Earnings call transcript: COOR Service Management Q2 2025 sees stock rise

COOR Service Management AB reported a slight increase in net sales for Q2 2025, reaching SEK 3.2 billion, a 1% year-over-year growth. The company’s stock rose by 5.77% to SEK 46.54 following the earnings announcement, reflecting positive investor sentiment. According to InvestingPro data, COOR is trading near its 52-week high with impressive returns of 42% over the past six months. The company continues to show resilience with a focus on operational efficiency, despite mixed results in organic growth.

Key Takeaways

• COOR’s Q2 net sales increased by 1% year-over-year to SEK 3.2 billion.
• The stock price surged by 5.77% post-earnings announcement.
• The company maintained a strong EBITA margin of 5.2% for the quarter.
• Significant growth was observed in the Norwegian market with a 23% organic growth rate.
• COOR is considering a share buyback program targeting SEK 50 million.

Company Performance

COOR Service Management demonstrated steady performance in Q2 2025, with net sales increasing slightly to SEK 3.2 billion. The company’s focus on operational efficiency and strategic contract extensions, such as the prolonged Volvo Cars contract, contributed to its stable performance. The Norwegian market stood out with a remarkable 23% organic growth, positioning COOR as a strong player in the region.

Financial Highlights

• Revenue: SEK 3.2 billion, up 1% year-over-year
• Adjusted EBITA: SEK 165 million for Q2
• EBITA Margin: 5.2% for Q2
• Net Income: SEK 65 million for Q2
• Cash Conversion: Improved to 88% from 81% in the previous quarter
• Leverage: 2.9%

Outlook & Guidance

COOR is optimistic about future growth, particularly in the Norwegian public sector. The company plans to hold a Capital Markets Day early next year to outline strategic initiatives. A share buyback program is under consideration, targeting SEK 50 million, which could further enhance shareholder value. InvestingPro data indicates strong analyst consensus, with net income expected to grow this year. The company’s financial health score is rated as "FAIR" by InvestingPro’s comprehensive analysis system.

Executive Commentary

CEO Ola Klingenberg emphasized the company’s commitment to extending key contracts and highlighted the exceptional performance in the Norwegian market. "We continue to extend some important contracts," Klingenberg noted, adding that the Norwegian operations are thriving under new management.

Risks and Challenges

• Market Saturation: Potential limits to growth in mature markets.
• Macroeconomic Pressures: Economic downturns could impact service demand.
• Contract Transitions: Challenges in Denmark with ongoing contract transitions.
• Cost Management: Ensuring continued cost efficiency amid restructuring efforts.

Q&A

Analysts focused on the impressive growth in the Norwegian market and inquired about the stability of margins and growth potential. Questions also addressed the impact of restructuring on future performance and market opportunities in the Nordic region.

Full transcript - COOR Service Management AB (COOR) Q2 2025:

Conference Moderator: Now I will hand the conference over to CEO and President Ola Klingenberg and CFO and IR Director Andreas Engdahl. Please go ahead.

Ola Klingenberg, CEO and President, CORE: Hello, everyone. Welcome to the q two report. My name is Ula Klingenborg, and I’m joined by Andreas Engdahl, the CFO of CORE. So getting into some of the substance, this is the agenda for today. First, a short update from from me on the things that are that are going on right now in the business.

Then we’ll walk you through the financials together with Andreas and make a small summary and the q and a at the end. I think some of the some of the important things are already highlighted from the report already highlighted on on this page where we have a organic growth this quarter of 3%, which is step up, I think. Then we also have the margins that are developing in the right direction. And the cash flow that is that is now back at 88% cash conversion. So I think those are some of the some of the most important highlights from the month.

We think that this is a step in the right direction and the continuation of what we saw in the previous quarter. Moving on to the CEO update. We continue to extend some of our important contract and there’s a lot of activity in the market at the moment. But some of our our core contracts is is, of course, Volvo cars in in Sweden where we have a big delivery that we’ve been doing for many, many years, and that has now has now has now been prolonged. Also, a new property contract with the which I think is particularly interesting since it was 100% focused on quality in the in the tender tender conditions.

