Earnings call transcript: Havila Kystruten Q4 2024 shows EBITDA growth

Havila Kystruten AS reported significant improvements in its financial performance for the fourth quarter of 2024, highlighted by a notable increase in EBITDA and a rise in occupancy rates. The company’s stock saw a modest increase of 1.12%, closing at 0.90, reflecting investor confidence amid strong operational metrics and sustainability achievements. According to InvestingPro data, the company maintains a FAIR overall financial health score of 2.46, with particularly strong metrics in growth potential and relative value. InvestingPro analysis suggests the stock is currently trading above its Fair Value.

Key Takeaways

• EBITDA improved significantly with a 40% margin.
• Occupancy rates increased from 65% to 73%.
• Stock price rose by 1.12% post-earnings announcement.
• CO2 emissions reduced by 34% in 2024, targeting climate neutrality by 2028.
• Positive Net Promoter Score of +70.

Company Performance

Havila Kystruten demonstrated robust performance in 2024, with total revenue reaching NOK 1.5 billion. The company reported a substantial improvement in EBITDA, which reached NOK 290 million, up from the previous year. The EBITDA margin also improved to 40%, driven by a 30% increase in the cabin average rate and higher occupancy rates.

Financial Highlights

• Total (EPA:TTEF) Revenue: NOK 1,500,000,000 for 2024.
• EBITDA: NOK 290,000,000, with a 40% margin.
• Occupancy Rate: Increased to 73% from 65% in 2023.
• CO2 Emissions: Reduced by 34% in 2024.

Market Reaction

Following the earnings announcement, Havila Kystruten’s stock experienced a 1.12% increase, closing at 0.90. This movement reflects positive investor sentiment towards the company’s operational improvements and sustainability initiatives. The stock remains comfortably within its 52-week range, indicating stable investor confidence.

Outlook & Guidance

Looking forward, Havila Kystruten aims for modest volume growth with occupancy targets exceeding 75% in 2025. The company also plans a 20-30% price increase and sets an EBITDA target of NOK 400-500 million. For 2026, the outlook includes a potential EBITDA of NOK 600-800 million, with secured volumes and anticipated ACR growth of 15%.

Executive Commentary

Ben Martini, CEO, emphasized the balance between sales through agents and direct channels, stating, "We are now in a very good balance between the sales through agents and our own channels." CFO Alexander Reinerstahl highlighted the company’s sustainability goals, saying, "We have a target to become climate neutral by 2028."

Risks and Challenges

• Potential revenue impacts due to weather conditions.
• Market fluctuations in the cruise industry.
• Achieving climate neutrality by 2028 requires significant investment in biogas technology.

Q&A

During the Q&A session, analysts inquired about seasonal pricing variations and the company’s prepayment and cash collection cycles. Concerns were also raised about potential revenue impacts from adverse weather conditions, which the company addressed by highlighting its operational resilience.

Overall, Havila Kystruten’s Q4 2024 earnings call showcased the company’s strong financial performance, strategic focus on sustainability, and positive market reception. InvestingPro subscribers can access the complete financial analysis, including detailed valuation metrics, peer comparisons, and expert insights through the comprehensive Pro Research Report, available for over 1,400 top stocks.

Full transcript - Havila Kystruten AS (HKY) Q4 2024:

Sarah, Earnings Call Moderator: Good morning, ladies and gentlemen, and I warmly welcome you to today’s earnings call of the Hawila Kuestrutten AS following the publication of the preliminary financial year figures 2024. I’m delighted to welcome CEO Ben Martini and CFO Alexander Reinerstahl. So the gentleman will speak shortly and guide us through the presentation and the results. And afterwards, as always, you have the opportunity to ask your questions directly to them. So having said this, Ben, the stage is yours.

Ben Martini, CEO, Havlara Sjostroden: Thanks a lot, Sarah. Welcome to the fourth quarter twenty twenty four presentation for Havlara Sjostroden. We will, myself will give the kind of a general business update, and then Alexander will go through the more specific financial highlights. Next (LON:NXT), please. And, yeah, the, our operations is the coastal route between Bergen and Reykjanes.

