Havila Kystruten AS (HKY) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to today's earnings call of the Havila Kystruten AS following the first half year results of 2026. I would like to welcome the company's CEO, Bent Martini, and CFO, Aleksander Røynesdal, who will guide you through the figures in a moment, followed by a Q&A session via audio line and chat. And with that, I hand over to you, Bent.

Thanks a lot. Good morning, everyone. First of all, I will start to say that this is a sad morning for people in Norway, I think also people outside Norway, with the recent news of the passing of His Majesty's King Harald V this morning. He will, for sure, be remembered as a great king. And our thoughts this morning goes to especially Her Majesty Queen Sonja, and, of course, the entire royal family. And we are looking forward to having a new King, King Haakon, I guess. This will be official in a few hours. So back to our first half, second quarter 2026, the results is next slide. For those not familiar with the route, we are 1 of 2 operators on this route between Bergen and Kirkenes, the unique coastal route. It's a concession with the Norwegian government, 34 ports going northwards and 33 ports going southwards. Havila Kystruten, we have 4 out of 11 vessels on the route, and the other operator, Hurtigruten, with their 7 vessels. Next, please. I'm quite proud that we are continuing delivering on-hire services. Our vessels are high-performing vessels. So 100% uptime is fantastic on this very hectic route, and it's a fantastic operation, with our crew, familiar with the vessels now and continuing to deliver high performance. So, the results for the second quarter is very strong, especially May and June is very, very strong and all-time high for at least Havila Kystruten. And both the contract revenue and the operational revenues are up and the EBITDA reached NOK 98 million, and Aleksander will come back to more details about the results in the figures. Also confident that we are on the right track when it comes to delivering on increased operational revenues on board the vessels, which is a firm target for the company to increase more in the second quarter compared to last year, an increase of 32% is good. We have a way to go when it comes to, kind of, the overall target looking ahead, but it's a very good movement and the performance is increasing day by day. So that's a very positive sign. And as we have said before, our focus on the digital platforms, selling most of our voyages by our own channels, that's still a focus. And we have now a very, very good balance between, kind of, the sales to operators and the sales through our own channels. Selling on our own channels implies that we will have no commissions paid out. So the revenues are stronger. And the development on selling on the FIT, individual travelers is going up and also securing kind of the onboard revenues very, very good. Yes. So, we do see that the focus we have on, kind of, mixing up the right customers or the guest segments is going very well. We have a strong increase in the -- especially in the English-speaking markets, Northern America, U.K., Oceania, and those represent more than 1/3 of our guests in the second quarter. So it's a strong, kind of, movements. Maybe the World Championship in football also helped out because it's a very, very strong booking now and all-time high activity on our web pages. So, Norway is a very, very attractive market these days. And it seems also going forward that the interest of traveling to Norway, and especially also on this route is very strong. Yes. And when you look at the bookings on the left side, the graph you see is showing, kind of the development year-by-year. The green one is 2026, and it shows the strong kind of development since 2025. And the red one is what we can say about 2027 is very strong, and we are very optimistic for 2027 also. So, all in all, it's a very, very positive development when it comes to the occupancy, the bookings. And, as I mentioned earlier, the development onboard sales, building, kind of the revenues, it's a very, very positive development. So then Aleksander, then you can go more into the details.

