Fasadgruppen Group AB (publ) (FG) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Fasadgruppen Group's presentation of the second quarter 2026. My name is Magnus Blomberg, acting CFO. And with me here in the room, we have our CEO, Martin Jacobsson. So Martin, will you please walk us through the report. And after the report, we will open up for some questions. So with that being said, Martin, please go ahead.

Thank you, Magnus, and a very warm welcome and a good morning from me as well. And let's move to the first slide directly. And let me give you a quarter here in short. By our own standards, the earnings were weak, but a weak quarter and a weak business, I would say, are 2 different things, and we will show that today. So on an adjusted EBITA level, we came in at roughly SEK 108 million against SEK 132 million last year, which is down 19% and I won't dress that number up. Remember here, we took roughly 2,000 colleagues in our organization, took this business from -- we had minus 12%, if you remember, organic growth in Q1 up to broadly flat now here in Q2. And the margin came in at roughly 7.6% and that's just a statement, and I'm proud of the colleagues that did this. And I would say that the decline in the result is not widespread. It is concentrated. It's mainly in our Nordic contracting business, and that's essentially in Norway. And I'll walk through the reasons later in the presentation. But every other part of the group, I would say, held its ground or improved. And that distinction matters because concentrated problems can be fixed. The other headlines we have here in the first slide is, of course, the organic order backlog, which was up 6.6% compared to last year, mainly driven then by Norway, Finland, and the U.K. Very strong increase in the Norway is noteworthy. And of course, we welcome new colleagues into the group here. We finalized this acquisition in August with ProRakenne. So a very warm welcome to ProRakenne. They are a roofing specialist, mainly focusing on industrial customers and also data centers. With that, we can move on. So if we just look on a rolling 12 months basis here on our numbers, we see net sales of roughly SEK 5.2 billion. We're at an adjusted EBITDA level of roughly SEK 350 million with somewhat lower margin compared to the same period last year. And it's also noteworthy the cash conversion here is roughly 100%. So whatever else this year has thrown at us, you could say, the business still converts earnings to cash. So moving on. Looking at the net sales was down roughly 1.8% in total. And of that, it was a broadly flat organic growth, minus 0.5%. But remember here, we had a divestment of Alnova that came in last year, and that also affected the quarter here. Then looking at our segments, I would say that the Total Solutions decreased by roughly 2.2% and our Specialist Solutions increased by roughly 1%, and then Clear Line, our business in the U.K. decreased by roughly 9%. But it's noteworthy here that if you remember, coming back to the organic growth, it was minus 12%, as I said, in the Q1, and now it's broadly flat. That's an important number for us that we are on the right path. I'd like to give an example like if this is broadly like a hotel, the rooms that we had during the wintertime costs money whether someone sleeps in them or not. And of course, now that the rooms have been starting to fill up again, we're making money in that instance. And as we see it, the earnings from those rooms arrive a quarter or 2 behind the guests. But with that said, of course, a number that stands out here is, of course, the decrease in Clear Line that's still affected by what we've told you before, the building safety regulator delays still there, but that means it's a cued demand and not a lost demand. And now we can stand just one last thing on the sales. I would like to stress here also in Sweden, we've seen housing cooperatives and property owners that have postponed facade renovations throughout the last couple of years are very active again. As we say, that our facade doesn't care about interest rates. And what we've seen now is that with the lower interest rates level and more, I would say, more confident market, we're seeing there's more projects to calculate on. And hopefully, we'll see that in the numbers in the future as well that Sweden is on the right path. With that, we can move on to the next one, please. Then looking on the adjusted EBITA, the earnings slide, I would say, the one that matters most today. Looking at the segments and you see exactly where the problem lies, you see that Total Solutions margin came in at 3.3% compared to 6.6%. And I would say that this is mainly then focused on our businesses in Norway, which are -- a lot of them are in the Total Solutions segment. And I would say that the 2 forces that have affected this, and I want to separate them. First, the market is weak that I would say that hand was dealt to us. But part of the decline is also self-inflicted, you could say. We've changed management in several of our Norwegian companies in the last year or so. I would say different phases in a cycle demand different leadership and a turnaround has its own requirements, and we acted on that. So I want to be clear upon that. And changes like those always cost tempo and volume in this transition. But I would say that with the changes that we've made, we're confident in the future in Norway. So I mentioned earlier that the order backlog grew significantly in Norway, and that leads the way. So that's what we're going to keep track of ourselves, the