Earnings call transcript: HusCompagniet Q4 2024 revenue growth steady

HusCompagniet AS reported a 22% increase in Q4 2024 revenue, reaching $647 million, aligning closely with market forecasts. Despite a 4% decline in full-year revenue to $2.3 billion, the company’s stock trades at $7.94, showing resilience in a challenging market. According to InvestingPro analysis, the company appears fairly valued, with a strong free cash flow yield supporting its current market position. The company’s strategic focus on sustainability and debt reduction contributed to a stable outlook.

Key Takeaways

• Q4 2024 revenue rose by 22% to $647 million.
• Full-year revenue decreased by 4% compared to 2023.
• Interest-bearing debt reduced significantly.
• Stock price remained stable post-earnings.
• New product launches emphasize sustainability.

Company Performance

HusCompagniet delivered a robust performance in Q4 2024 with a 22% increase in revenue, driven by new product launches and a focus on sustainability. However, the full-year revenue saw a decline of 4% compared to the previous year, highlighting challenges in the broader market environment. The company remains a market leader in the Danish detached housing segment.

Financial Highlights

• Revenue: $2.3 billion for 2024, down 4% year-over-year.
• Q4 Revenue: $647 million, up 22% year-over-year.
• EBITDA: $104 million with a 4.5% margin.
• Gross Profit: $58 million with a 22.1% margin.
• Free Cash Flow: $105 million.
• Debt Reduction: From $356 million to $271 million.

Outlook & Guidance

HusCompagniet forecasts 2025 revenue between $2.8 billion and $3.1 billion, with expected house deliveries of 2,200 units. The EBITDA guidance ranges from $110 million to $160 million, reflecting confidence in market share gains and strategic expansion. InvestingPro’s comprehensive analysis indicates a "Fair" overall financial health score of 2.12, with particularly strong ratings in cash flow management. Get access to the full financial health assessment and detailed Pro Research Report, part of the extensive coverage available for over 1,400 stocks.

Executive Commentary

CEO Martin stated, "We are getting positive feedback and look forward to pursuing opportunities," signaling optimism in future growth. CFO Alan added, "We remain cautiously optimistic," highlighting a balanced view amid market uncertainties. Martin also noted an increase in leads in the detached segment, indicating potential growth.

Risks and Challenges

• Potential increases in SG&A costs could impact profitability.
• The 4% decline in full-year revenue suggests market challenges.
• Maintaining EBITDA margin amidst competitive pressures.
• Macroeconomic factors like inflation and interest rates.
• Ensuring sustainable supply chain management.

Q&A

During the earnings call, analysts inquired about potential SG&A cost increases and margin fluctuations in the semi-detached segment. Executives confirmed ongoing market optimism and discussed capital allocation strategies, emphasizing a focus on strategic growth and cost management.

Full transcript - HusCompagniet AS (HUSCO) Q4 2024:

Martin, CEO/Chairman, Huskamil: After a great deal of turbulence in recent years, we saw a continuous realization in 2024. Today, we are pleased to deliver on the outlook we provided a year ago and narrowing during the year. Revenue came to $2,300,000,000 and was impacted by lower unit sales in 2023, but sales have been picking up since and increased significantly in 2024. We maintained solid results with EBITDA on $104,000,000 and a margin of 4.5%. We may not be out of the woods yet, but we have seen moving in the right direction the last year.

Consumer confidence and interest in house billing improved gradually and we are sizing the opportunities in the market to grow sales and bolster our backlog. We also maintain our sharp focus on customer satisfaction with another industry leading Trust by the score of 4.8 in ’24. The good performance in daily operations was combined with several new partnerships, orders and initiatives. We expanded our activities in B2B market a lot in 2024 and utilization of factories in Uzbek and Sweden has improved. At the same time, we have launched several new concepts in our detached and semi detached segments.

We will get back to that shortly. And while the turmoil in the global politics these days is not very helpful, we still expect to continue the good momentum in 2025 in a market expected to gradually rebound. With this words, let’s flip to Slide three for just a few more comments on the market sentiment. This slide clearly shows how consumer confidence have been certainly impact in the recent years. But it’s also quite clear that we are now climbing from a very low point.

