HusCompagniet A/S (HUSCO) Earnings Call Transcript & Summary

At this time, I would like to welcome everyone to this HusCompagniet's Full Year 2025 Conference Call. Today's call is being recorded. [Operator Instructions] If I now turn the call over to your speakers. You may now begin. [Technical Difficulty] We should be back now. So at this time, I would like to welcome everyone to this HusCompagniet's Full Year 2025 Conference Call. Today's call is being recorded. [Operator Instructions] I will now turn the call over to your speakers. You may now begin.

Thank you for taking the time to join us on our call today about HusCompagniet Full Year Results for 2025. I'm Martin Ravn-Nielsen. I'm CEO of the company. And as usual, CFO, Allan Auning-Hansen is with me on this call. Let's go straight to Slide 2 and a brief overview of our '25 performance. We continue to see a gradual market rebound from the drop in sales in 2023 and 2024 in the first half of the year. Sorry, we have some technical issues here. Do you still hear us?

We can still hear you. Please continue.

Thank you. The rebound followed the overall Danish housing market The rebound followed the overall Danish housing market with an imbalance between supply and demand, at least in the larger cities and urban areas. We still maintained positive sales traction across the Danish segments, supporting a revenue lift of 29% to DKK 3 billion. And our net order book was worth almost DKK 2.3 billion at year-end. On the negative side, we faced challenges and unsatisfactory performance in Semi-detached. This impact profitability, which dropped to DKK 61 million and an EBITDA margin of 2.1%. Overcoming the challenges in our B2B business is a key priority to us, and we are focused on returning to the core and synergy test. We will get back to this. On the positive note, we are proud that customer loyalty remained high with an industry-leading Trustpilot score at 4.8% based on more than 7,400 reviews. This was secured despite critical media coverage in June month over issues with combinate joins in the test houses concerted being constructed during the period of to 2022. We increased the number of houses sold and delivery, and we celebrated the 1 year anniversary of FORMIUM, our high-end Detached brand. The concept has been very well received after the launch. Early this year, we opened a dedicated office in Aarhus as well to meet growing interest for [indiscernible] tailored houses in Jutland. In the same period, we reopened and dedicated showroom and office in Horsens. I'll come back to that later. With this introduction, let's go to Slide 3 for just a few more comments on the market. The Danish economy remained solid throughout the year, supported by a high employment rate. Core inflation was around 2% and the long interest rate was fairly stable. On the other hand, consumer confidence took another turn for the worst in '25 after a positive trend in the second half of '24. This continued negative perception was reflected in our Detached business in the second half of '25. The KPI has improved in the first month of '26 and we are monitrating the situation as always. Our hope was less global political turmoil in '26. Instead, we have seen another great conflict erupt over the last week. However, we remain to leverage opportunities in the market. This also means that we remain cautiously optimistic for '26 despite the low visibility and continued vulnerability. I will end this slide at a broader outlook on the market opportunities at the beginning of '26. The Danish Ministry of Urban and Rural Logistics published a report on the expected Danish housing expansion until 2031. Municipalities plan construction of 250,000 new homes, including 50,000 new detached houses in the period. Also in Sweden, the government has proposed incentives to increase real estate transactions by offering and increasing the loan ratio. We welcome such political incentives and look forward to contributing. Please turn to Slide 4 and comments from Allan about the Q4 highlights.