And we have four out of 11 vessels in this route. The contract with the Norwegian government called the concession, is from 2021 up to 02/1930. And the government has one year potential of one year option from 02/1930 to 02/1931. The government is also in progress of coming out with the new a new concession from 02/1930 to 02/1940. So that’s in progress.

Next, please. We are quite proud to have been able to to reduce the CO2 emissions in this route. This is 20 in 2024, we reduced by 34%. We could have reduced even more if we if the infrastructure around the Norwegian coast has had been a bit better when it comes to shore power. But we are in progress both in extending or improving the infrastructure and also we are looking into blending in biogas going forward.

And our ambitions is to be climate neutral in 2028, selling with 100 biogas. We continue the good work of reducing the food waste. And, also, in 2024, we were able to deliver below our target of 75 grams per day per guest, which is quite low in this market or segment. So, overall, we are extremely satisfied with the results when it comes to the ESG deliverables in 2024. Next, please.

Also, when it comes to having four new vessels into operations, in average for 2024, we had uptime of 98%, which is quite good. Not quite good. It’s very good, actually. In the fourth quarter, we had % uptime, which also helps on the results. Next, please.

For the preliminary highlights, we ended up in 2024 with an occupancy of 73%. That’s up from 65% from the year before. We do see very positive development on the ACR and also on the onboard spend per guest night is growing. And we have initiated more activities and more initiatives to grow the OBS further. And then up with a total revenue of NOK 1,500,000,000.0 in 2024.

And the EBITDA ended up on, yes, NOK $290,000,000, which is far better than the year before. But we do see a positive trend going forward and the EBITDA margins will grow. We continue having a very positive feedback from our guests. So the net promoter score, in average for 2024 was plus 70 for all four vessels into operation. And this is extremely good as we see it.

Next, please. It also helps a lot for everyone in the company when we also are receiving awards and recognitions, which we have done throughout 2024. This is some of the awards, maybe mentioned the awards from the Time magazine where we were selected as one of the top hundred extraordinary destinations to visit and stay in. And that is a fantastic achievement for a new company, which put us on the agenda. Next, please.

The sales have, through our own channels, have continued to improve. We More than 50% of all sales, about 55% of all sales are through our own channels, which is very positive. The sales through the web has increased. And we are now in a very good balance between the sales through agents and and to operators and our own channels. And the focus is on digital marketing, And we have had great success on keeping the cost flow on marketing, but have reached out in the different channels in a very good and positive manner and achieved good sales without reducing our prices.

So we continue to work with the setup. The systems also implemented the new CRM system end of this year last year, and this will also help out with the sales going forward, building knowledge and ownership with the guests and customers. Next, please. And we also see that the aim we have put up in kind of being a company and a product for also the younger ones is something we have actually achieved. The average age traveling on this route, we have been able to reduce from twenty twenty one, 20 20 two from average rates of 64 down to now the 54 last year.

And that is the the customers have focus on sustainability. They have focus on high quality, and they have focus on different flexibility when it comes to travel, shorter trips. The flexibility to jump off and jump on is a positive side effect. And we do see that this attract customers from the growth is huge from The US and Asia Pacific areas. Still high when it comes to German speaking from Germany and Austria and, yeah.

So Switzerland is still high, but the Asian market is also coming now this year. Yeah. Next year. Next slide, please. Yeah.

And these slides indicate the present book. We actually, today exceeded the 54% bookings, not 53%. And this is, as we see it, a very positive status when it comes to the timing of the year. The balance in the book is very good. We have a high occupancy in the first six, seven months of the year.

And the ACR is much higher this year than last year. So, average ACR for the 54% is 5,200 NOK per guest, which is extremely good. So, we are optimistic and we believe that, with the balance now where we have fiftyfifty between the northbound and the southbound voices, we will be able to to achieve the targets of EBITDA for 2025. Next, please. Salik’s on it.

Alexander Reinerstahl, CFO, Havlara Sjostroden: Thank you. Thank you. Okay. So a couple of words on the on the financial performance. While the contract revenue is stable and adjusted annually, the operational revenue has been growing quite rapidly since since delivery of the last two vessels in in q three twenty twenty three.

