Interview with Brdr. A&O Johansen’s CFO Per Toelstang

For those who have not previously heard of Brødrene A&O Johansen, can you tell us about your business, what you do, and which markets you address?

Founded in 1914 by the Johansen family, Brødrene A&O Johansen (AO) has evolved into Denmark’s largest technical wholesaler. The company supplies essential materials to plumbers, electricians, construction firms, and carpenters. Publicly listed on the Danish Stock Exchange for over 60 years, AO retains strong family ownership, ensuring strategic continuity.

With 90% of its business concentrated in Denmark, AO has been expanding its footprint in Sweden and Norway, transitioning into a Scandinavian player. This geographical growth, coupled with a diversified revenue model where 70% of sales come from maintenance-related activities and 30% from project-based sales, provides resilience against market fluctuations. AO’s commitment to digitalization, omnichannel retail, and customer-centric innovation positions us at the forefront of the industry.

A&O Johansen is a leading distributor of home furnishing equipment, specializing in areas such as HVAC, electrical, tools, and building materials. What are the key competitive advantages of your offering within this field, and how do you view your positioning relative to other players in the market?

AO operates under a core philosophy: ”We Lend a Hand”, a commitment that permeates every aspect of its operations. The company’s dedication to customer convenience and support has remained steadfast since its inception. AO provides seamless shopping experiences through its physical stores, e-commerce platforms, click-and-collect services, and 24/7 store access via the AO 365 system. This omnichannel approach ensures that customers can interact with AO in the most convenient way possible.

Another key advantage is AO’s focus on long-term employee retention. AO emphasizes stability, fostering deep expertise and strong customer relationships. This approach has contributed to high levels of customer trust and operational consistency.

Moreover, AO’s integrated ”one-stop-shop” model strengthens its competitive position. By expanding its product range to include carpentry tools and construction materials, AO ensures that customers can find a comprehensive selection of technical products under one roof. Cross-selling opportunities further enhance revenue potential, with for example one-third of AO’s electrical products being sold to non-electricians and the same applies to other product groups in our assortment.

The annual report notes that 2024 was a challenging year, with lower market activity leading to fierce competition, customer consolidation, and increased pressure on margins. Could you elaborate on the specific actions AO has taken to address these challenges, and how do you see the potential for improving margins moving forward?

Despite AO’s strong positioning, 2024 presented significant challenges due to a sluggish market, intense competition, and price pressures stemming from an oversupply of wholesale capacity. However, AO navigated these difficulties strategically, focusing on:

• Retaining Skilled Employees: Unlike competitors that downsized, AO retained and even expanded its workforce. This decision, while impacting short-term profitability, ensures that AO remains well-prepared for future market growth.
• Enhancing Value Proposition: AO shifted the conversation away from price competition, emphasizing product availability, store network density, and advanced digital logistics solutions.
• Leveraging Digital Tools: The AO 365 concept, which enables customers to enter stores outside business hours via a mobile app, has improved customer loyalty and operational efficiency.

By focusing on these areas, AO has reinforced its competitive resilience and positioned itself for long-term growth.

You recently acquired both Svenska VA-Grossisten and Designkupp, which provide a strategic foothold in Stockholm and triple your B2C sales in Norway. How have these acquisitions impacted your market position in each region, and how do you plan to leverage these assets to drive further growth?

In 2024, AO made two significant acquisitions outside Denmark: Svenska VA-Grossisten in Sweden and Designkupp in Norway. These acquisitions have been instrumental in strengthening AO’s market position in both countries.

• Svenska VA-Grossisten: Prior to the acquisition, AO lacked a presence in the Greater Stockholm area, effectively missing out on half of Sweden’s water and drainage market. The acquisition provides AO with a strategic foothold and enables it to serve nationwide customers like NCC, Skanska, and PEAB more effectively. Additionally, AO has plans to open additional sites in Sweden, further cementing our presence in the region.
• Designkupp: Located an hour south of Oslo, Designkupp has tripled AO’s B2C sales in Norway. The acquisition not only boosts AO’s e-commerce capabilities but also provides a physical presence in Norway and facilitating easier logistics. AO plans to consolidate its Norwegian operations under Designkupp, enhancing operational efficiency and expanding its market reach while maintaining our unique Norwegian e-commerce brands and web shops.

These acquisitions align with AO’s disciplined M&A strategy, which requires a 15% return on investment within three years. The company continues to explore further acquisition opportunities, particularly in Sweden and Norway, to accelerate growth.

Where do you see Brødrene A&O Johansen in a year, and what is the strategy to get there?

AO’s growth strategy focuses on three pillars: scale, digital transformation, and strategic acquisitions. The company aims to leverage its expanding footprint to enhance profitability, with a long-term goal of achieving a 10% EBITDA margin.

Key initiatives include:

• B2C Expansion: AO has significantly grown its consumer segment, now serving 20% of Danish households annually. With 20 dedicated webshops, AO expects B2C sales to account for over 15% of group revenue by 2025, with growth anticipated across all markets.
• Omnichannel Optimization: The company will continue investing in digital integration, ensuring seamless interactions between online and physical stores. The AO 365 concept will be expanded to more customers to enhance customer convenience.
• Product Line Diversification: AO sees strong potential in tooling and workwear, areas where it has yet to maximize its market share. Expanding these product lines will further solidify AO’s one-stop-shop model.

Can you name three reasons as to why Brødrene A&O Johansen is a good investment today?

For investors seeking a resilient and growth-oriented company, AO presents a compelling case. Three key reasons that make AO an attractive investment:

1. Strong Market Position and Diversified Revenue Streams: AO is a leading technical wholesaler in Denmark with a balanced sales mix, ensuring stability in both strong and weak market conditions.
2. Scandinavian Expansion: The company has successfully expanded into Sweden and Norway, leveraging acquisitions to strengthen its regional presence and unlock new growth opportunities.
3. Resilient Business Model and Long-Term Vision: AO’s focus on workforce retention, digital transformation, and strategic expansion positions it well for sustainable profitability and shareholder value creation.