volume increase and with that, the margin will recover. And of course, that's something that we will have a look at closely at in the future, and hopefully, you will do too. Then I would say it's also noteworthy here the Clear Line's strong result and the margin that increased from roughly 29% to 38% is, of course, a very impressive number. And Clear Line is working in a very disciplined way and delivering quality projects every day to our customers. So very proud of Clear Line in that matter. Of course, I would say that it's good to see that we're on the right path. But with that said, we can move on to the next slide, please. Now looking on the order backlog. As I mentioned, it increased here organically. And this tells a bit different story than the income statement. And of course, we see that it's mainly on the Specialist Solutions segment and on Clear Line segment that we see the increase. And I would like to stress here once again that it's especially in Norway, Finland, and the U.K. that we've seen a very strong uptick in the order backlog. So we are eager to convert this strong order backlog into sales. But just a noteworthy here is, of course, that we're having a close look on the Danish order backlog, which have had a somewhat of a hit in the last couple of months here. But with that said, I'd like to come back to that in the future to see where we're heading. Yes. So I think we can move on to the next slide, please. Then on the cash flow, operating cash flow of SEK 52 million compared to SEK 181 million last year with working capital as a swing. I would say when the production accelerated hard in April after a late start to the season, I would say the working capital built sharply, but it's more like a normal breathing of a project business entering high season. And I would say that it's amplified this year because the season started late and then fast. So it's more of a timing and not a leakage question, I would say. And the number to double check here is, of course, that 98% on a rolling 12 months. So as I mentioned earlier, we're still converting a lot of earnings into cash. But remember, it's mainly in the second half that seasonally converts. All right. Next slide, please. We had a net debt here of SEK 1.6 billion, down from SEK 2.2 billion a year ago. Leverage of 3.3x adjusted EBITDA. The rights issue that was concluded in the second quarter did the heavy lifting, so to speak. And from here, I would say the deleveraging comes the old-fashioned way, earnings and cash conversion. Next slide, please. So as I mentioned here in the start, we welcome a new company into our world, ProRakenne. ProRakenne, a roofing specialist situated in Oulu in Finland and was acquired through our subsidiary, Rovakate. ProRakenne had a long-standing collaboration with Rovakate in the Finnish industrial and data center segment mainly, I would say. I would say that there's 3 things I want you to take from this deal. First, the logic, we have 2 established players who already work together, industrial customers want more of a one-stop shop. We provide them with that. So demand is pulling the acquisition not the other way around, so to speak. Secondly, it's structured. It was financed from existing cash with part of the consideration settled through a long-term co-ownership instrument in Rovakate. So the seller becomes a co-owner in the business they're joining, and I care a great deal about this. I think it's a very, very strong signal because in a group of entrepreneur-led companies, the best acquisition currency isn't cash. It's a shared ownership of the outcome. And we talked about that earlier, but people water the garden they own a piece of. I think that's something to take with you. And thirdly, then the direction deepens our exposure to data centers and the industrial customer segment. And of course, data center is especially interesting, one of few construction segments that is in structural growth, especially in the Nordics. Then moving on, just some examples here from ProRakenne shows the range of the capabilities, and it's the range I want you to notice first on the left-hand side, SEK 2 million roof done in 3 months. And on the right-hand side, 45,000 square meter data center roof done in 32 months, which is a unique expertise. And it means that we can handle all types of projects under roofing side. So it's very, very glad to see ProRakenne join us, and we are eager to help more customers in the future. Then some concluding remarks before we open up for questions then. Backlog, stronger, SEK 4.5 billion, and it's growing the fastest where we need it the most, so to speak. Recovery through the quarter was also gradual. We saw the end of the quarter was strong here. And the profitability focus continues, especially in Norway, where new leadership and a filled order book, the high season now in the midst of it have to do their work together. And of course, we added ProRakenne, as I just mentioned, which is a step in the right direction for us. So from here, I would say, mainly it's an execution story and judge us on that. I would say that Sweden's volumes will reach the earnings lines that Norway's volume increases in the margin as well. And that the Danish order backlog is filling up would also be something that we're [ looking out ] to execute on. And finally, I would thank our 2,000 employees, especially. And the backlog that we've built is built in a difficult market, but it's a heck of a job that's been done. Now it's up to us to execute it, and we'll do that together. So with that, we open up for questions.

