Earnings call transcript: Fasadgruppen Group AB Q1 2025 sees stock surge on strategic gains

Fasadgruppen Group AB’s stock surged nearly 14% following its Q1 2025 earnings call, reflecting investor optimism driven by strategic organizational changes and a strong adjusted EBITDA performance. Despite a decline in organic sales, the company reported a 12.2% increase in total net sales, bolstered by contributions from its Clearline segment. According to InvestingPro analysis, the company maintains a "GREAT" financial health score of 3.12, with particularly strong metrics in relative value and cash flow management. The stock currently appears undervalued based on InvestingPro’s Fair Value calculations.

Key Takeaways

• Adjusted EBITDA rose to 77 million with a 6.5% margin.
• The company implemented a new organizational structure with three business segments.
• Fasadgruppen is optimistic about 2025, targeting a leverage ratio below 2.5x.
• The stock price increased by 13.96% post-earnings call.

Company Performance

Fasadgruppen Group AB reported a robust increase in total net sales by 12.2% compared to the previous year. However, the company faced a decline in organic sales by approximately 10%. The strategic shift to a flatter organizational structure and the introduction of new business segments—Total Solutions, Specialist Solutions, and Clearline—were notable developments aimed at enhancing operational efficiency and growth.

Financial Highlights

• Revenue: Increased by 12.2% year-over-year.
• Adjusted EBITDA: 77 million, up from 20 million in the previous year.
• Net debt to adjusted EBITDA: Reduced to 3.25x.

Market Reaction

The stock of Fasadgruppen Group AB experienced a significant rise of 13.96%, closing at 19.92. This increase places the stock well above its 52-week low of 15, signaling strong investor confidence in the company’s strategic direction and future prospects.

Outlook & Guidance

Looking forward, Fasadgruppen is prioritizing profitability and a reduction in leverage, aiming for a target below 2.5x. The company is cautiously optimistic about the potential for project growth in 2025, particularly in the renovation market and public tenders. InvestingPro analysts maintain a consensus recommendation of 3.0, with price targets ranging between 39-41 USD. For comprehensive analysis including growth projections and detailed financial metrics, explore the exclusive Pro Research Report available on InvestingPro, covering this and 1,400+ other top stocks.

Executive Commentary

CEO Martin Okuson highlighted the company’s readiness to capitalize on market opportunities, stating, "We are poised to take full advantage of the market situation here for 2025 going forward." He also emphasized the focus on profitability and leverage reduction.

Risks and Challenges

• Continued decline in organic sales could impact future revenue growth.
• The low new build activity across Nordic markets presents a challenge.
• Potential credit risks require ongoing monitoring.

Q&A

During the Q&A session, analysts inquired about the company’s working capital fluctuations and Clearline’s order book dynamics. Concerns about leverage covenants and potential acquisition strategies were also addressed, providing insights into Fasadgruppen’s strategic priorities.

Full transcript - Fasadgruppen Group AB (FG) Q1 2025:

Magnus Lundberg, Head of IR: It’s a q one call. And here in the room, we have our CEO, Martin Okuson, our CFO, Kasper Tom, and me, Magnus Lundberg, head of IR. With that being said, I hand over the word to Martin. So please go ahead.

Martin Okuson, CEO: Thank you, Magnus, and good morning also from me to everyone. I am glad to present the q one results for pasalgliptin today. So let’s dive into the presentation. So first of all, we implemented a new organization here in q one to a more flatter organization and partly new group management team as well. And I’m pleased with the development so far with the organization in place and, the new group management team.

It’s been been well received throughout the organization. In the quarter, we saw a continued organic sales decline, roughly 10% down, and that was mainly due to the low new build activity. We’ve seen in the market, well, pretty hesitant markets around the new build activity still, and pretty early to tell here where where the new build market is is going. But in the quarter, least, we saw still muted activity. In q one, we also achieved an adjusted EBITDA of roughly 77,000,000 compared to 20,000,000 in the same period last year, meaning a margin of roughly 6.5% compared to 1.9% a year ago.

And it was a strong contribution from Clearline in the results. We’ll get back to that. In the important order backlog, we saw an organic growth by roughly 4%, mainly driven by the Swedish entities. And, that was the first organic improvement in our backlog in Swedish entities since 2022. So that’s quite positive as we see it.

Then, for the first time, we also present our new segments for transparency reasons mainly. And, and we divide it into three divisions or segments called total solutions. The total solutions segment, that’s where we, because they mainly have the full ownership of the project. We coordinate various services on the building envelope. That’s the main main focus for the total solution segment.