Thank you, Bent. A couple of words on the overall revenue and EBITDA development in the second quarter. So, as Bent mentioned, very strong headline growth on revenues driven by contract revenue up more than 20% operational revenues up 13%, where this is driven by higher volume. We have a 17% increase in passenger nights. We have an increasing ACR, and we have very strong growth in onboard sales. And I think the KPIs probably suggest somewhat even stronger growth on the -- especially on the ticket revenue side. There is -- and we mentioned this in the quarterly report, there is a certain periodization effect compared to the KPIs, where we do expect a positive in Q3. And there's also somewhat a currency effect where a large part of, especially May bookings, for this year were made at a higher exchange rate than the realized one. And then I think it's worthwhile mentioning that currency effects on the operational side translate into savings on the financial side, where we do have debt denominated in EUR and USD. Looking at the EBITDA, NOK 98 million, up from NOK 79 million last year. So the positive growth in revenues is partly offset by cost increases, but especially on the bunker side, where we, in the second quarter faced higher bunker costs compared to especially first quarter this year and also compared to the expectations at the end of last year. We are working also on efficiency initiatives on board the ships. And we do expect that these -- we do see effect of that now, and we do expect these effects to materialize in the coming quarters. On the KPIs, the overall KPIs are all moving in the right direction. Occupancy is very strong in the second quarter, 83%. It's the highest occupancy we have recorded. Q3 is shaping up very well as well, and we're seeing the same type of occupancy figure for the third quarter of this year, which is a leap from '24 and '25. Cabin factor has risen from 1.7 level up to 1.9, and it's kind of, stabilized at that level. The ACR, we are working hard on yield management and achieving a price growth of close to 10% this year. At the moment, we have about 8% growth in ACR compared to last year. And what we see is that the pricing curve this year has been very positive, with the average price increasing throughout the year as bookings closer to departure is sold at a higher rate than earlier bookings. The spend per pax night is also up, and we do see that the initiatives that we have implemented on board is paying off. And, as Bent mentioned, we have -- with the very high occupancy that we now have, there's a great opportunity now to work on sales on board as we have all the guests on board. On the cost side, I think I'll jump to the next slide. I think this is more for analytical information. Looking at the cost in the third quarter -- in the second quarter, on the right-hand side, you can see the correlation between occupancy and costs. The Q2 of '26 is on the line of cost, and as expected, given the very high occupancy figure that we saw in the second quarter. And it should be mentioned that this cost overview is not adjusted for inflation. Looking at the various cost components, cost of goods sold up 30% compared to Q2 last year, driven by both a higher number of passengers on board, but also higher sales per guest. Payroll crew up 13% from second quarter last year. It's a function of higher occupancy and also wage inflation. The LNG side, we also have an increase compared to last year, where the higher spot price from the geopolitical uncertainty in the Middle East is impacting our fuel cost. On the admin OpEx, we are, kind of -- we are maintaining the same level as earlier. And we have -- I think, organizational-wise, we have scaled up the organization over the past couple of years, and I think we are now at the appropriate level in terms of staffing onshore. On the outlook, we have revised our target to approximately NOK 500 million for the full year. The revision is predominantly linked to the geopolitical uncertainty that we are experiencing at the moment and especially the higher energy costs as an effect of that. We do see -- expect, based on the current forward pricing, a much higher fuel cost in Q3 and Q4. But that said, we are on track operationally. The occupancy is trending close to 80% for the year. We are currently above 74%. We are on track on achieving an occupancy in the higher range of our target. The ACR is also trending upwards towards 10%. So, with those strong underlying booking figures with the positive development, we are maintaining the long-term outlook for NOK 600 million to NOK 800 million in '27 onwards. And we do -- with the indexation that we have in the government contracts, where approximately 70% of the fuel cost is compensated in higher revenues on the state contracts, but with a time lag of 1 to 2 years. So we do expect the 2028 compensation to reflect the current decrease in fuel pricing. So that's the reason why we are maintaining the long-term target. We see that this is a short-term issue. On the financing side, we did full refinancing at the end of last year, reduced effective interest rate from high double digits to just below 10%. It's a very flexible and long-term financing arrangement for us, and it puts us in a position to deliver on the operational results. And it's, kind of a platform that can be optimized as we do deliver on our results with the first call option in 2028. On the balance sheet side, the vessels that we have, we do collect the broker valuations every quarter. And this is a broker's assessment on the value based on newbuilding costs, willing seller, willing buyer mechanisms. Vessels valued at EUR 663 million at the end of second quarter. That compares to book value of close to NOK 4 billion. So there's a substantial premium on the market value of the vessels. And that really reflects the movement in newbuilding costs since the ships were ordered back in 2019. So if you went out and ordered similar type of ships today, you would easily pay NOK 180 million per ship. And based on that broker value, the value adjusted equity stood at NOK 2.2 billion in the second quarter, supporting the underlying value of our share. So, to sum it up, we have a record high booking situation for 2026. 2027 is firming up really well. And, as we have commented on in our trading update, we see that we differentiate between group bookings and individual bookings, and we see individual bookings developing very positively. So we do see that the book for next year is firmer, high quality than a year ago. And this high occupancy creates a platform for growth in onboard spend. So the job is now really to develop the product on board and take advantage of that opportunity that lies in onboard sales. We do actively work on additional revenue streams. So we do -- we have started packaging to some extent. So we do offer shorter trips combined with flight and hotel. We are testing that out. We are offering hop-on, hop-off. And with these shorter trips, with these specialized packages, we are attracting a much younger clientele than what has historically traveled on the route. The refinancing puts us in a good position. So it gives us the time to deliver operationally. And then we have a call option from '28, and work on that will start next year. And then finally, we are -- we do expect that the next tender for the next concession period will be announced sometime later this year or early next year. And we are in a very well position to participate in that tender and achieve a renewal of the contract. So, I think with that, Ingmar, the presentation from the company is complete, and then we are open for questions from the audience.

Thank you very much. So we move on to the Q&A session. [Operator Instructions] We already have a raised hand. Tim Kruse, you should be able to unmute yourself, switch on the microphone, and ask your question. Mr. Kruse, please go ahead.

On the guidance for this year, so it would imply that you do roughly NOK 350 million plus EBITDA if we reach the NOK 500 million in the second half. Can you walk us through, like where that would come from? I mean, it must then only come from the booking revenue line as cost base will increase in the second half. So, obviously, Q3 is your best quarter, but also Q4 must be then substantially better than last year and even the year before. That would be helpful if you could give a bit more color on that. And then secondly, I'm also looking at sort of your midterm targets. There again, that would imply for the NOK 800 million, another NOK 300 million plus in revenue sort of from this current year level, which you are saying you're heading to 80%, maybe 80% occupancy, sort of what occupancy level and what other sort of onboard sales activities, pricing, et cetera, would you need to reach that? And yes, what sort of, time frame would you -- yes, would you think that could be possible?

Yes. So, on the -- I think on the target for this year, Tim, majority of our EBITDA is created in the third quarter, obviously. And if you look at the history of the last Q3, that has been the case. We do see a positive periodization effect in Q3 on the revenue side compared to Q2, as well as a lesser currency effect compared to the headline KPIs. So the bulk of the EBITDA is created in Q3. And then we do see Q4 firming up quite well. We have -- I think the booking intake at the moment for the year is very strong. So I think we are very optimistic on top line, and then we are concerned about the cost side, which has led to a revision of the estimates. I guess on the onboard sales, Tim, it's going to -- we have the guests on board. We are now working on developing the product portfolio for the guests on board, as well as it's really a people thing. So it's the sales training, it's management training. And we're also implementing sales targets and incentives for the staffing on board to achieve these goals. I don't know, Bent, if you have anything to add?

No.