Thank you, Martin. In Q4, revenue increased 22% to DKK 789 million, driven by all segments. The main drivers were an increased number of deliveries in Detached and Wooden houses, combined with higher average selling prices in the Danish segment. In addition, there was a good contribution from work in progress in Semi-detached. Sales were lower across segments compared to a strong end to 2024 and impacted by the decline in consumer confidence in 2025. Gross profit came to DKK 118 million for a margin of 14.9%. Gross profit in Detached and Wooden houses were stable, but lower in Semi-detached due to the negative effect of the challenges in the 3 B2B projects. The margin was positively impacted by wooden houses, but offset by provisions to potential future cases related to crumbling mortar joints in detached. Please note that the recognition of this provision relates to potential future commitments and does not reflect an increased number of registered cases in the quarter. The provision is based on a third-party evaluation, which has provided a stronger foundation for estimating the number of cases. This estimate is still subject to uncertainty. EBITDA amounted to DKK 15 million for a margin of 1.8% and compared to DKK 23 million and 3.5% last year. The decline was mainly due to the development in gross profit and slightly higher staff costs following the balanced ramp-up of our organization since last year. EBIT came to DKK 1 million, down from DKK 12 million last year. Free cash flow amounted to DKK 128 million, up from minus DKK 21 million last year, mainly supported by changes in working capital following a high number of deliveries at the end of the period. Let us go to the full year highlights on Slide 5. Revenue grew as expected and reached DKK 3 billion in 2025, an increase of 29%. The progress was driven by higher sales in our Danish segments, mainly in first half of the year. And the activity level was high, and we delivered more Detached and Wooden houses in 2025. Gross profit was $488 million and a margin of 16.5%. The increase in gross profit was driven by the Detached and Wooden house segments. The Detached segment was aided by slightly improved average selling prices. The margin declined was due to the negative effect of the previously mentioned challenges in Semi-detached. The 3 challenged B2B projects will also impact profitability in 2026 and the first half of 2027. EBITDA was DKK 61 million for a margin of 2.1%. The margin decline was caused by the same elements as the gross margin. And in addition, we had higher SG&A costs, mainly due to the valid ramp-up of the organization in the first half of the year. combined with higher marketing costs. The ramp-up was initiated to support higher sales and execute on increased order backlog. Following the slower Q4 sales, we adjusted the organization in January this year. Still, we do not see structural or macroeconomic indicators of a longer-term drop in sales. But as mentioned earlier, it is a volatile market we are operating in. Our main focus in 2026 will be our core business and operation. EBIT amounted to DKK 15 million compared to DKK 56 million last year. Free cash flow was stable at DKK 102 million after changes in net working capital and higher investments in the year. Martin will now provide more insights to the changed market approach in semi-detached. So please turn to Slide 6.

Thanks, Allan. After the unsatisfactory performance and Semi-detached business, we have reviewed the order portfolio and revisit our internal processes. This includes calculation, tendering, contracts and internal collaboration as well as collaboration with developers. We are evaluating our approach to the market and identifying ways to improve performance again, profitability over growth. Going forward, we will return to the core of the Semi-detached business and do what we are best at. And it means that we will change our profile from being a contractor to being a developer focused on our own projects to B2B and B2C. A few good and recent examples include at B2B project with PFA in Aalborg named [indiscernible] completed in '25 and the recent completed project in B2B in Skaevinge in North of Zealand. We also engaged in carefully selected low-complexity projects with clearly defined risk profiles and execution frameworks. We will have focused on long-term partnerships with key customers. At the same time, we will look for more opportunities to build on our own land and collab with partners with our house concepts on their land plus. In these cases, we will be drawing on our standard principles and framework, which has proven successful in the past. We will leverage our core competence to optimize our ability to execute on the projects we engage in. We have begun improving process across the Semi-detached business to be more effective. A part of that process, we have drawn on learnings from both the challenge projects and the successfully completed projects throughout the years. We will be financially impacted by the challenges projects in our existing order book in '26 until the first half of '27. With this, I will return to the '25 developments. First, looking at the sales. And please turn to Slide 7 total sales grew by 7% to 1,509 units, driven by progress in Danish segments. Sales in Wooden houses segment declined 6%, corresponding to 6 units. This overall sales increase was recorded in the first 3 quarters of '25, while we saw a decline in Q4. This was mainly due to the dampened sales after a decline in consumer confidence in '25. The test sales increased by 4% and based on a solid performance across the country, and we maintained the market share in the level 17 to 18 percentage. While the activity level remained high in larger cities and nearby areas. We noted our access to financing remains more challenging for customers in rural areas. As I mentioned in the beginning of this call, we have reopened our office and showroom in Horsens. The office marks a physical return to a key regional market. It also introduced our first new concept showroom with architecture Materials & Design solutions are presented in a structured and a new way. This enables customers to better understand the implications of the choice, including budget considerations and what it takes to build a new house. We will also here in March launched the new concept in a big showroom in [indiscernible] near Copenhagen instead of the current detached showroom in [indiscernible] . About a year ago, we established FORMIUM, our brand for architect design premium homes. After 12 months, the brand has proven its commercial viability and market relevance on Zealand. We have also seen a rapid growing interest from customers in Eastern Jutland, and therefore, we have opened 4 offices as well with [indiscernible] showrooms in Aarhus and already sold several houses. The new location provides customers with high curated experience supported by in-house architects, engineers, construction managers and specialist advisers. In total, we now have dedicated strong team for more than 20 employees serving our FORMIUM concept. Semi-detached sales grew by 13%, driven by 3 larger announced projects and some smaller ones. At year end, the projects were all unconditional mean that we can execute according to plans aligned with the customers. Looking at the development in the 2 first months of '26, we sold 105 units in Detached and 6 Semi-detached and 10 houses in Sweden. On that note, let's go to Slide 8, an update on deliveries. The increased sales during 2024 and in early 2025, had a positive impact on deliveries, which grew by 15% to 1,031 units. The progress was driven by a 21% increase in the detailed segment and 40% increase in Wooden house. In semi-detached the number of deliveries declined by 10%. In the first 2 months of this year, we delivered 77 units in Detached, 0 in Semi-detached and 14 in Sweden. Please go to Slide 9, and Allan will take us to our order backlog.