Whereas in the specialist solution segment, we provide niche a niche service and and mainly work as a subcontractor. In Clearline, it’s quite obvious. It’s only Clearline, and we have it as as a own segment due to large importance for Casagopan. And then looking at our net debt to adjusted EBITDA pro form a, like, came in at 3.25 times in the March, and, it’s down slightly from q four. It’s noteworthy.

And, still focus here on taking leverage back below 2.5 in accordance with our financial goals. So moving on to net sales, we saw a total increase of 12.2%. And as I mentioned, it was down roughly 10% organically. And some more flavor to that, if we divide it into various geographies, in Sweden, we saw double digits down. In Denmark, it was slightly up.

Norway and Finland, slightly down. And in in Sweden, as I mentioned, especially when we saw continued low activity in in the new build. Remember here that back in go back to 2023 at whereas was an okay new build activity, there were some spillovers into q one twenty twenty four, and, that affects these numbers. Then if we move on to our segments, our new segments, total solutions segment was down, roughly 10%, of which then 14% was organically, and the specialist solutions was actually up 3.4% in total, but down 6% organically. Both of the these segments were mainly affected by the lower activity in Britain.

And then Clearline was had sales of of a hundred and 74,000,000. We don’t have a comparison number here since they were acquired in the October.

Magnus Lundberg, Head of IR: Yep. We move on.

Martin Okuson, CEO: Then looking on the results on an adjusted EBITDA level, as I mentioned, the result was roughly 77%, margin of 6.5%. And, all in all, you could say, of course, Clearline, is performing according to plan, which is important for us, obviously. And they then of these 77,000,000 stood for roughly 61,000,000 of the adjusted EBITDA. Looking at the total solutions, we came in an adjusted EBITDA level of 23,000,000 roughly, a margin of roughly 4% compared to 5% a year ago. On specialist solutions, we saw an adjusted EBITDA level of 13 and a half million, margin of 3.2% compared to 1.3% a year ago.

And then looking at the total adjustments of the group, it was roughly 2,500,000.0, so nothing out of nothing special there, really. And I’m pretty glad to see that the the EBITDA, if we took it take a look at it on the last twelve months have improved here if you compare take a look at the graph on the right hand side. The trend is is going in in the right way. And, then moving on, take a look at order backlog. As I mentioned initially, we saw an, organic increase in the organic in order backlog of roughly 4%, and that was mainly driven then by by renovation demand.

And if we take a look once more at the various geographies, it was quite flat development in in Denmark. Norway was actually down significantly compared to last year, and Finland significantly up. In Sweden, it was also strong set of numbers compared to to last year here, if you take a look at the organic order backlog. Then, obviously, the strong increase in the total order backlog was heavily affected by the Clearan acquisition, which was not part of the group quite a year ago. So now we’ve reached an order backlog of roughly 4,000,000,000 here.

And when we take a look at the order backlog margin, that was pretty stable compared to the q four numbers here. So not nothing really dramatically in the order backlog margins since since q four. If we take a look at our various segments, in total solutions, we saw an organic decrease of roughly 2.2% in the order backlog, but up somewhat on the total level. Special solutions, we saw an organic increase actually by roughly nine percent and also then up on on a total set of level. Then Clearline’s order backlog came in at roughly 800,000,000 Swedish, somewhat affected by by FX.

And what you could say in general by the clear for clear align, we’ve seen a very strong demand throughout the quarter, and their kind of niche services is still very much in need going forward as well. Some general comments as well around the market, I would say, we’ve seen, obviously, lower interest rates. And all in all, that’s net positive for us and our customers. And we’ve seen, especially then in public tenders and in housing associations, positive development around the demand situation. Then moving on to cash flow.

Since we’ve seen now that the business is ramping up, that has had an effect on on our cash flow. So we are because the the net working capital is roughly minus 127,000,000. And that’s an unusually, I could say, strong number in one way because it’s a net positive for us that the business is is ramping up. But, of course, it negatively affects our cash flow in in that instance. Then we also have a one off that is then come in conjunction with the Clearland acquisition of roughly £3,000,000 that was paid out here in the quarter.

It is a delayed payment in in conjunction with the Clearland acquisition. Yes. Moving on. Okay. We’ll take a look at the financial capacity and our net debt.

We saw the interest rate was pretty stable. We continue with the interest period of one to three months. And as I mentioned initially, the net debt to adjusted EBITDA pro form a came in at 3.25, somewhat down compared to q four. And this is obviously our focus area for us. We continue to monitor this monitor this going forward as well.

Yes. Okay. Then we wanted to give also a deep dive in historical cash flow for Clearline since it’s so big a part of the group and wants to give some granularity and transparency for for Clearline. All in all, Clearline delivers strong cash flow with low CapEx needs. And as you can see in the table on the right hand side, if we take a look on the three year period that is closely similar to Fasal Europeans.