And at the same time, the macro indicators look rather good. Employment is strong and the core inflation is below 2%. People are still cautious and concerned about the economy, but interest rates are not fluctuating as much as a few year back and activity is high in the housing market. During the year, this trend has translated into sales growth at our offices and we will build on this momentum going forward. Please turn to Slide four and comments from Alan about the Q4 highlights.

Alan, CFO, Huskamil: Thank you, Martin. The positive trend in deliveries and revenue continued in the last quarter of the year as we began to see an effect of the pickup in sales that Martin referred to before. Both the detached and the semi detached segment in Denmark contributed to a 22% increase in revenue to $647,000,000 in the quarter. This is in fact the highest revenue realized in a single quarter since Q1 twenty twenty three, underlining the continued traction in our business. Gross profit increased moderately to $133,000,000 and the margin was lower at 20.6% as the average sales price in the semi detached segment was below the levels in late twenty twenty three due to changes in the product mix.

Still, we were pleased to see a really good efficiency level on the projects and continued cost control across the business with SG and A coming in slightly lower than expected. We lifted earnings by a third and delivered EBITDA of $23,000,000 as we benefited from the increase in revenue. This also resulted in a slightly higher margin of 3.6%. The lower average sales price in the semi detached business weighed down the earnings level and our margin in the quarter. EBIT doubled to $12,000,000 in Q4.

The free cash flow was negative by $21,000,000 for the quarter and was mainly impacted by changes in working capital following the steadily increasing activity level leading to more work in progress for customers. Let us move on with comments on the full year highlights on Slide five. After the solid end of the year, we delivered on our expectations and landed revenue of $2,300,000,000 for 2024. This was around 4% lower than 2023 after low activity in Sweden and impacted by the fact that we obtained building permits in some B2B projects later than initially expected. Still, we were pleased to note gradual improvements and growth quarter by quarter throughout the year.

In the first couple of quarters, revenue was severely impacted by the low sales in 2023, but the pickup in sales translated into higher revenue in the second half of twenty twenty four. We managed to maintain a solid gross profit of $5.00 $8,000,000 and lift the margin to 22.1% despite the decline in revenue. Efficient execution across projects was key to ensuring this progress. In addition, material costs were lower in the first part of the year than initially expected, and this had a positive effect on the B2B business. These positive factors more than compensated for an adverse impact from an expected lower average sales price in the semi detached business.

EBITDA was relatively stable at $104,000,000 for an unchanged margin of 4.5% despite the lower revenue. This was a result of the flexibility and adaptability of our business model combined with efficient execution and strict financial discipline as mentioned by margin. EBIT was slightly lower at $56,000,000 against $62,000,000 in 2023. Please note that the result for 2024 is impacted by a higher financial cost of $10,000,000 and a $2,000,000 tax increase. These items are recognized in the 2024 income statement following an audit and initial ruling by the Danish tax authorities.

The initial ruling stipulates a reversal of the deduction of marketing contributions provided to foreign subsidiaries for the period 2019 to 2020. It is important to note that this initial ruling will have no future impact as no marketing contributions have been made to group subsidiaries since 2020. As we reviewed the historical marketing contributions during the audit process, it came to our attention that a correction of a marketing contribution for the period 2015 to 2018 by mistake was submitted and afterwards corrected in a later taxable income year. While the tax authorities have initially refused to reopen the taxable income statement for the affected years, we are currently engaged in a positive dialogue. Based on an assessment from our external legal advisor, we expect a positive outcome and we have therefore not made a provision.

If the tax authorities maintain their position and do not allow reopening of the taxable income statement for 2020, this could entail an additional expense of $25,000,000 comprised of interest cost and tax. You can read Note six one in the annual report for additional information, but the key takeaways are clear. The dialogue with the authorities concerning historical tax matters is ongoing and we note that the outcome will not impact our guidance, our future operating profit or our ability to stay within our covenant range. Returning to the 2024 cash flow, we saw net cash generated from operating activities decline due to changes in working capital. We were busy selling and building new houses in 2024 and a significant share of deliveries are trailing into 2025.

