Earnings call transcript: Fasadgruppen Group AB Q2 2025 sees rising sales, stable stock

The earnings call for Fasadgruppen Group AB, a company with a market capitalization of $4.77 billion, highlighted a strong financial performance with net sales rising by 10% year-over-year. Despite challenges such as a 6% decline in organic sales, the company reported an adjusted EBITDA of SEK 132 million, up from SEK 81 million the previous year. The stock showed a minor increase of 0.17% despite the lack of major surprises in the earnings report. According to InvestingPro analysis, the company maintains impressive gross profit margins of 33.34%.

Key Takeaways

• Net sales increased by 10% year-over-year.
• Adjusted EBITDA improved significantly, with a margin increase of 300 basis points.
• The Clearline segment faced regulatory delays, impacting sales.
• The stock price rose slightly by 0.17% after the earnings report.

Company Performance

Fasadgruppen Group AB demonstrated solid performance with a 10% increase in net sales compared to the previous year, signaling strong market demand despite a challenging environment. The company’s focus on profitability and deleveraging is evident in its improved adjusted EBITDA figures. Trading at a P/E ratio of 13.48x, the stock currently shows potential upside according to InvestingPro’s Fair Value assessment. The decrease in organic sales and regulatory challenges in the Clearline segment pose ongoing hurdles. For deeper insights, investors can access the comprehensive Pro Research Report, available exclusively to InvestingPro subscribers, covering this and 1,400+ other top stocks.

Financial Highlights

• Net sales: Increased by 10% year-over-year.
• Adjusted EBITDA: SEK 132 million, up from SEK 81 million last year.
• EBITDA margin: Increased by 300 basis points to 9.2%.
• Net debt to adjusted EBITDA: 3.36, with a target to reduce to 2.5.

Market Reaction

The stock price of Fasadgruppen Group AB saw a slight increase of 0.17%, closing at 29.8 USD. This movement reflects a cautiously positive market sentiment, as the company continues to improve its financial metrics amidst regulatory and market challenges. The stock remains within its 52-week range, indicating stability.

Outlook & Guidance

Looking forward, Fasadgruppen is cautiously optimistic about the Swedish market, anticipating gradual improvements in regulatory bottlenecks. The company is prioritizing profitability and leverage reduction, aiming for a net debt to adjusted EBITDA ratio of 2.5. Future EPS forecasts suggest steady growth, with projections of 1.01 USD for Q4 2025 and 1.32 USD for Q3 2026. The company maintains a healthy dividend yield of 2.48%, and analyst price targets range from $37 to $40. InvestingPro data reveals several additional positive indicators, including strong financial health metrics with an overall score of 3.02 (GREAT).

Executive Commentary

CEO Martin Jacobson expressed confidence in the company’s strategic direction, stating, "We have a lot to be proud of, but much left to prove." He emphasized the focus on profitability improvements and deleveraging, highlighting the company’s commitment to long-term growth despite current challenges.

Risks and Challenges

• Regulatory delays impacting the Clearline segment.
• Decrease in organic sales by 6%.
• Low activity in the new build sector in Sweden.
• High net debt to adjusted EBITDA ratio, though targeted for reduction.
• Macroeconomic pressures and potential impacts on the construction sector.

Q&A

During the earnings call, analysts inquired about the regulatory delays affecting the Clearline segment. The company remains confident in the long-term potential of this segment despite current challenges. Additionally, improvements in working capital through best practice sharing and the benefits of a new Swedish tax reduction program were discussed.

Full transcript - Fasadgruppen Group AB (FG) Q2 2025:

Magnus Blomberg, Head of Investor Relations, Facade GroupPEN: Good morning, everyone, and welcome to Facade GroupPEN’s second quarter result presentation. And here in the room, we have our CEO, Martin Jacobson our CFO, Kasper Tan and myself, Magnus Blomberg, head of investment relations. And, yeah, with that being said, I hand over the word to Martin. So go ahead.