It’s a fiscal year. Remember, Claire Van had a fiscal year ending in March. But then the three year average of the cash conversion is roughly similar as you can see. So Clearland had roughly 87% cash conversion, similar to what we what fasolgipine had in roughly the same period. So we can expect similar pattern as fasolgipine cash conversion wise going forward.

Hopefully, we can improve it somewhat. Then, just to clarify, there is a line here called UT contributions. And in the in the, CLEARline statements that is then connected to to when, Clearline acquired, we could say that the employees and the management acquired the company from the entrepreneur and repaid throughout these EOT contributions to the entrepreneur. It’s just important to not that’s was this big, you say, distortion of the cash flow. If there was any questions about that, then we’ve shown this now what what happened, so to speak.

So nothing unusual there. And, with that said, I want to reaffirm our priorities now and forward. So still focus on profitability and leverage, obviously. This is the same as we mentioned in our Capital Markets Day here last year. And, of course, we want to ensure the continuous improvements in our subsidiaries.

We want to still focus on our efficiency within the group and the cooperation within the group. And as I mentioned initially, with the new organization in place, I see this as, going according to plan, and I’m pleased with with the development so far. Then on the leverage side, we’ve we’ve talked about that. Of course, it’s a focus area to to decrease leverage. Okay.

And then some concluding remarks before we open up for questions. So we’ve seen a stronger order backlog and some positive signs in in the market with that, especially in the Swedish market. But but also still a low low activity within new build. It’s it’s not it’s too early to tell if it’s if it’s how the year will pan out to be if we put it like that. Then if we look at what we’ve seen business wise, it is really ramping up, and that’s having a negative effect on on our cash flow here in q one.

I’m also pleased to say that Clearman is performing according to plan and focus on forward go is still on profitability and our deleveraging as we’ve talked about. I think that sums it up pretty well. And with that, we open up for questions.

Conference Operator: To ask a question, please dial pound key The next question comes from Elvin Rolder from Carnegie Investment Bank AB. Please go ahead.

Elvin Rolder, Analyst, Carnegie Investment Bank AB: Good morning, Martin and team. I hope you can hear me well.

Martin Okuson, CEO: Absolutely, Adam. Good morning. Just

Elvin Rolder, Analyst, Carnegie Investment Bank AB: have a couple of questions here. If I begin maybe on the cash flow side, I can see that I mean, the working capital is quite negative here in Q1. But then also, have higher adjustments for noncash items. And you mentioned that there was GBP 3,000,000 there from Clearline affecting the working capital. Is that portion offset by the noncash adjustment items as that is not seemingly fully explained by G and A items and such?

Or can you give a little bit of comments so we understand the dynamics of the working capital here in Q1 and how we should think about that in Q2 and the coming quarters?

Martin Okuson, CEO: Yeah. Well, mainly, you could say that working capital that that’s such a big negative is is, of course, in one way a positive, as I mentioned, since when we start a lot of new projects, there can be some initial purchasing around materials as an example. And I would more put it, like, with this kind of networking capital situation, you could more expect an increase in the business. So the business is ramping up in that instance. And I think it’s too early to tell whether how this will pan out for the rest of the year, if if that’s the the the question.

I think in q one, this has been a lot of project starts. And it’s it’s more like you could see that this is an as a start up start up costs you could initially say. But I don’t know if that answers your questions, Elvin, or if you have any more thoughts about that.

Elvin Rolder, Analyst, Carnegie Investment Bank AB: Well, it’s yeah. Part partly. But but just one question maybe so I understand because the the adjustments for noncash items is, let’s say, 135,000,000 here, whereas depreciation and amortizations and such were 75, if I’m not remembering wrong here. Is is the is the is the difference there explained by this £3,000,000 related to the clear line? Because or what what explains that difference?

Because it seems

Martin Okuson, CEO: that it’s offset

Elvin Rolder, Analyst, Carnegie Investment Bank AB: the the negative.

Martin Okuson, CEO: Okay. Sorry.

Kasper Tom, CFO: Yes. It’s Casper here. No. No. I think when you look on the adjustments for noncash items, the big difference there is the is the the exchange rate differences where which we have had on on on on the the income statement.

So that that’s the main main reasoning because they are not cash flow driven, so to say. It’s just the recalculations, to

Martin Okuson, CEO: say,

Kasper Tom, CFO: of of our loans and things like that. So that’s the main reason why why it’s increasing here.