And that’s really a testament to our ability to deliver with the with the high quality. Also, Norway, strong development. We’ll get back to that. And then in the Danish market, a lot of tenders going on in the coming eighteen months or so, and we’ve we’ve won some contracts. And most interesting here maybe is that we lost VLOOX, which is a delivery that we had there for for quite some time.

So a lot of activity in the market. We’ll get back to that on the on the next page. Also, the announced organizational changes to the central staff has now been fully completed and is in full effect from from the the the end of this quarter. What we’re working perhaps most on is improving our our work with operational efficiency, And that is not a silver bullet, but a lot of different projects and initiatives going on to secure our our ability to to deliver our on our contracts in the in the most efficient way possible. So a a lot of work going on there.

When it comes to kind of more forward looking view, we intend to hold the Capital Markets Day early next year to to update a little bit more on on how we see, you know, our growth path going going forward and also what what markets to focus on, etcetera. So that’s a very short summary of all the work that’s been done this quarter. You can see a lot of the results in the in the in the numbers that we’ll we’ll walk through shortly. I thought I’d just take a more close look perhaps at the at the contract portfolio. And maybe starting here on on the right, we see a a spread of maturity in our contracts, which I think is is quite quite interesting to view from a from an investor perspective, which says that 60% of our our contracts are small and medium contracts that are usually kind of with an open end where we keep delivering.

And those have to be renewed on on on a regular basis, of course. But it and the but it’s still not a big a big change when one of those shifts, but that’s rather kind of run of the run of the business. Then we have quite a few contracts expiring from ’27 and beyond. And the the the maturity of those those contracts that are that are ending this year or next is only only a small part of our our business. So I think that’s a testament to to the stability, I think, of of our contract portfolio at the moment.

And looking at new contracts now won in in the first first half of the year, we have we have about 300,000,000 that that we that we won, and there’s about a 100,000,000 that that we have ended this year. Now VELUX ends, I think, this month. So if we would include that, the net would be maybe 45 and and not 193. But still, it’s a con it’s a it’s a balanced and portfolio move moving action, and that’s that’s a stability for for the company. So so I thought that was something that really worth highlighting.

Now I guess you’re all eager to go into the numbers, so I’ll hand over to Andreas to take you through the to take you through the the quarterly report numbers.

Andreas Engdahl, CFO and IR Director, CORE: Thank you, Ula. We start with an overview of the business KPIs. In the second quarter, there’s an organic growth of 3%, as Ulla mentioned earlier. That comes from high variable volumes in Norway that I will come back to. The EBITDA margin for Q2 is 5.2%.

That is an improvement comparing both with previous quarter as well as last year. Cash conversion, that is an LTM number ended at 88%, also that a stable improvement compared to the 81% in the previous quarter and the 57% in the quarter before that. I will come back to that number as well later on in the presentation. Leverage also that LTM number at 2.9%, a slight increase from previous quarter driven by dividends being paid out in the quarter. On the P and L, net sales ended at SEK 3,200,000,000.0 that is 1% up compared to last year.

Organic growth as I mentioned 3% and FX negative 2%. Adjusted EBITA amounted to SEK165 million, which gives us an EBITA margin in the quarter of 5.2%. Items affecting comparability during the quarter amounted to million and that comes from redundancy costs related to the changes in the organization and management changes implemented during the second quarter. Net income is SEK65 million and adjusted net income when adding back amortizations amounts to SEK80 million. On the full year numbers, we see that net sales is close to SEK12.4 billion.

Full year organic growth is negative 0.5% and FX negative 1.3%. The full year adjusted EBITA level $534,000,000, which gives us an EBITA margin of 4.3%. Adjusted net income for the full year is SEK 178,000,000. So looking at Q2 country by country and we start with Sweden. Organic growth negative 0.8% in the quarter.

We see effects from new contracts that are offset by the ended property part of the contract with Saab. We also see somewhat lower demand for variable volume compared with last year. Adjusted EBITDA, 153,000,000 and margin at 9.1%. That is an improvement from previous quarter’s margin of 8.7%. And as Ola mentioned before, there is a continued focus on activities to achieving a positive margin trend in the operations.