Martin Jacobson, CEO, Facade GroupPEN: Thank you, Magnus, and good morning also from me. First of all, I would like to highlight that we had a tragic accident here during the summer where a colleague actually passed away during the line of duty in one of our subsidiaries. Tragic loss, that has affected the entire organization. Our thoughts are, of course, with the deceased family, his friends, and colleagues. And, we are actively working to minimize the risk of this ever happening again.

With that said, I want to dive into today’s presentation. So some highlights for the second quarter then. We saw continued decline in the organic sales, which was mainly then continued affecting from new build. And we also saw here in q two that the results increased, the adjusted EBITA up to SEK 132,000,000, up from SEK 81,000,000 the same quarter last year. The margin also increased by roughly 300 basis points, up to 9.2% in the quarter.

So we saw rather flat organic development in the order backlog. We’ll get back to this later. And in England, we saw some delays from something called the building safety regulator. But at the same time, we saw an increase in the order backlog for Clearline. We’ll get back to this later in the presentation.

Then looking on the important covenant fixtures, we saw that the net debt to adjusted EBITDA pro form a came in at 3.36, up somewhat compared to Q1, still a continued focus to take leverage back down to 2.5. We also updated our agreement with our banks here, so we have managed to push the covenant step down two quarters. We’ll get back to that. Then looking on the net sales. In total, there was an increase of 10% compared to last year.

Was mainly and on the positive side from acquisitions, roughly 18%. And organically, we saw a decrease of roughly 6%. It was mainly Sweden and Norway that stood out on the weak side. And Denmark and Finland stood out on the positive side. But in general, we saw a continued low activity within new build, as I mentioned, especially in Sweden.

Taking a look at our segments, the total solutions, segment saw an, decrease organically by roughly 12%. In total, it was down roughly 9%. Specialist solutions actually saw a total increase of 7.4%, but a small negative organic drop here by roughly 1%. And, clear line sales came in at roughly 162,000,000, somewhat affected by the BSR, which I mentioned here initially. So the BSR is the building safety regulator, which is an authority in England, that you could say more or less gives out building permits.

It’s quite a new concept from 2022. And that authority has had extremely busy times and affected project starts for Clearline. Then looking on the adjusted EBITDA. As I mentioned there initially, we came in at SEK 132,000,000, strong development compared to last year. Margin was also up.

So I’m very glad to see the positive development of the results. Taking a look at various segments, we saw margin decrease here for total solutions down to 6.6% compared to 8.4% last year and a total adjusted EBITDA for the quarter of SEK 48,000,000 roughly. And for the specialist solutions, we saw an adjusted EBITDA of roughly SEK 51,000,000. But here we saw the different side where we saw an increase in the margin up to 9.4% compared to 6.4% last year. And Clearline came in on an adjusted EBITDA level of 48,000,000 roughly, a margin of close to 30%.

In the quarter also, we had some adjustments of roughly 11,000,000, which was mainly related to the earn out revisions. On the order backlog side, we saw roughly a flat organic development, was somewhat down then to 0.8%. We saw a continued healthy demand from housing associations and the public sector. The order backlog came in at all time high, 4,300,000,000.0, following especially a strong development for Clearline. In the various countries, we saw strong development in Sweden and actually negative development for the rest of Norway, Denmark and Finland.

But in Sweden, we’ve had some struggles with during the last couple of quarters, I’m very glad to see that development. And it’s it’s a team effort in into being able to to land all of these orders, which I’m very glad to see. We’ve also seen some, indirect effects of, the Swedish tax authorities tax authorities that had a tax reduction incentive program started here in, in May, which is going through the full year of 2025. And when I say indirectly, it’s mainly then because it’s it’s related to to smaller villas, which is not our focus areas, but to some smaller competitors could focus more on that than leaving more for us, so to speak. We also saw that the order backlog margin increased compared to q one twenty twenty five.

That was especially then following the strong contribution from Clearline. And going into our segments, we saw an decrease for total solutions. It was down roughly 6.2% organically on the order backlog side, that is. And then on the specialty solutions side, we saw a different development that increased roughly 5.4 organically. And of course, a strong order backlog for Clearline.

