our immediate future

I wrote in the last quarterly report that 2024 will not only be a year of technology and sales work, but we will also continue to improve our margins through increased value added and synergy effects. I am very confident that margins will continue to develop in line with our financial targets through the investments we are making in Stockholm and in a number of businesses with high value added content. I look forward to sharing more about how this work develops in the coming quarters.

Anders Wallqvist, CEO Gothenburg in May 2024