Belysse Group NV (0RQK.L) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the conference call of Belysse Group NV regarding the first half results of 2025. [Operator Instructions] Today, we have with us James Neuling, Chief Executive Officer; Andy Rogiest, Chief Financial Officer; and Ruben Pattheeuws, Group Director of Sustainability and Strategic Projects. Gentlemen, the floor is yours.

Hello, and good morning, and thank you to you, Lynn. This is James Neuling, CEO. Welcome to our -- the Belysse Group's first half results call. If you have not already done so, you can download the press release and this presentation in the Investor Relations section on belysse.com. I need to start with bringing your attention to the disclaimer on Slide 2. I will not read it out, but please do make sure you have read it. I will first talk about the financial summary on our first half of 2025, and then Andy, our CFO, will take us through the financial review. And then finally, Ruben Pattheeuws, the Director of Sustainability and Strategic Projects, will give a short update on our BEYOND program. And then I will do a -- I will make a conclusion. We will end this call with a Q&A session with the analysts following our stock. Could we now look at Slide 4 for the first half 2025 financial summary. From a financial viewpoint, we saw first half consolidated revenue at a total of EUR 134.6 million, which represents a decrease of 7% year-on-year. Revenue of our U.S. businesses were stable -- of our U.S. business was stable, while our European business faced a decline of close to 15% at 14.7%. In terms of profitability, the first half result adjusted EBITDA was EUR 17.3 million, which represents a decrease of 19.6% year-on-year. Our net debt at the end of the period was EUR 126.8 million, including EUR 21.8 million of impact from the IFRS 16 lease liabilities, which results in a leverage of 3.5 -- of multiple of 3.5. Andy will go more in depth in the financials, so across to you.

Thank you, James. Good day. Good morning to everybody who has dialed in and is also following our presentation. So first, let's have a short update on the Q2, so the second quarter performance, especially on the group revenue. So we saw that the consolidated revenue for the second quarter was slightly above EUR 67 million, representing a decrease of 9.5% year-over-year. Important to mention as well is that we had a minus 2.5% unfavorable FX impact. In the U.S., the revenue decreased by 4.4% to EUR 40.9 million compared to last year. The EUR 1.9 million decrease is fully driven by the unfavorable evolution of the U.S. dollar. In Europe, revenues decreased by 16.3% compared to last year to a level of EUR 26.6 million. This is mainly due to lower volumes, especially or primarily in the Residential business line. We will now move to the first semester, so the first half year of '25, talking a bit more about the group revenue and the divisional revenues. So in the first 6 months of '25, we saw consolidated revenue close to EUR 135 million, EUR 134.6 million to be exact. This represents a 7% year-over-year decline, of which the unfavorable U.S. dollar effect is about 0.5%. In the U.S., our overall volume and revenue were stable in the first half year when compared to the first half year of 2024. This outcome was supported by solid performance in the corporate, education and healthcare segments. In Europe, revenues decreased by close to 15% compared to last year to EUR 58.7 million. The H1 volumes were in line with the second half of '24, but clearly below the first half of '24. And this is mainly due to the continued market softness we see in the Residential business as well as a strategic phaseout of low profitability offerings in the Residential market. In the project-driven Commercial business, volumes in the first 6 months were also below the first 6 months of '24, but albeit to a lesser extent. Now moving on to the adjusted EBITDA and the group adjusted EBITDA for the first 6 months, so the Belysse Group consolidated adjusted EBITDA for the first half of '25, was EUR 17.3 million, representing a decline of 19.6% year-over-year, and the adjusted EBITDA margin came to a level of 12.8%. This was 14.8% in the first half of '24. The consolidated group adjusted EBITDA for the first half year was impacted by the lower volumes in Europe as well as a weaker U.S. dollar, while profitability further increased in the U.S. Our U.S. business realized an adjusted EBITDA of EUR 15.6 million in the first half of '25. This is 8.2% higher than the first 6 months of 2024. The adjusted EBITDA and adjusted EBITDA margin improved in the first year half compared to the first year half of last year as a result of the higher realized product unitary margins. In Europe, the adjusted EBITDA and adjusted EBITDA margin for the 6 months of '25 reflects the negative volume effect we are experiencing on sales and unitary product costs and that were partially offset by reduction in the fixed costs. I will now do a deep dive into the cash flow, starting from the cash position at the end of 2024, so at the 31st of December. So we ended with a cash position -- a reported cash position of EUR 36.4 million at the end of June, which is -- EUR 1.9 million, which is almost fully related to unfavorable exchange rate. So the fluctuations of our cash balances, which explains EUR 1.9 million unfavorable. Excluding for this effect, the cash flow was EUR 0.3 million negative. We see on the slide that the generated adjusted EBITDA and the reduced trade working capital had got consumed by debt repayments, interest payments, but also changes in other working capital and our capital expenditures, which brings us to the slide on our leverage. So the net debt at the end of the period was EUR 105 million if we don't take into consideration the EUR 21.8 million of the IFRS 16 lease liabilities, which with an adjusted cash EBITDA of EUR 30 million brings us to a leverage that is 3.5x. This is an increase compared to the 3.1x we reported at the end of 2024. Our total available liquidity, which includes also the headroom under our RCF, amounted EUR 48.7 million at the end of June in '25. We were at EUR 52.7 million at the end of 2024. Needless to say that both debt and cash movements were strongly influenced by offsetting U.S. dollar translation effects. I will now hand over the floor to Ruben Pattheeuws, our Group Director of Sustainability and Strategic Projects for an update on the BEYOND program.