Thank you, Martin. We continue to build our net order backlog in 2025 , and it reached DKK 2.3 billion at year-end. This was an increase of 21%. The positive development was driven by the Danish segments. Detached accounted for 58% of the total order backlog, Semi-detached 37% and Wooden houses for the remaining 5%. We are pleased to note that we enter 2026 backed by an increased order backlog. We will now move on to the financial outlook for 2026. Please turn to Slide 10. We saw stabilization and a gradual rebound in the housebuilding market last year as macroeconomic indicators remain solid. Core inflation was around the 2% mark, and interest rates were quite stable. Also, consumer confidence has actually improved slightly in recent months after declining in 2025. While the macro trends are sound, the uncertainty has still been leading to increased cautiousness among homebuilders in Q4 and the beginning of this year. It means that we are facing low visibility, continued volatility and higher price sensitivity, also on the back of global geopolitical turmoil and conflicts. Furthermore, the winter season was unusually cold causing delays and more deliveries initiation of work. And we are working on this to catch up, but we're also very much focused that we ensure the customers' quality and the quality in the houses. Based on the higher order backlog, we expect moderate growth in 2026 with revenue in the range of DKK 3 billion to DKK 3.3 billion. We assume that we will deliver between 1,000 and 1,300 houses this year. Earnings are expected to improve as well with the 2026 EBITDA in the range of DKK 70 million to DKK 130 million. This is based on the market perspective I just highlighted, and impact from the 3 challenged B2B projects, which will affect profitability until the first half of 2026. In addition, we will see an effect of higher SG&A costs due to the full year effect of the organizational ramp-up. We are monitoring inflation and cost closely and will mitigate if needed. EBIT is expected to be in the range of DKK 15 million to DKK 75 million. The EBIT level is impacted by higher depreciation following investments in new showrooms at several of these locations. There will be no dividend distribution in 2026, and dividends are not expected to be reintroduced before our leverage is below 2x net debt-to-EBITDA. With this, we want to thank you for listening in. So please turn to next slide for the Q&A session.

[Operator Instructions] Our first question comes from the line of Kristian Tornoe from SEB.

Yes. Thank you. I have a few questions. I'll just do them one by one. So firstly, on your updated strategy for Semi-detached, I mean, if I should summarize, it sounds like you're going from a growth focus to a profitability focus. While that makes a lot of sense. I'm just curious how your factories fit into this equation because you also highlight being more selective and disciplined, which I would interpret as something which ultimately could lead to lower volumes, yet you are dependent on having an optimal utilization of your factory. So can you just elaborate on that balance, please?

Thank you for your question, Kristian. So first of all, you are correct. When we look ahead, it's more a profitability than growth focus that we clearly have in the Semi-detached segment, also learning from the past year, especially. It also means that in terms of strategy for the factory, it will still be a supporting element to our Semi-detached business but it will also -- it's also something we have worked with the factory around to be more -- to be able to operate on a more stand-alone basis and serve and provide wholesale elements, which is something that we already sell to various customers. So we are operating with the factory in terms of being more specific and more able to stand on alone basis while still support the B2B business. Previously, it was mainly a focus of supporting the B2B business. But we do see demand for wholesale elements products as well.

All right. That makes sense. Then another part of of your updated strategy is the focus on ensuing opportunities to build on own land. Yet when we look on your balance sheet, the level of own land is almost unchanged versus '24 and materially below the levels in '22 and '23. So to what degree is your current financial leverage really a challenge to accelerate that part of the strategy?