This impacted the free cash flow, which declined to $105,000,000 in 2024. On a positive note, the gearing level declined to $2,600,000 as planned after a reduction in interest bearing debt from $356,000,000 to $271,000,000 This is comfortably within delivered covenants under our financing agreement. Let’s look at sales, deliveries and our order book. And please turn to Slide six. Sales activity was higher in all quarters compared to 2023, and we were pleased to note a 66% increase in sales for 2024 after a good end of the year.

This translates into fourteen fourteen units sold in total. Progress was good in the detached segment with 30% growth, but the semi detached business was particularly strong with 227% growth after solid contributions in Q4 with permits being obtained in two larger projects for Enrep and Wellcome. The Swedish business saw a modest 2% growth in unit sales for the year. Please note that the contract with Julanda announced in October is not included in semi detached sales as the building permit is still pending. But the project is another good example that we are making progress in the B2B market in Denmark.

And we continue to see good traction with larger investors and expect to sign more interesting projects this year. We continued to strengthen sales efforts during the year as we aim to win market shares in B2C and B2B. We introduced the Formium high end concept in B2C business in Q3 and followed up with the launch of our innovative and wood based B2B concept called Moro in Q4. The positive sales trend from late twenty twenty four has continued in the first two months of 2025. We have sold 123 units in detached, 115 in semi detached and 20 in Sweden.

On that note, let us go to Slide seven and an update on deliveries. The traction in sales during 2024 had a positive impact on deliveries towards the end of the year. In Q4, we noted a 42% increase in deliveries after lower figures in the first three quarters following lower sales in 2023. For the full year, we still saw a 15% decline in deliveries across segments, but we are now moving in the right direction again. Deliveries in the detached and semi detached segments were down by around 5%, but deliveries in the Swedish business fell by more than 60%.

In total, we delivered eight ninety nine houses in 2024 after the slow sales in 2023. In the first two months of this year, we delivered 78 units in detached, two in semi detached and eight in Sweden. Now please go to Slide eight and our order backlog. Looking at our gross order backlog, we saw another uptick in the last quarter of the year and reached 2,400,000,000 This is an increase of 57% from the end of twenty twenty three and progress is driven by all our segments. After obtaining the permits mentioned before, the semi detached order book more than doubled for the full year.

At the turn of the year, the net order backlog had grown by 66% to $1,900,000,000 This amounts to 64% of the midpoint of our revenue guidance for 2025. In addition, we are pleased to note that the good traction in B2B contributes to build a foundation of orders reaching into 2026 as well. We still need to obtain building permits, but we are pleased to continue in the right direction. Let us turn to Slide nine for comments by Martin on the strategic efforts in 2024.

Martin, CEO/Chairman, Huskamil: As just mentioned by Alan, we built a stronger order book in ’twenty four, but we remain committed to continue increasing the backlog in ’twenty five. This is a clear priority for us as we are building a foundation for delivering profitable growth in the years ahead. We are therefore focused on translating strategic efforts into sales in each of our segments. Our detached business is leading in Denmark and has a market share around 18% to 19%. We want to win additional market share by standing out from the competition and adapting our business to meet demand and provide leading customer experience.

This is done every day by our skilled employees at eight offices and seven shore parks across Denmark. And they are supported by great digital tools to ensure that we can deliver best in class customer support and personalized guidance through the billing process. In the B2B market, we expanded our footprint in 2024, which was a breakthrough year for us in this space. But we want to continue this path and leverage our production capacity at the two factories to really upscale benefits. We have invested a lot of time and efforts in building strong relations and partnerships with professional developers and investors.

And we are pleased to see that it is beginning to pay off. I will provide a couple of examples of our new B2C and B2B concepts in a minute. Sweden remained a difficult market and we have maintained our strategy of adapting to the tough conditions. We are making sure that we will be ready for a rebound. And in the meantime, we are making good use of our production facilities to support the growth in the Danish B2B market.