And, and we’ve kind of doubled the income in that period, which is which is, of course, extremely good. We see a positive development in in the operational performance and in the development of of the EBITDA margin. We’ve gone from from, from a negative territory on on the operating result to a positive EBITDA in in both second, third, and now the fourth quarter of twenty twenty four. So we’re kind of building on that positive momentum that we have. And I think the fact that we are we are positive EBITDA in the kind of shoulder seasons in in in kind of q four is is a positive thing.

And and we had very high occupancy in in in the fourth quarter, for which which contributes to the to the results. So the total EBITDA for the year ended up $219,000,000 and a margin of 40%, which is which we are happy with. But, as we will go into details on on some of the next slides, that is kind of a start, and it’s reflective of of this kind of startup phase that the company is in. Next slide, please. Couple of words on the key performance indicators.

They are all supportive of the positive development in the operational results. Occupancy has been growing. We’re up from 65% to in 2023 to 73%, last year. The cabin factor, which is how many people, are staying, how many guests do we have in each cabin, which is driving, driving onboard sales and utilization of of our cruise vessels. It’s also trending our ports.

But I think the most important one is is it’s the cabin revenue. And, year on year, we’ve recorded 30% growth in the cabin average cabin rate. And we do see that that growth can be continued into 2025. And I’ll go into that also on the next slides. The onboard spend is also showing a positive development.

And and the onboard spend is driven by, you know, passengers on board as well as kind of the activities that we can that we can create for our guests on board the ships. Next slide, please. The cost breakdown per quarter. The cost is is reflective of the buildup in in revenues divided by, into each category. The kind of variable costs are, we’ll go into that in in the next slides.

But if you look at the the major cost cost items, the crew is, of course, a big a big chunk of the cost. So it’s it’s LNG and so it’s it’s the cost of goods, which is quite related to to the number of persons on board. Next slide, please. So if you if you look at the operating cost per category, it has been growing throughout the year, which is partly reflective of of, you know, underlying inflation. It’s also reflective of kind of the increased activity.

So we have, on the right hand side, we’ve shown shown the operating costs total operating costs per quarter, benchmarked against the occupancy rate, which shows that the the cost is quite correlated with the occupancy rate. So a higher occupancy drives, you know, more people on board, higher cost of goods, etcetera. Next slide, please. So looking at the outlook, we are kind of repeating the outlook that we provided in in in the third quarter presentation. 2025 is is a year where we target modest volume growth, you know, up from 73% last year up to 75% plus this year.

If you look at the pricing that we have on the books, I mean, Ben mentioned that we now have 54% on the books, for 2025. And on that volume, we are seeing, you know, the 20 to 30% price increase, which is supporting, you know, a growth in in the top line and also a growth in the EBITDA to bring us into this 4 to 500,000,000 target range for for this year. Going out on the curve, 2026 onwards, you know, we see still potential for improvement. We have we have already secured some volume for 2026. And what we see on the pricing there, it’s it’s already at at the upper end of the range that we are are targeting here, you know, 15% ACR growth compared to 2025.

We do see potential for a higher utilization as as as the products are developed and and kind of the business matures, which will then bring us into a range of of 600,000,000 to 800,000,000 per year in EBITDA, which is where we think that this business should be. Next slide, please. Couple of words on the on the refinancing. We do have an expensive loan, which is a bridge loan maturing in in July 2026. We have a very flexible shareholder loan of, of about €80,000,000 with our majority shareholder, Pavila Holding.

And we also have an overall facility with the majority shareholder of about 200,000,000. And the focus at the moment is to address the maturity of the secured bond loan, which is maturing in July 2026. I I think as a prudent policy, we would like to handle that twelve months before maturity, before the loan becomes current. So we we are in in in the process of of addressing that maturity. We see that, the credit markets are are open.

Credit spreads are are low, and there is there is money out there for this type of of of finances. And I think the feedback that we get is is, you know, lenders, debt providers are are very positive towards the ships, you know, the the quality of the ships, the environmental profile, the fact that they comply with the current emission regulations in in the government and can also comply with any stricter regulations in the future. And I think they also recognize now that we are on the right path from an operational perspective. You know, we are building confidence in in the figures, and they can see that what is on the books supports the targets that we have projected. And and, so the feedback is is good from potential potential lenders.