Moving on to cash flow. We saw a strong cash flow following a negative Q1. And I would say that it’s following the seasonal pattern more or less, where we see usually a ramp up from the start of the year until finalized at at the end of the year. But we’ve also seen working capital improvements throughout the company, but especially in Sweden. So I’m very proud of the work that has been done in Sweden regarding working capital development.

Then looking on the financial capacity and the net debt, we saw that our average interest rate here in the first June 2025 decreased somewhat compared to the same period last year. We still have an interest rate period of one to three months, which is nothing unusual. And then on the important covenant, we saw a somewhat uptick from 3.25 in q one up to 3.36 here in q two. And as you can see on the bars in the bottom left corner here, you could see that the new orange dotted line is the new agreed level, meaning that the covenant level is is then pushed two quarters compared to what it was before. Then I want to stress once more, our priorities and the focus for 2025 here is profitability and the leverage until we give the full focus to growth once again.

So it’s it’s a reaffirmation of our priorities. Then moving on to some concluding remarks before we open up for questions. So we have an all time high order backlog, but I want to stress once more that there are still, issues in in the market. And I am cautiously optimistic, but the Swedish market is is still having some struggles. Yes, on the we can see that on the modernization side, it’s improving.

But on the newbuild side, it’s still very low activity. Then on want to highlight that once again, We saw some delays from the building safety regulator. There are still delays in the system going forward as well. This is not only for Clearline. It’s it’s a a systematic problem for the full sector in England, not only on renovation, but also on new build.

But at the same time, we saw strong demand for Clearline, and the order backlog was clearly up. We had a covenant step down pushed two quarters, as I mentioned. We are also focusing on profitability improvements and deleveraging, as I mentioned. So to sum it up, we have a lot to be proud of, but much left to prove. I think with that, we open up for questions.

Conference Operator: If you wish to ask a question, please dial 5 The next question comes from Max Baco from SEB. Please go ahead.

Max Baco, Analyst, SEB: Thank you, and good morning, Martin and Casper. Very sad news this morning. I hope you are all right under the circumstances. With that said, a couple of questions from my side. Perhaps starting down with Clearline and the bottlenecks, the regulatory bottlenecks, alluded to this yourself.

But do you have an any indication from your side how long do you expect this to to remain a bottleneck, and has it been more pronounced during the summer due to vacations and so on? Have you seen anything related to that? Mhmm.

Martin Jacobson, CEO, Facade GroupPEN: Good morning, Max, and thank you for your kind words. Well, looking on to the BSR, that was actually on the June, the government the UK government sent out an announcement where they are doing an, you could say, a fast lane, to to improve the activity. So that’s a net positive for the for the full sector. And I would say that the the most dangerous kind of facades are still on the top of the line of the queue. So clear the clear line products, which is all renovation, is, of course, in high priority and and top of the queue here.

So we have seen some some approvals, of of, project starts. So but it’s been it’s been delays in the system, but the government has sent out an an announcement where they are pushing this through. This is on very, I would say, prioritized agenda for the government in The UK. So things are being done. I think they mentioned here that they are hiring another 100 people to improve, let’s say, the BSR administration.

So they are clearly focusing on this area, and henceforth, we are positive that this will play out, but it’s it’s hard to tell exactly when. And it’s you can’t expect it to be some kind of floodgates that open, but I think you can see that there will be some some small improvements, hopefully, from from the summary when they mentioned this. It’s it’s public information on the on the government’s side. You can see that’s that on the June, they sent out this announcement.

Max Baco, Analyst, SEB: Okay. Understood. And then looking on Clearline, we have three quarters now where it has been part of the group, all of Q4, but some of it. And we have seen that the profitability has come down each quarter somewhat. And of course, I suspect some seasonality into it and then, of course, also impacted by the regulatory bottlenecks.

But going ahead, you did some 29%, 30% margin here in the quarter for Careline. Do you expect the profitability to stabilize at these levels? Or what are you seeing in the order backlog? I think you mentioned that the profitability for the group was up in the order backlog here in Q2 sequentially, and I guess that’s much driven by Clearline as well.