If we then move over to Denmark, organic growth of negative 3% in the quarter, primarily explained by a couple of ended mid sized public contract as well as lower variable volumes within property projects. Adjusted EBITA at 27,000,000 and margin at 4%. The margin decreased from 4.8% in the previous quarter, partly due to a positive retroactive non recurring effect in the first quarter. Our long term efforts to improve the management and governance of the operations are continuing. There is a focus on strengthening leadership skills and creating a clear division of responsibilities within the operations.

And after summer here, Pietro Hasbach will take over as CEO of the Danish operations and will be a valuable addition to this ongoing work. In Norway, see organic growth of 23% and that comes from unusually high variable volumes related to maintenance stops in the energy sector. While maintenance stops occur annually, the scope and timing in the year varies from year to year. Around half of the organic growth we see in this quarter comes from above normal levels. Adjusted EBITDA for the quarter amounted to 37,000,000 and margin was 5.4%.

The strong improvement compared to both previous quarter and last year is driven by the high variable volumes. And last among the countries, Finland, organic growth of negative 1% in the quarter from a couple of smaller contracts that was ended. Adjusted EBITDA margins are in line with last year. Moving on to cash flow and balance sheet. During last year, we saw an increase of working capital as a result of changes in the contract portfolio.

We also had year end balance sheet effects and to a certain extent due to inefficiencies in ways of working. A number of measures have been taken to reduce the level of working capital in 2025. And in the first six months, working capital has been reduced by SEK113 million compared with a buildup of working capital of SEK142 million in the same period last year. With that, our net working capital position has been restored to a negative 7.5% as a percentage of LTM net sales. As a result of improved net working capital, our key metric LTM cash conversion also improves in the quarter to 88%.

That is an improvement with 31% compared with full year 2024. And with that, we are essentially back in line with the company target of staying above 90%. And finally, leverage that is on the bottom right of the slide increased to 2.9 after paying out dividends in the quarter. And with that, I hand it back over to you Ula to sum it up.

Ola Klingenberg, CEO and President, CORE: Thank you, Andreas. So summarizing all that we’ve heard now, we continue to extend some important contracts. There’s a lot of activity going on in the market, and we’re we’re paddling through that in a in a successful way, I think. The organizational change that has been on the agenda here for the for the first half year is now completed. We are working a lot with improving systems and support to to enable us to have a higher operational efficiency throughout our our operations.

And the networking capital is now restored. So I think that’s what to bring what to bring along from from this quarter and into the next. So that’s what we’re working on at the moment. So having said that, we now go over to the q q and a section of the presentation.

Conference Moderator: The next question comes from Simon Johnson from ABG. Please go ahead.

Simon Johnson, Analyst, ABG: Good morning, guys. I have a few questions about Norway specifically. You have very good momentum right now, especially in the variable volumes, of course, but you have also started to sign some contracts with the public sector. So I mean, can you talk a bit about what you think the long term opportunities for that looking a few years out? Could you read sort of a similar share as you have in Sweden and Denmark, you think?

I’ll start there.

Ola Klingenberg, CEO and President, CORE: I think the if we if we talk about Norway, I think they’re doing a lot of right things simultaneously at the moment. They have a new manager since one and a half year, and I think she’s doing a fantastic job with both kind of working with the sales culture, working with operational efficiency questions, working through some of the contract portfolio that has been less profitable in the past, etcetera. So so I think there was a lot of explanations for for the for the strength of the Norwegian results. Now particularly in terms of the public sector, it’s obviously, I mean, a huge opportunity given that the Norwegian the the Norwegian markets is largely untapped there. And just recently, we’ve had some other contract where we are in a very good position to win.

So I think it’s it’s a big opportunity. I think the exact market size of that remains to to be seen, but, obviously, it’s it’s it’s a big opportunity if if all the municipalities and regions of in Norway starts to outsource in the same way as in Denmark and Sweden. We don’t have an exact number.

Simon Johnson, Analyst, ABG: Got it. Thank you. And as a follow-up on that, how do you think that could impact margins? Let’s say, you continue to have good momentum with the public sector continue to grow in Norway. Do you think this segment and the country could be coming back to becoming accretive to group margins again?

I mean, it’s reached 6% or 7% historically when you have the big Equinor contract, maybe that’s a stretch, but do you still think it could become accretive to group?