We have been focused on integrating and aligning our factory with the Danish factory to scale our production and ensure greater flexibility. We will continue these efforts. Now let us look at few strategic initiatives launched in 2024. Go to Slide 10, please. We want to lead the market evolution in house building and live up to our purpose of co creating the houses of tomorrow, today.

We do this in close collab with our customers and we are calibrating and offering a launch in new concept to stay top of mind and stand out as the market leader. We have highlighted three concepts launched in 2024 on this slide. Firstly, we decided to leverage our years of experience building high end houses by introducing the new Forman concept to expand our reach in the B2C upmarket segment. We have sharpened our offering with a focus brand and a dedicated organization which brings our customers’ luxury homes to life and offers support and service during the after the building process. We offer expert gardens and advice from construction consultants, architects, lighting designers, color experts, interior designers and landscapes architects.

The new concept has been well received by customers across the country and we will open an office also in Aarhus in 2025 to expand in this space as well. Secondly, our new Moro concert was launched to enhance our offering in the semi detached segments. Moro has a significant lower carbon footprint compared to average Danish essential constructions. It will serve as our innovative B2B platform for lower carbon institutes going forward. The concept is based on wood elements and produced at our factory in Nesberg to ensure stability and stable deliveries for our project partners.

This climate impact is also significantly below the new limits to be introduced by the mid-twenty five and model offers future proof projects to our customers. The third concept highlighted here is Jose Elements, which provides competitive edge in semi detached house building. After acquiring the factory in Nersberg in twenty June, we have now launched this new concept to provide pre fab wooden elements to third party deliverers and builders. And this enables fastest constructions and high precision. This also contributes to ensure more sustainable and cost effective solutions.

In short, we have taken several steps to deliver our business in Trinidad and strengthened the offers across the B2C and the B2B segments as well. We are getting positive feedback and look forward to pursuing opportunities within all these areas. And on that note, let us turn to the outlook for 2025 on Slide 11.

Alan, CFO, Huskamil: Thank you, Marcin. We are confident that we are on the right track and well positioned to seize opportunities in an expected market rebound in detached. At the same time, we are strengthening our position in the semi detached segment and signing more contracts with professional developers. There is still a lot of political and macroeconomic uncertainty around, but we remain cautiously optimistic. All in all, 2025 offers good prospects across our segments and we expect the positive trends to entail revenue and earnings growth.

Our order book is significantly stronger today than a year ago with a good contribution from the sales recorded in the first two months of the year. On this backdrop, we expect revenue to be within the range of $2,800,000,000 to $3,100,000,000 for the year. We have assumed that we will deliver between 2,200 houses in 2025. The midpoint of this revenue guidance would entail a growth of 28%. In terms of earnings, we expect EBITDA to improve to a range of $110,000,000 to $160,000,000 with EBIT reaching the range of $70,000,000 to $120,000,000 dollars We will maintain our focus on efficient project execution and strict financial discipline.

But we will also make the necessary investments in SG and A and our new concepts to support the continued expansion of our order book. We are still monitoring our leverage and expect to stay well within the covenants of our financing agreement in 2025. There will be no dividend distribution in 2025 and dividends are not expected to be reintroduced before our leverage is below two times net debt to EBITDA. With this, we want to thank you for listening in. Please turn to the next slide for the Q and A session.

Moderator: We will now start the Q and A session. Our first question comes from the line of Christian Toney from SEB. Please go ahead. Your line will be unmuted.

Christian Toney, Analyst, SEB: Yes. Thank you. I got a couple of questions. I’ll just do them one by one. So first one goes to the SG and A cost in your detached business.

So $280,000,000 in 2024, only up less than 3%. So what have you assumed on the SG and A cost ramp in 2025?