[Operator Instructions] The next question comes from Max Bacco from SEB.

Perhaps starting with Sweden, I mean, you mentioned a couple of times that Sweden is on the right path and that you are seeing increasing activity, especially on the renovation side here in Sweden. But I understood it correctly, if Sweden did not add to the growing order backlog here in Q2. How should we think about that, that you're seeing improving activity, but the order backlog is not improving?

Thank you for that. Yes, of course, it's a relevant question, but it's based upon the discussions we have with all our customers around in Sweden, and we're seeing around the corner what's coming. And of course, it's -- Sweden is working from a bit higher level on the order backlog side than, let's say, in Norway. So it's -- the autumn is full in that instance, you could say. But we're always eager to fill it up even more. And I think with the current situation, we have the possibilities at least with the active customers to increase even more in the future. And I would say that a bottleneck for us is, of course, still the amount of craftsmen and subcontractors that we have. And with that said, if you -- the customer wants us to start immediately and we can postpone them, that would be to our benefit. But as we're seeing it now, at least, the demand is strong in Sweden. So hopefully, we can grasp some of those outstanding offers in that instance. But we're seeing a lot of activity. That's the main thing here and very strong discussions with the customers.

Okay. Understood. And then on the same topic, I noticed that Clear Line's order backlog declined 9% versus Q1. How should we think about that? Is it just that Q1 was very strong and perhaps some timing to it? Or is there anything else that number?

It's nothing in particular in that number. It's still on a very high level. And we're looking into still 2028, 2029 now for Clear Line. So I wouldn't say that, that's something to worry about or so. It's nice that we're executing on sales, even though on a somewhat lower level compared to last year in Q2. But on the other side, it's on a disciplined level as we can see on the margin.

Okay. Understood. And then the final question, you basically touched upon it during the presentation when you stated that going ahead, it boils down to execution more or less. But that's all taken together with improving order backlog, regulatory delays, perhaps easening in the U.K. and so on and so forth. Going into the second half here of 2026, do you see that better volumes and better profitability compared to the second half of last year? Is that a reasonable scenario? Or is there something that goes against that view? What's your thinking on that?

Yes. I mean, it's -- as you know, we don't really give any forecast in that sense. But of course, very, very strong order backlog that makes us -- makes the possibility at least to execute strongly in the second half of the year. So I think the room for improvement is there.

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

Yes. We have some written questions here as well. So let's begin with the first one. And have there been any changes or adjustments to Clear Line's revenue recognition or the policies? Martin?

During which period?

During Q2 2026.

It's well known. Well, it hasn't been to any other period either so -- but no.

And the second question is, has the BSR granted new Gateway 2 approvals to Clear Line during the quarter, as it seemed likely given the improvement permitting environment and higher approval rate in London towards the end of June?

Yes, we have received several approvals.

And did Clear Line achieve or recognize an unusual high number of project milestones or has a possible novelty initial mobilization payment during Q2 2026. And did this contribute significantly to the exceptional strong EBITA margin reported to the segment? Long question, sorry for that.

I think it's connected to the margin of Clear Line in Q2, as I read it. But I would say, well, of course, there was some -- we ended some projects for Clear Line in June, but that's nothing unusual in that sense. So nothing stands out on that, I would say.

Thank you. Moving on. Sweden looks to have turned and Finland is also growing. Could you also see growth in the second half for Norway and Denmark? Or is that more of a matter for 2027?

Yes. It's back to the forecasts. And I think, as I mentioned to Max here, there is room for improvement in all countries. But we have a strong order backlog in that sense.

And what margin can we expect from Clear Line going forward? Since the margin has fluctuated.

Well, I think if you just take the 2 margins that we see in this quarter, if it's 38% in Q2 2026 and 29% in Q2 2025. If that doesn't give you the full picture of the margin. But of course, it gives you a sense of how disciplined they are at Clear Line and what kind of quality they provide. But I can't give you any more than that.

Thank you. Moving on here. The Danish revenue declined a bit in the second quarter and also for the first half year. Could you please elaborate on the -- what's driving the decline in Denmark? Is it mainly related to timing, weather? Or are you seeing anything else?

It's more of a mix effect in the sense of what kind of projects you're executing on. So it's no demand question per se. I would say it's still demand on a strong level.

And if you elaborate more on the Danish order backlog?