Elvin Rolder, Analyst, Carnegie Investment Bank AB: Okay, perfect. Thank you. And then I mean, you talked about a little bit, I would say, positive renovation side of the market, but whereas new build continues to be quite low. Is it possible to give any comments on the margin for the projects that you’re taking in now on the renovation side? Is it a similar kind of pattern as we’ve seen the last couple of quarters here?

Were it still I mean, lower prices than normal? Or have you seen any changes there Q over Q or year over year that you can comment on?

Martin Okuson, CEO: Yeah. So we mentioned, though, going to order backlog margin was quite stable in q one compared to q four. But it’s it is, I could say, a mix of new kind of new orders, I would say, in of course, in some some geographies, if you put it like that, like Sweden, we’ve seen an an increased demand and henceforth, we also managed to right raise prices, but somewhat then offset in other markets. But but as I usually say, remember that the the order backlog margin is not the true answer to to what it will be at the end. It’s you can say this when you to write the contract is one thing with the customer, but that’s that’s when the project starts.

And then you have a a lot of work ahead of you, of course. And and with that said, then the the project, will move forward in in either in a in a better situation than we thought initially or or worse. So and there are various things that affects projects along the way. So it’s it’s not like the the the initial price is everything, but but in total then, as I mentioned, it is on a stable set of levels since q four. But in in various geographies, there are some positives, but also some negatives in other geographies.

But at the end of the day, it does not give the full picture because as you remember, Elvin, we talked about this before, but usually, a project grows by roughly 30% along the way in in various extra works, you could say.

Elvin Rolder, Analyst, Carnegie Investment Bank AB: Yes. Good. Then I just have one final comment here regarding, I mean, basically. In q one, as as has has there been any help here in q one that we should take into account going into q two with the effects of Easter? Or how should one one think about that?

Yeah. Coming into q two and

Martin Okuson, CEO: Yeah. Good question, Edwin. Yes. Of course, Easter was since Easter is in April this year, and last year was in March. So then March this year, of course, obviously, was somewhat helped by that.

And then it would be somewhat negative then for this year. Absolutely. But that’s I would say, it’s it’s hard to tell exactly how much it will affect. But but since it was in another quarter last year, that’s it distorts the comparison figures. Yes.

Elvin Rolder, Analyst, Carnegie Investment Bank AB: Okay. Perfect. Thank you. That was all for me.

Martin Okuson, CEO: Thank you, Emily.

Elvin Rolder, Analyst, Carnegie Investment Bank AB: Taking my questions, and have a good day.

Martin Okuson, CEO: You too. Thanks.

Conference Operator: No more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

Magnus Lundberg, Head of IR: Alright. So we have a few written questions here. The first one from Max here, if you could elaborate a little bit on the Clearline order book decline. Mhmm. And also what Clearline the the comparable numbers to to q one twenty twenty four.

Martin Okuson, CEO: Yeah. Yes. Definitely. So, yes, there was a decrease in Clearline’s order book, and that was somewhat, you could say, distorted by FX since the British pound was weakened here compared to the Swedish krona. And then we’ve also seen that it’s more of a seasonal pattern in that instance, so it’s nothing unusual that I’m worried about in the in the order book backlog for for Clearline.

And regarding the comparison figures for Clearline, we write that in the report as well, but we say that for q one here in ’25, the margin for Clara was somewhat better than the average margin in the same same period in the last couple of years here. So that’s net positive on that side.

Magnus Lundberg, Head of IR: Right. Moving on. If you could elaborate on the, so to speak, old FG, the Nordic facade luptan, which has margin in line with the comparison period. Mhmm. Do you see any improvement or profitability going forward?

Martin Okuson, CEO: Oh, yeah. The the usual, let’s say, outlook question. Mhmm. But, I mean, obviously, there are positive signs in the market, but also, I mean, some negatives. So it’s you it’s actually too early to tell here, Max.

It’s it’s a mixed kind of set of numbers in that instance. And, obviously, we said it before that the the, on the net side, ’25 has the opportunities, you could put like that, to be better than ’24. And I think, I can stand by that comment still.

Magnus Lundberg, Head of IR: Thank you for that. And moving on, we have several questions, of course, related to our leverage. Mhmm. Could you elaborate a little bit on that part going forward to q two and q three? Mhmm.

Martin Okuson, CEO: Yes. So, of course, leverage, we spoke about that in the last quarter report as well regarding our covenant situation as well. So if you remember here towards our banks, we have an agreement in place that the cap on covenants should decrease during 2025, you could say. And, obviously, the key focus area to to be within agreed levels. And there are various, let’s say, solutions to that, and we want to optimize in in that way that we still run as efficiently and profitable as possible, but but still have that, let’s say, covenant level in in regards to to to the situation.