Ola Klingenberg, CEO and President, CORE: I think that generally speaking, the if we look at all our markets, the public sector contracts generally have a little bit lower margin. But we we also see a trend where there are many that are going for quite strong quality conditions in the in the tender conditions, and that is something that’s really, really helpful for us. And that’s where we that’s where we want to play. And then, of course, it would be possible to to have that that type of margins in a new contract. But we have to be careful.

We have to ensure profitable growth and not only not only growth. But we see some positive signs, I think, in in terms of that in the Norwegian market. But as we know, the public sector is is moving perhaps slower than the private sector. So the the kind of speed at which what at which this is happening is it’s a little bit difficult to predict, but or but a large potential if it if it does happen.

Simon Johnson, Analyst, ABG: Alright. Thank you. That’s all for me.

Conference Moderator: The next question comes from Raymond Kay from Nordea. Please go ahead.

Raymond Kay, Analyst, Nordea: Hi, good morning. A couple of questions from me, and I’ll start with Norway as well. Regarding the exceptionally high maintenance volume that you saw here in Q2, When did that take place approximately during the quarter? And do you see any of that trickle into Q3?

Andreas Engdahl, CFO and IR Director, CORE: Raimond. Primarily the second half of the quarter, There there might be be some some trickling over here in q three, but but limited, I I would say, because that that maintenance stuff is actually coming to an end here in in in the coming days.

Raymond Kay, Analyst, Nordea: Got it. And then on Denmark and the VLOOX contract that you lost, when does that contract end? Just so we can understand when it sort of falls out of your numbers.

Andreas Engdahl, CFO and IR Director, CORE: It ends towards the end of Q3. So you will see the impact of that from Q4 onwards.

Raymond Kay, Analyst, Nordea: Got it. And finally, just on Sweden and Denmark, you saw lower variable volumes behind the negative organic growth there. Could you help us understand if that’s something that we should expect to change shortly? Or is this sort of the theme maybe going into H2 as well? Thanks.

Andreas Engdahl, CFO and IR Director, CORE: I mean, it’s yeah. Sorry. Sorry. Go ahead, Ola.

Ola Klingenberg, CEO and President, CORE: No. I think a general comment on that is that we it is a little bit challenging to predict because we have certain of our segments that are affected, of course, by the the economic environment and have have a little bit slower con kind of projects. Or it it takes a longer time for them to start up new projects, and it’s it’s longer decision times and it’s smaller project. But then on the other hand, we work with the defense industry, energy, and so on. And there is really a lot of things going on, and we see a lot of volumes coming in.

So it’s a little bit difficult to see how this kind of balances out. So that’s more of a general comment. But go ahead, Andreas. Sorry to interrupt you there.

Andreas Engdahl, CFO and IR Director, CORE: No. I mean, you’re right on sort of the it’s very hard to predict. Looking at the trend right now, they are somewhat lower than previous year. And it’s not a massive decrease, but still, it’s there. And we’ll see how that sort of plays out here in the second half of the year.

Raymond Kay, Analyst, Nordea: Great. And just one final one. The restructuring costs that you had in this quarter, twenty one million, are we correct to understand that this should fall or be lower going forward?

Andreas Engdahl, CFO and IR Director, CORE: Yes, that is correct. Because now we have concluded the restructuring related to the reorganization that we announced earlier this year. So that is correct. It will decrease.

Conference Moderator: The next question comes from Karl Johan Bonnevier from DNB Carnegie. Please go ahead.

Karl Johan Bonnevier, Analyst, DNB Carnegie: Yes. Good morning, all, Andreas. First of all, congratulations to a good continued turnaround of of the company after last year’s struggles. Just to conclude on Norway, Andreas, could you remember and enlighten us how is the comparison in Q3 from last year? I tend to remember that you mentioned variable volumes being particularly high in that quarter?

Or is it a fair base to compare with?

Andreas Engdahl, CFO and IR Director, CORE: Yes, yes, exactly. We had quite high volumes both in Q2, Q3 last year. But I think looking ahead in Q3, it’s a fair comparison, I think. But not on sort of the unusually high levels that we have seen in Q2, but should be sort of on balance with last year, I believe.