Next slide, please. A couple of words on the on the balance sheet. We do get questions about equity of the company, and we think it’s important to address it. So the book value of of of the vessels are recorded in NOK, in kronor, while the debt is recorded in in euro. And because of this misalignment between the asset and and the liabilities, when the currency fluctuates, and in this case, the kronor has depreciated against the euro, that has caused unrealized currency losses.

So a big part of the negative equity is actually unrealized currency. And then we see, on the other hand, that since the delivery assistance ordering of the ships and and construction, shipbuilding prices have increased by, you know, more than 50%. And and I think that this goes for all, shipping segments. So if you look at the broker value of the vessels, which is, you know, it’s kind of a broke ship you know, specialized ship broker assessment of new building cost today. And, you know, we have indications that, that this range is is is reasonable and kind of where a willing seller, willing buyer would would evaluate these vessels today.

And, you know, they they do they are, you know, built for the coastal route. They are also built for for the expedition segment. So these vessels are flexible and and attractive to to potential to potential cruise companies. So if you do that that value adjustment based on on kind of market value of the ships, we do have significant positive equity. We estimate this just based on on on the ship values alone to be positive 3,800,000,000.0.

So it’s it’s about realizing that value over time. And and, you know, we think we think we’re on a good track, with with the kind of targets that we have and and the positive development of operational performance. Next slide, please. Yeah. Finally, a couple of words on the stock.

We are you know, we have a low free float on the stock, so it’s quite quite sensitive to to larger investors buying and selling shares. But we do think that there’s, you know, substantial underlying value supporting the shares, just as we showed on on the previous slide. We think refinancing in in 2025 is is kind of a trigger that that could unlock some of the value in in in the share, you know, for us to achieve a more sustainable and long term financing, would obviously unlock some of of the value in the share. We are committed to delivering on on kind of environmental requirements, but we are also committed to over delivering on the on the environmental requirements on the route. So we are actively looking at at phasing in biogas into our fuel mix.

We have a target to become climate neutral by 2028. And we can do that without any modifications to the ships, by by blending in biogas. So it’s a it’s a matter of, if the economics make sense, then that’s certainly a viable route for us to to create additional value. And and through that, we believe that we’re in a well positioned to to to win another concession for the four vessels. And, also, I think with the with the operational platform we have, we are also interested in in in growing on the route.

I think that concludes the presentation, Sarah. That was the last slide.

Sarah, Earnings Call Moderator: That was the last slide.

Alexander Reinerstahl, CFO, Havlara Sjostroden: Thank you.

Sarah, Earnings Call Moderator: So thank you very much for your presentation, and congratulations on the results. So dear ladies and gentlemen, you have now the opportunity to ask your questions to Ben and Alexander, if you may have. So if you would like to speak directly to them, just raise up your virtual hand. Or if you have dialed them by phone, you can use the key combination star key nine followed by star key six. And you also can place your questions in the chat, and we will read them out for you.

And in the meantime, we received the question in the chat box from Jan Martinek. So he says, congratulations on the great performance. One question on Q4 versus Q3. Why is the EBITDA drop higher than the revenue drop?

Alexander Reinerstahl, CFO, Havlara Sjostroden: I think the fact that our volume was quite good in the fourth quarter, but the pricing is is a lot lower compared to compared to the high season. So if you look at the seasonality, historically on the route, seasonality has been expressed in in terms of occupation that has changed somewhat. And and we do see kind of a more even occupancy throughout the year with with a lot of, of tourists wanting to explore Norway in in the winter season. But pricing wise, we are extracting a lot higher pricing from from our our guests in the high season, so in kind of typically, second and third quarter. So I think that that’s the reason why there’s, like, a larger drop in in the, in the EBITDA compared to the top

Sarah, Earnings Call Moderator: line. Alright. Thank you so much. So now we have a virtual hand from Ingo. So Ingo, you should be able to ask your question.