Alan, CFO, Huskamil: So in general, we expect a significant SG and A cost ramp in 2025 to support our growth. I think we have been looking at sales for 2024, the sales recorded. We have increased sales significantly in the B2B business that requires additional production from our factories in both Espia and in Sweden. And it requires additional hourly paid workers, which is recorded as SG and A in our financial statements.

Christian Toney, Analyst, SEB: Is this something you can quantify how much a significant grant of it?

Alan, CFO, Huskamil: No. I wouldn’t quantify that.

Christian Toney, Analyst, SEB: Fair enough. Then just to this change to discontinued operations. So if if I understand this correctly, you have had some some costs related to the, the the German business, which closed down some years, which you no longer are allowed to report as discontinued operations. So in the 2024 numbers, can you just tell us how much of an EBITDA impact have this cost had? And what do you expect for for 2025?

Alan, CFO, Huskamil: Yes. So as you said, Christian is correct that we don’t no longer separate discontinued and continued. And the effect in 2024 is the SEK 3,000,000. The effect in 2023 was roughly 400,000. So it’s not something that we expect anything from in this new place.

There can be some smaller adjustments. I I cannot conclude that, that won’t take place, but it’s not something we expect any significant impact from.

Christian Toney, Analyst, SEB: Okay. Fair enough. Then if I may jump to the semi detached business. So looking at Q4, deliveries are quite high. So it seems that you have finished a larger project.

On the other hand, gross margin is somewhat lower at 16%. Is there an element of a project being completed at sort of below expectation execution?

Alan, CFO, Huskamil: No, there is not. So in general, we have to if we have larger projects, we deliver in baskets. And when we deliver a basket, we are recognizing that as a delivery, number one. Number two, we did expect a change in margins throughout the year as we saw a change in the mix of our B2B deliveries and B2B projects. I think you commented upon that earlier.

Christian Toney, Analyst, SEB: Okay. That makes sense. But maybe just to help us because obviously looking at your gross margin, it has varied from 39% to 38% in Q1 to sixteen percent in Q4. So is ’sixteen the run rate we should expect going forward?

Alan, CFO, Huskamil: No, it is not. It’s a million of timing of margins and projects, so it is not.

Christian Toney, Analyst, SEB: So it should be higher than 16% just to clarify?

Alan, CFO, Huskamil: Yes, I can confirm that.

Christian Toney, Analyst, SEB: Great. Excellent. I will stop here and jump back in the queue. Thank you.

Alan, CFO, Huskamil: Thank you.

Moderator: Our next question will be from the line of Sebastian Kral from Nordea. Your line will be unmuted.

Sebastian Kral, Analyst, Nordea: Good morning, Martin and thank you for taking my questions also. First, I want to double click on the assumptions for your guidance. So talk about a continued market rebound. Are you able to expand a bit on this? So do you assume improving end markets plus market share gains?

And does that go for both detached and the semi detached market? That would be my first question.

Alan, CFO, Huskamil: Okay. So I would say, if we look at the semi detached market, we would say we have gained significant market share and we will continue to focus on our sales for the upcoming year. And we have strong dialogues with or good dialogues with a lot of partners, both partners that we already have dialogues with and potential new partners. In the detached business, we still see I wouldn’t say we still see, but we still we expect growth for the upcoming year. As Martin commented on, there’s still a lot of macroeconomic uncertainty.

But in terms of discussions on interest rates and, we don’t really I would not say we don’t really see, but we don’t see the same hesitance among consumers when we look at interest rates. And I would say we still have a lot of interest and an increase in our lead activity overall.

Sebastian Kral, Analyst, Nordea: Okay. Okay. So so so so so what I hear here, maybe correct me if I’m wrong, but but end markets semi or detached market end markets are are are still moving in the right direction as you see it. And I mean, considering the your your your strategic investments in in in in formum and and other initiatives, you should also anticipate like still continued market share gains in 2025. Is that fair to put like that?

Martin, CEO/Chairman, Huskamil: Yeah. I can confirm, Alan, because yes, we are seeing that there is an increase in leads in the detached segment. Yes. There is.