Karl Johan Bonnevier, Analyst, DNB Carnegie: Excellent. And on the cost savings program and realizing the SEK 120,000,000, I see you mentioned that you’ve taken down costs on the central level of about SEK 8,000,000 in the quarter. Can you just enlighten us how how you see the the full effect of the 120,000,000 coming through on the central level or on the country level? Is it half half? Or how how should we see it?

Andreas Engdahl, CFO and IR Director, CORE: It’s it’s roughly half half. That that that is correct.

Karl Johan Bonnevier, Analyst, DNB Carnegie: And when you look at now, say, having implemented the maybe it’s too early to say, but obviously, taking out that amount of employees, have you seen any detrimental effects on your business being taking out 130 employees?

Ola Klingenberg, CEO and President, CORE: No, I think it’s a good question, but think we’ve seen an increased focus actually on the core questions that we need to work on, operational efficiency, some of our IT challenges, etcetera. So so far, we’ve actually seen, you know, an ability to for an increased focus. And I think we should also remember that we’re kinda more now back to to more normal HQ cost levels that that I think you’ve been used to seeing core, you know, over over the the historic time. So I think it’s it’s back to normal levels. You should think about it more like that than than that it’s a decrease.

Karl Johan Bonnevier, Analyst, DNB Carnegie: And Ola, on that temp, you have already given a lot of comments about how you see the strength in the Norwegian operation and maybe the volatility in still underlying in the Danish operation. If you look at the general stability of the operation, how do you would how would you say envisage the different countries at this stage?

Ola Klingenberg, CEO and President, CORE: I think, as I mentioned, I think Norway is on a on a on a good path where where we see a stability and a predictability in the in the in the work that they’re doing. Sweden is perhaps somewhere a little bit less kind of predictable and stable than than Norway. And then the end market is probably, at at this time, the the least predictable where we see some changes from from month to month that we that we that we work with getting under control. So I think this is the primary task for the new Danish manager to to really to to really get an even tighter control of of of the costs and the the operations in the Danish business. So so I would probably rank them, you know, something like that.

And this is also, you know, the the result of the historic growth pattern where where we’ve grown a lot and taking a lot of new contracts and kind of how are you able to to how have you been able to to manage the integration of that rapid growth? And the countries are there on a little bit varying level.

Karl Johan Bonnevier, Analyst, DNB Carnegie: And when you look at the, say, take that stability into to the perception of what kind of market opportunities you see out there, is it easy to let the Norwegian organization for the moment going for for growth opportunities than than maybe the Swedish and the Danish?

Ola Klingenberg, CEO and President, CORE: Yeah. I think it’s my management philosophy that you always have to kind of earn the right to invest, to do that. If you are if you are managing a good a good operations and you know your control of what you’re doing, then you can then then you have a better opportunity to absorb new growth. So, of course, that is one of the factors that that is playing into this. But, of course, if there is also we’re very long term.

So if there is a good opportunity coming up, we’ll just have to make sure that we support that even if it’s in in a market that is currently a little bit less less successful than the Norwegian one.

Karl Johan Bonnevier, Analyst, DNB Carnegie: Excellent. And one final maybe for you Andreas, looking at I guess the annual gearing cycle normally peaks in Q2 with the dividend payment and the kind of normal kind of working capital headwind you have in the quarter from seasonality perspective. I’ve noticed that you really talked about starting the share buyback program directly after the AGM. I haven’t seen anything happening in Q2. How do you see that going forward?

What kind consideration has maybe postponed slightly?

Andreas Engdahl, CFO and IR Director, CORE: No, you’re absolutely correct. It has been somewhat postponed here with handling the reorganization that internally and so on. But something we will look into and prepare for the board after summer and take a look at it.

Karl Johan Bonnevier, Analyst, DNB Carnegie: And the outlook of, I think, was €50,000,000 you detailed for coming up to March year. That’s still a valid number?

Andreas Engdahl, CFO and IR Director, CORE: It’s still the number we’re looking at. Correct.

Karl Johan Bonnevier, Analyst, DNB Carnegie: Excellent. Thank you very much and all the best out there.

Conference Moderator: The next question comes from Roli Juva from Indiers. Please go ahead.

Rauli Juva, Analyst, Inderes: Yeah, hi. It’s Rauli from Inderes. I would still have two more questions related to the Norway development. So first of all, you mentioned that a larger scope of the shutdown contributed to about half of the growth. So what was the main drivers behind the other half, which is still double digit as such?