Ingo Schmidt, Analyst, MONTEGA: Yeah. This is Ingo Schmidt from MONTEGA speaking. Good morning, and thank you for your presentation so far. Today, I’m representing my colleague, Tim Kose, who has given me a few questions and I’ll start with the first one. Weather conditions in Q4 were not ideal, which negatively affected onboard sales.

How much revenue did you lose approximately due to this in Q4?

Ben Martini, CEO, Havlara Sjostroden: Not sure if I can answer that directly, but we can send some information afterwards, if that’s okay, if you’re in go.

Ingo Schmidt, Analyst, MONTEGA: Yeah. That’s okay. That’s okay. Then I’ll continue with the next one. Can you comment on occupancy in February and also how the weather has been so far in respect to onboard sales?

Alexander Reinerstahl, CFO, Havlara Sjostroden: I think on the occupancy, we’ll, we will, once February is complete, we’ll provide a trading update on February, but weather wise.

Ben Martini, CEO, Havlara Sjostroden: Yeah. I guess, if you have followed the weather in Norway, both January and February, we have had quite a weather along the Norwegian coast, which, of course, have an impact on especially on on the excursions. So but but, I think that we, in general, see a positive trend, positive development on onboard spend compared to the year before. And we also see a positive trend on the average ACR also in February compared to the year before.

Ingo Schmidt, Analyst, MONTEGA: Okay. Will there be any change in contract revenues in 2025?

Alexander Reinerstahl, CFO, Havlara Sjostroden: Yeah. There there there is an annual adjustment of, of the contract revenues, and and that is included in our target projections for 2025. So there’s, like, an annual adjustment on the contract based on a number of official parameters like, crude cost, inflation, and particularly, LNG costs is a part of that, cost adjustment.

Ingo Schmidt, Analyst, MONTEGA: Okay. And the last one, you sold 3% points of capacity in February putting you at 54, sold occupancy for 2025. How is the presold occupancy distributed over the year?

Ben Martini, CEO, Havlara Sjostroden: I I am not sure if you can go into all the details. What I can say is that the 54% is in average for the air. That’s correct. The occupancy for the first half is much higher.

Ingo Schmidt, Analyst, MONTEGA: Okay. Yes. Thank you, Urs.

Sarah, Earnings Call Moderator: Thank you so much, Ingo. So we will now move on with questions from the chat box. So, Lars wants to know what’s a typical commission margin taken by a booking agency?

Ben Martini, CEO, Havlara Sjostroden: Typical margins could vary from the contracts we have, but everything from 15% or 12% up to 20%.

Sarah, Earnings Call Moderator: Alright. Thank you so much. So by now, we only have one question in the chat left, so please feel reminded to ask questions if you may have. Can you please comment on cash collection of prebookings?

Alexander Reinerstahl, CFO, Havlara Sjostroden: Yeah. So I I’ll I’ll address that question. So kind of the the prepayments on on cash bookings follow the seasonality. So and we do have, you know, we have a certain deposit that is paid when when the guests book the trip, and there’s a deposit, you know, there’s a remaining payment to be made, about three three months prior to three to four months prior to to the voyage. So naturally, the low season in terms of of pricing, it’s around year end, which is marks kinda marks the low period in in our working capital.

And then it builds towards the summer season, so it kind of peaks, around June, July. So what we what we would see is that at the year end, it’s at at the low point, and then it builds towards the mid mid part of the year. So over the past few years, we’ve seen, you know, like a rule of thumb, approximately €5,000,000 difference in in the level of prepayment from from, from January to June. As, you know, revenues grow, we do expect that that difference to to grow as well. I think that’s the yeah.

Sarah, Earnings Call Moderator: Thank you so much, Alexander. So this answer concludes our q and a session as we did not receive any further questions in the meantime. So, therefore, the participants, thank you everyone for joining. I just shown interest in Habila. So should further questions arise at a later time, please feel free to contact Ben and Alexander.

And also a big thank you to you for your time today and for the insightful presentation. I wish you all a lovely remaining Friday. Happy weekend. It was a pleasure to be your host today and a hand back for some final remarks.

Ben Martini, CEO, Havlara Sjostroden: Thanks a lot, Sarah. And thanks to all participating. So, and if there is any other questions, please just send us a note, and we will do our best to answer it. Thanks a lot.

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