A beaten down Danish Compounder

Why I own A O Johansen

Over the last decade, AO Johansen has been a strong compounder. The road wasn’t steady as a cyclical business, though, and the company has seen long durations of going sideways. We are two years into a correction, down 41% from its ATH. The business was founded in 1914 and is still family-owned in the third generation. The Group is a knowledge-based IT and logistics enterprise with a broad technical range of heating, plumbing and sanitary ware products, electrical equipment and components, water supply and drainage products, and tools. In other words, it is an industrial distributor with B2B and B2C operations. The family still owns 30% of the business and is running it. Let’s talk about why this business could be a compelling investment.

AOJ primarily operates its network in Denmark (90% of sales), with small operations in Sweden and Norway. The business is split into three different parts:

• AO Stores are 58 stores in Denmark where customers can get advice and help from AOJ employees but also use self-serving options to increase speed and efficiency. This is especially important for business customers.

• Half of sales are generated with online stores through the web or the AOJ app, where customers can shop 24/7.

• Competency centers offer higher levels of advice, especially for larger projects and customers.