Andreas Engdahl, CFO and IR Director, CORE: It’s coming from both new contracts that’s been started up and and, also more in sort of a a normal fluctuation of of the maintenance stops. So so even taking away the unusually high ones, the the maintenance stops this year is is somewhat higher than than last year in in q two. Okay. But I would say in sort of

Rauli Juva, Analyst, Inderes: And then secondly, if we

Andreas Engdahl, CFO and IR Director, CORE: No. Sorry. Go ahead.

Rauli Juva, Analyst, Inderes: No. No. Go go ahead. Go ahead.

Andreas Engdahl, CFO and IR Director, CORE: No. I would say even though higher, but but but still sort of in in in in normal fluctuations that we see year on year.

Rauli Juva, Analyst, Inderes: Yes. Yes, that’s clear. And then secondly, your Norwegian sales was up around SEK 100,000,000 and the EBITA was up some or exactly SEK 10,000,000. So 10% of the sales is is is that kind of a fair level for you as a kind of operative leverage when you see higher volumes? How would you describe that?

Andreas Engdahl, CFO and IR Director, CORE: So sorry to take that that again. I didn’t fully catch your your

Rauli Juva, Analyst, Inderes: Just looking at the no no Norwegian numbers. You you had 100,000,000 increase in sales and a 10,000,000 increase in in in the EBITDA line. So So I was wondering, that ratio kind of a typical drop for the sales increase to earnings when you see volumes?

Andreas Engdahl, CFO and IR Director, CORE: It’s hard to sort of have that as a general view because it depends on where that growth is coming. Is it coming in building density that then you can sort of grow with healthy margins? If it comes with a more sort of scattered geographical spread, then the margin profile might look different. So so it’s it’s hard to to say sort of in general that that growth comes with with a with a certain margin.

Ola Klingenberg, CEO and President, CORE: All right. Any more questions? All right.

Conference Moderator: The next question comes from Oliver Usitolo from Actiasporana. Please go ahead.

Oliver Usitolo, Analyst, Actiasporana: Hello, guys. Good morning. I thought we will finish up with a few questions from my end. I think you mentioned in the report that there are some large deals coming along in Denmark. And considering the recent status of your Danish operation, do you feel that you have resources to be a competitive player in these upcoming bids?

Do you think we can see some is this the low point the Danish market?

Ola Klingenberg, CEO and President, CORE: It’s a really good question. I think there since there was a movement in many different kind of parts of the market, the answer varies a little bit. But I mean, we still remain one of the top players in the Danish market. We have some challenge with the operational efficiency in terms of how to generate profit. But I think it doesn’t mean that we are not competitive.

So I wouldn’t say that. Also, even if we have now done some resource optimization on the central level, we still have a large team there that works internationally support in the big tenders. That’s not something that is done in the low but all but but in cooperation with the with the international team that that kind of supports in in in the big cases. And in in the small cases, I’m I’m sure that the Danish business is quite capable to to to manage it. But it’s always a stronger situation, of course, when when you are performing well and when you have a predictable and stay and stable stable business.

But we are we are definitely working to to to to to make the Danish situation even even better and more stable for us. Do you have anything else on that, Andreas?

Oliver Usitolo, Analyst, Actiasporana: Okay. No. Yes, fine. Thank you. And just one follow-up question on the Norwegian market as well.

I mean the margin is also strong there and you said that half of the growth is considered like above normal level. How much has the margin been affected? And would you say that you’ve been able to expand your margin year over year even without this above normal

Andreas Engdahl, CFO and IR Director, CORE: growth? Yes. I mean, also taking away the volume and the variable volume here, there is a continued focus on operational efficiency in Norway as well. And as Ola mentioned before, I believe Steen in Norway is doing a very good job on handling that as well. So there would have been some margin expansion even without volume the volume here in the quarter.

Oliver Usitolo, Analyst, Actiasporana: Okay, great. Thank you so much. I think that’s it from my

Ola Klingenberg, CEO and President, CORE: All right. Any further questions?

Conference Moderator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Ola Klingenberg, CEO and President, CORE: So thank you very much for joining the Q2 call, and we wish you all a good day. Thank you very much.

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