Sebastian Kral, Analyst, Nordea: Okay. That’s fair. And then again maybe like remaining on the detached business here for a while, so you sold 123 detached units in January and February. If you look at sort of the implied monthly run rate, it is quite a bit below what we saw in Q4. Has there been a change as you see to the to the sort of consumer environment or anything that could explain this or is it simply a question of seasonality?

Yeah. Any any comments here would would be very helpful.

Alan, CFO, Huskamil: Yeah. I I would say looking back at I think looking back at the past two, three years, it’s difficult to talk about seasonality because the macroeconomic impacts made it more made it fluctuating a bit more. I would say what we have informed you about in terms of sales is what we had expected. I think that’s the way I can put it.

Sebastian Kral, Analyst, Nordea: Okay. No, that’s fair. And then, just the last question and I will go back to the queue. Now, it’s around capital allocation. So you previously shared thoughts around the source increasing the the capacity in your your production.

Is it something that you you still consider or or what are other sort of top priorities in terms of capital allocation for 2025?

Alan, CFO, Huskamil: So that is correct what you are saying or referring to, Sebastian. And we are constantly looking into how we can optimize and improve on the factories, both in SBIR and in Sweden. And we see a really good progress in Sweden, which is supporting deliveries in the B2B segment. So currently, we don’t anticipate large investments, but we are constantly looking at our needs and balancing capacity and needs and investments and looking at that.

Sebastian Kral, Analyst, Nordea: And now there’s anything else, I mean, capital allocation wise, I mean, is it are you looking into land purchases, building up show houses or or is there anything that we we, we there’s, like, top of top of the agenda here for ’25?

Alan, CFO, Huskamil: I think we are I think what what we need to look at when we when we look at it is that first maybe starting with 2024, we we were having our foot on both the the break and the and the gas pedal. Right? So we will be navigating that in 2025 as well. We are looking into whether investments in land, digital efforts, etcetera, are opening an office for Formium is relevant for us. So these are the thoughts that we are of course doing and then we are going to balance all of that.

Sebastian Kral, Analyst, Nordea: Yes, sounds good. Okay, thank you for taking my questions.

Martin, CEO/Chairman, Huskamil: Sure. Thank you.

Moderator: The next question will be from the line of Anders Bretzmann from Danske Bank. Please go ahead. Your line will be unmuted.

Anders Bretzmann, Analyst, Danske Bank: Thank you for that and hello, Martin and Alan. Thank you as well for taking my questions. Also have a few. So if we begin with the order backlog, the net order backlog of SEK1.9 billion, I suspect that part of that relates to some semi detached orders being executed beyond 2025. Are you perhaps able to tell us how much of the net order backlog that you expect to utilize in 2025?

Alan, CFO, Huskamil: No, we cannot disclose that.

Anders Bretzmann, Analyst, Danske Bank: Okay. That is fair. We move on to the semi types business and an average sales price of $1,200,000. Is the expected run rate going forward or do you expect them to go down more or perhaps a little bit up?

Alan, CFO, Huskamil: This is more or less the average we would expect going forward.

Anders Bretzmann, Analyst, Danske Bank: Okay. That sounds good. And then just final question. You reopened your location or one of your locations in Central Jaffland this year, part of the Danish market where activity levels are historically at least have been pretty high in terms of vehicle. Can you tell us about how that has gone?

Have you seen increased customer interest in that part of the country?

Martin, CEO/Chairman, Huskamil: Anders, I’m not sure what you are talking to because we are opening up an office in in the Hawtas because it is because that that you are thinking about. And and we will open at the office here in, in, about two, three months, actually. So we haven’t started.

Anders Bretzmann, Analyst, Danske Bank: Okay. Understood. All right. That was all for me. Thank you.

Okay.

Moderator: Thank you. As no one else has lined up for questions in this call, I’ll now hand it back to the speakers for any closing remarks.

Martin, CEO/Chairman, Huskamil: Thank you. We will, of course, like to thank all of your interest in Huskamil. And please reach out if you have any following up questions and have a nice day. Thank you for now.

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