So, Of course, I’ll I’ll put it like this. The net debt situation is is yeah. I’ve stressed it enough, but the focus area. And, of course, throughout the year, we usually if we put it like this, usually, the we have a large dividend or a dividend at least, that is due to be paid here in q two. We don’t have that this year, so that helps.

We’ve taken a lot of various actions, around cash flow and leverage, which we see as as good measures in order to to be within our agreement.

Magnus Lundberg, Head of IR: Thank you for that. And speaking of cash flow, big increase in the working capital. Yes. Do we see any credit loss risks here?

Martin Okuson, CEO: Not really. Of course, we’ve there were some bankruptcies in, especially in Sweden on large construction companies, And we’ve talked about those before, and we were affected back back then. But but we don’t see any real credit risks here at at this moment. Of course, continue to monitor that closely. And you can also be quite proactive in various projects, which we are I see it’s also a focus area for us to don’t not end up in a situation like that.

And you you can also ensure some credit, because there’s some invoices in that instance. So that can also affect positively in in such regard if something like that would happen.

Magnus Lundberg, Head of IR: Thank you. You mentioned that our orders, typically grow at 20%. Yeah. We see how was the sentiment among the extra Developing the quarter.

Martin Okuson, CEO: Yeah. Now this is also affected, you could say, by the the competition landscape competitive landscape. So in take Sweden once more, which was affected, especially in 2024, where we had, we say, various competitors that were into this kind of extra works. They, some actually went bust. There’s been a lot of bankruptcies within the the construction sector in in Sweden, which is, ultimately positive for us.

And we’ve also seen I don’t know if people have read that, but there’s a new, let’s say, government subsidy as well, meaning that, it could be positively for these kind of smaller players to be more affected to to, let’s say, the smaller works side towards private individuals because they get a new kind of subsidy from the government. And that’s also an indirect positive effect for us as we move towards those kind of projects instead. We are, as you remember, mainly a business to business company then, of course. And so, I mean, with that said, the the the buildings that we work on are still as in still in the same bad shape, if you put it like that. And usually, still the same amount of extra work that is needed on each of these kind of older buildings that we renovate.

So with that said, it’s since q one is, remember here, the the smallest kind of quarter for us as well. So now that the business is ramping up, this is something that we will monitor, of course, closely and be as proactive as you can in that instance to take full full kind of advantage of of the situation. And, hopefully, we can see some dynamics going back to, let’s say, the more normal pattern.

Magnus Lundberg, Head of IR: Thank you. And another question. Are you planning to buy any more companies in Denmark since it’s going quite well?

Martin Okuson, CEO: Denmark is going quite well. Absolutely. And, of course, we are looking into acquisitions in our various, let’s say, geographies. But, of course, as we mentioned, focus is now on profitability and and leverage.

Magnus Lundberg, Head of IR: Thank you for that. And if you could elaborate on the margin going forward, do do you have any comments on that, Martin?

Martin Okuson, CEO: The margin going forward? Mhmm. Well, not really.

Magnus Lundberg, Head of IR: Alright. We have another we have another question here on the line. So, operator, if you could please connect us with Elvin. Question comes from Elvin

Conference Operator: Rolder from Carnegie Investment Bank AB. Please go ahead.

Elvin Rolder, Analyst, Carnegie Investment Bank AB: Hello again. Sorry. I just have one more one more question regarding the timing of of earn out payments. I see you have is it 88,000,000 here that is expected to be paid out within twelve months? Can you give some comments on the timing of those cash flow outflows, so to say?

Martin Okuson, CEO: Yeah. Well, it’s not been finalized yet, Elvin, so it’s too early to tell, actually. But yeah. Within twelve months, but not really any more comment on that.

Elvin Rolder, Analyst, Carnegie Investment Bank AB: Okay. Thank you. I’ll get back again.

Martin Okuson, CEO: Yeah.

Magnus Lundberg, Head of IR: Alright. So no more questions for now. I’ll hand over the word back to you, Martin, if you have any concluding remarks.

Martin Okuson, CEO: Yes. Okay. Thank you, Magnus. Well, I’m pleased with the development for the organizational structure so far, and we are poised to take full advantage of the market situation here for 2025 going forward. So I am excited for 2025 and hope that you are too.

And next week, we’ll have an annual general meeting here. And if you have the possibility to attend, you’re more than welcome. The last day to notify your attend notify your attendance is today. So I want to say you’re more than welcome to to attend as a shareholder. And with that, I’d like to wish you all a pleasant day and hope to to see you again in the next next quarter.

We will present in August. K. Thank you.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.