Martin Jacobson, CEO, Facade GroupPEN: Yes. That’s a correct statement that it’s a strong margin for Clearline’s order backlog. But, of course, the the BSR delays is a factor that is affecting since I mean, if you if you’re planning to start a large project in, April and you can’t start until August, that’s that’s a big difference in in our world. But, I mean, I’ve I’ve said it before, we are confident within the margins for Clearline. So it’s I’m not I’m not worried in that instance, but we’re still, let’s say, focusing on on the margin for clear line.

It’s it is a key focus area, of course, but I’m I’m not worried regarding but this should be deteriorating from this level, so to speak.

Max Baco, Analyst, SEB: Okay. Understood. That was all the questions from my side at the moment. I might come back, but thank you very much.

Martin Jacobson, CEO, Facade GroupPEN: Thanks, Max.

Conference Operator: The next question comes from Elvin Rolder from DNB Carnegie. Please go ahead.

Elvin Rolder, Analyst, DNB Carnegie: Hello, and good morning, everyone. I hope you’re well, and I just like to reiterate the message that that Max said before me. Really sad to hear. I have a couple of questions that have been answered during the call here, but but maybe some some if we begin maybe with with the new or or should I say updated covenants, is it possible in any way to say how the discussion is now? Because I mean or or how firm these are.

Do you still have any leeway to push them again if if if the the ever so changing world were to to change in any sort of way, or or how firm would you say that these these levels are now compared to to previously when when you’ve been able to push them?

Martin Jacobson, CEO, Facade GroupPEN: Yeah. Yeah. Yeah. Good morning, Elvin, and thank you also for your kind words. Well, if you take a look on the on our let’s put it like our dialogue with our banks.

It’s, of course, as I’ve mentioned historically, good dialogue. And, it’s everything is in, you could say, in a discussion. And, of course, as we see it, this should be enough. But but, of course, we will we have this continuous dialogue. So, of course, no one wants to end up at a place where we don’t want to be, so to speak.

So I I think with that said, we have very good dialogues still. So I’m confident with our banks, and they obviously, with this agreement, they also have an understanding for our situation if you put it like that. And Yeah. So continuous dialogue, and I have strong beliefs that they could assist should we need so.

Elvin Rolder, Analyst, DNB Carnegie: Okay. Perfect. And then, we we talked a little bit about about Clearline and and the building safety regulator. But is it possible in any way to to kind of isolate if there has been any significant impact here in Q2 on both top line and, I guess, earnings? And how much of the backlog would you say is at risk of not being able to execute on if this situation were not to ease for the rest of of the year at least.

Martin Jacobson, CEO, Facade GroupPEN: Okay. We can start with the order backlog. I have I see no risk that that that should not be done because it’s it is still very high on the agenda to to fix all of these dangerous facades. That’s a it’s a big, big issue in in England. And by the way, I mentioned that this is still only in England.

Now there are talks that this should go to Scotland and Wales next. So there’s plenty of they have not even started. So that’s on a side note. But of course, there has been an effect on both on top line and on the results from from these delays. I mean, you could say that if you’re not able to start your projects, you have too large overhead at that time, if you understand what I mean.

But Mhmm. Since the job will be executed, I’m I’m not worried in that instance, so to speak, but that there is a government delay that is affecting us.

Elvin Rolder, Analyst, DNB Carnegie: Okay. Perfect. And then just, the final question, that hasn’t been asked yet. Relating to these working capital improvements, primarily in Sweden, can you comment a little bit more on what you have done to improve that compared to previously? And does that change the overall, like, cash flow profile of the company in any any meaningful way?

I mean, you usually have a more backwards tilted cash flow generation profile, but now it was quite strong here in q two, which is it has been some years as well. But but how should we think about, yeah, cash flow as well for for the rest of the year?

Martin Jacobson, CEO, Facade GroupPEN: Yeah. No, sir. Well, you can put it like this. The like this. If when we acquire a company, usually, cash flow has not been the top of the agenda for the entrepreneurs.