Thank you, Andy. We can move to Slide 12 for the results of our Lean program. If I look at our Lean program, it has delivered EUR 0.8 million savings in the first half of 2025 versus last year. If we measure from the starting point of the BEYOND program in January 2022, the program has delivered EUR 8.4 million of savings against a target of EUR 7.3 million. This means that with 6 months to go, we have already exceeded the 4-year cumulative savings target of the program. If we look at the initiatives that drove the savings this year so far, we have more than 40 initiatives running, contributing to these results with the key focus being on quality, material, energy and labor efficiency. And with this, I would like to give the floor back to James for closing comments.

Thank you, Ruben. Please turn to Slide 13 for the conclusion of this presentation. Our first half consolidated revenue was EUR 134.6 million, and adjusted EBITDA was EUR 17.3 million, resulting in an adjusted EBITDA margin of 12.8%. In the U.S., adjusted EBITDA and associated adjusted EBITDA margin improved with overall volume and revenues remaining stable. In Europe, the reported adjusted EBITDA and adjusted EBITDA margin reflect mainly the negative volume effect on revenues and unitary product costs of the continued market softness in the Residential business. Our leverage increased to 3.5x, and our total available liquidity was EUR 48.7 million as of the 30th of June 2025. I'll now go back -- I'll hand back to Lynn for the Q&A.

[Operator Instructions] We have a question from Wim Hoste.

Wim Hoste, KBC Securities. Do you hear me well?

Loud and clear.

Okay. I have a couple of questions. Maybe first on Europe. Can you quantify the impact of the phase out of the lower value-added product lines on revenue in the first half? And also maybe elaborate on whether that effect will continue to be a bit of a drag in the second half of the year. So that's -- yes, that's the first question. Maybe I'll let you answer that one first.

One moment. Wim, James Neuling speaking. It's not something I can precisely quantify. We have in previous calls with me as CEO and also previously when Cyrille Ragoucy was in this chair. We have talked about our intention to phase out low-margin activities. And this is -- I'd say we're near the end of that. I hope that answers your question. So there was quite an amount of it during 2022 and '23 and to a lesser extent in '24 and '25. So I think now we're more in the stage of a normal ongoing business, tuning in and out of bits and pieces as and when they become profitable or not as compared with 2 years ago when it was really a massive structural change in what we were doing as we separated from the -- what was the old Balta, now owned by the Victoria Group. It doesn't -- I know it doesn't precisely answer your question, but probably a bit -- we could add into that just saying, look, it's not something that should be significantly affecting us going forward. There might be some lingering carryover effects into the second half, but it's not going to be a major topic. And I do not expect at this stage that would be a major topic next year.

Okay. Understood. Then maybe what is then the current breakdown of the business in Europe? And I mean, the split between Residential and Commercial. Yes, obviously, I think most of the pain was in Residential. So I'm wondering what is the current split of the business. And then also, yes, a bit following up on Europe, you had double-digit EBITDA margins in the past. I think in 2021, it was even 12%. Even as recent as last year's first half, it was 10% or around 10% EBITDA margin. What is the margin potential you're seeing for the European business? And also, yes, towards -- what would you need to get to much better margins? Is that just volume effect? Or are there other measures or initiatives that are needed to go back to decent profitability in Europe?

You've got multiple questions within the one question there. Yes, it's okay. It's hard for me to give a -- as you know, we don't give a target price on our stock, and we, therefore, don't give a target margin or target EBITDA as such a guidance. So it's difficult, therefore, for me to say what should our target percentage be within a certain period of time. The double-digit margin that we saw in first half last year, the primary driver behind that was we saw in quarter 1 last year, an uplift in volumes that didn't really repeat itself, and that was across the flooring segment. And you can see when you look at the results of other flooring companies, you also see this unusual, particularly quarter 1, to a lesser extent, first half last year effect. So something happened in the market there that lifted the volumes. But more importantly, what that shows is when the volume comes, the margins move up very quickly. And our view is we're in a continued kind of downward -- well, we think the cycle is down. We know it's a lengthy down cycle. Our strong belief this is not a structural situation in the market. So the volumes will come back. But I'm not willing to make a prediction exactly when the volumes will come back. And we all know the important factors that are happening in the market with interest rates discussions, which go on with the Fed in the U.S., which obviously influences Europe. The raise in 30-year rates that we see on mortgages at the moment, all those things have an effect. So the overall market situation, in our view, is flat, but I'm not willing to give a prediction when it comes back. But the first half results of last year definitely show a little lift in volume shows a quick improvement in the EBITDA margins.

Are there any other questions? Any other questions? I think we have no further questions.

Okay. Thank you. Well, thank you, everyone, for attending our call and listening to our results. As I mentioned at the beginning of the call, our results are published on our website at belysse.com under the Investor Relations section. So thank you all for attending, and I wish you all a good Friday and weekend. Bye.