If they’ve been able to pay the salaries and maybe a dividend, they’ve been quite happy with that. So when they enter Fasal Europe and we want to shift the mind mindset, and that’s not done overnight. So what we do is, we sit down, have talks around what could be improved, what are the payment terms to to suppliers, how does the contract look to to the customers. It’s it’s a long, long list of what you could improve. And then you could also learn from the rest of the group.

And we also compare various companies. How could one company have this kind of cash conversion and the other one have the other cash conversion? So it’s it’s a long process, to to to to improve, But I think there’s there’s more to be to be done, here in the future, even though we’ve we’ve come, come some way now. But I think in in order to to fully reach the reach the full potential, I think, we want to continue this work where we compare, we learn from each other, have the best practices, focus on this, I mean, as soon as possible before you start a project, before you, I mean, even calculate on how could we improve on these kind of figures. It’s it’s a long process, but, I think there’s more to be done.

So, well, yes, you could say that, hopefully, they could could tilt it into a better cash position in general for for the company. That’s we always want to strive for development and and and enhancement. So that’s what we are doing, Elvin, and we’ll continue to do.

Elvin Rolder, Analyst, DNB Carnegie: K. I think I think that was all for me. Thank you so much for taking my question, and I wish you all a nice rest of the summer.

Martin Jacobson, CEO, Facade GroupPEN: Thank you, Alvin. Same to you.

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

Magnus Blomberg, Head of Investor Relations, Facade GroupPEN: Alright. We have some written questions here for you, Martin. The first one, if you could elaborate a little bit on the on the covenant step down and if if it has resulted in additional cost for the for the group.

Martin Jacobson, CEO, Facade GroupPEN: Yes. Okay. Yeah. Of course, when when you reach a new agreement with the banks, that’s often connected to some additional costs. So, yes, there have been some costs connected to this, but we saw it as as necessary costs in in in this case.

Magnus Blomberg, Head of Investor Relations, Facade GroupPEN: Alright. Thank you for that. Could you also please elaborate on the route, the the tax authorities deduction that you talked about a bit earlier?

Martin Jacobson, CEO, Facade GroupPEN: Absolutely. So that’s in Sweden, I think as many people know, at least in Sweden, there’s been on the May 12, they introduced this new tax reduction where the I think the labor cost was the was increased from 30% to 50% kind of tax reduction on on on labor. So that has affected us, or as I mentioned, an indirectly positively because, that’s, to, let’s say, to private individuals, that’s tax tax reduction, not to businesses. We are mainly focusing on business to business, remember that. But but as these small competitors that could focus on business to consumers or business to business, they are then tilting, of course, towards the most profitable.

And as we see it, that the this kind of new tax reduction incentive program is then clearly positive for the b to c market. So they have then tilted away from our main focus area of b to b and henceforth leaving also what we’ve seen an improvement in order backlog. And there’s been some media coverage around this as well. So it’s a net positive for the whole sector actually.

Magnus Blomberg, Head of Investor Relations, Facade GroupPEN: Thank you for that. And the multiple development regarding acquisitions in the market, how have they developed in the last, let’s say, three years?

Martin Jacobson, CEO, Facade GroupPEN: Yeah. So well, if we take it in a longer perspective, I think I mentioned it before. We started Fasol group and maybe multiples around closer to three three times than in the heydays around 2021, ’22, maybe around five to six times. But we’ve seen a decrease in the multiples the last couple of years here. So maybe around three to five, something like that.

If that’s if that was the question, I think so.

Magnus Blomberg, Head of Investor Relations, Facade GroupPEN: Thank you for that. I think we covered it all. We don’t have any more written questions here. So with that being said, we finalize this call with maybe a few

Martin Jacobson, CEO, Facade GroupPEN: No. No more from the telephone conference. No questions there.

Magnus Blomberg, Head of Investor Relations, Facade GroupPEN: No? Alright.

Conference Operator: Okay. Are no more questions at this time.

Martin Jacobson, CEO, Facade GroupPEN: Perfect. Okay. Then, I’d like to, thank you for your time, and, hope to see you again on the next quarterly call here in November. So thank you a lot, and have a nice day.

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