Yes. And thank you again, Kristian. So all in all, I think when we look at own land, there are various ways of getting that financing in place. And we are looking at various ways of being able to do that. I also think that we have a very good dialogue with the bank around these elements, which also has shown a support in our dialogues with them. And we have some interesting projects, especially when we look in 2027 and onwards. And that's why we are going to be focusing more on own land. And then own land can come in various ways.

All right. Fair enough. And then you highlighted that we should expect these effects to materialize in 2028. Does this also mean that we should expect you to target an EBITDA margin of this 8% to 10% by 2028?

I would say, on the longer run, it's still our ambition to get to that level. What we are saying is that the B2B projects and the 3 challenged B2B projects we have, they are going into 2027 or unfortunately impacting a part of 2027. And then we consider towards a normal, so to say, EBITDA margin level from there.

But the target is still 8% to 10%?

Our target is still 8% to 10%. That's correct.

And Kris and also in the past, we have seen Semi-detached projects on own land have better margins, of course. And therefore, you may be also can -- when we have our own land, more own land going forward, then we can see another split in B2B projects, Semi-detached projects, but also B2C projects. It's both of those kind of synergy tests is in total in our business. And we have more focused also to look into B2C as well with higher margins.

Understood. And then the last topic I wanted to touch upon is just the SG&A cost in Q4. It seems quite low. So usually, the SG&A is higher in Q4 and Q3 but in '25, it's on par. So can you tell us what happened exactly?

Yes. So basically, it's the -- throughout the year, we make a provision for employee bonuses. And based on the results that we have generated in 2025, this bonus is lower than initially assumed. So that's the primary thing for it.

Next up is Sebastian Kao.

First, I would like to follow up on the Kristian's question regarding the factory. So I guess I'm struggling to fully understand what makes you the right owner of the factory if it's not going to play an integrated part of your Semi-detached strategy and they have to acquire most of the volumes themselves? Because to my knowledge, these factories have never, on a stand-alone basis, in a strong business model, at least we don't have a lot of evidence for that historically in Denmark.

Thanks for your question. And the way that we look at it is that the factory is still a supporting element to our Semi-detached business. Also when we look at the future for now. And it also supports our B2C business with the construction of the roof facets. So I would say, historically, also selling wholesale elements has been a very rather profitable business for the factory. So I would say there are several elements that means that we are -- where we are from now, we still think we are the right owner of the factory.

Okay. No, that's very clear. And I would like to just a question about the detached sales trends. So we've seen slow but fairly steady recovery since '23. And now in the quarter, sales are down unit-wise, more than 20%. And also, it seems like current trading in January and February has been trending somewhat softly. So I know uncertainty is high, and obviously, there's a lot of things going on outside the borders of Denmark. But are you seeing anything sort of fundamental reasons why you're seeing this slowdown? And have your overall expectations for continued recovery? Are those still in place?

So thanks again, Sebastian. So if we look at the Q4 and as we said on the back of our publication of the Q3 financials, Q4 sales are lower than we expected on a backdrop of more uncertainty. And we also saw consumer confidence declined further in the second half. What we have seen lately is that consumer confidence has improved over the past couple of months. And what we see from our activity and from our lead generation is that we are more positive going forward. This being said, and as you also recall here, is that it is a very uncertain time and lately only a week ago, we saw a war in the Middle East initiate. So I would say, looking ahead, we are slightly optimistic, but as you also said, this is very uncertain times.

And what exactly, again, what do you build this optimism on, Allan, if I may ask?

Yes, sure. So overall, our macroeconomic indicators are pretty strong in Denmark. Unemployment rate is low. Consumer confidence has declined recently. So I would say, all in all, based on the activity that we see from our leads, we are more positive when we look into the coming months. But time will show based on all this macroeconomic volatility that we see right now. So that's where we are.

No, that's completely fair. And just my last question. You alluded to an unusually cold winter. I'm just trying to get my head around, do you expect to fully catch up the lost activities in Q1? Or is there sort of a net negative earnings impact embedded into your '26 guidance from winter effects?

I would say, over the year, we do expect to catch up I would say here in the next coming quarters, we do expect a delay, so to say, because of these challenges. And for us, it's very important also to ensure a high quality on the houses that we deliver.

Our next question will be from the line of Anders Preetzmann from Danske Bank.

So going back to what you mentioned on the FTE side, of course, landing at DKK 508 on the year-end, which is an all-time high, I suppose. But now you've adjusted it a bit, can you just allude to where we are currently on the FTE side and where should we see this going forward?

I don't want to go too much into the details of that, Anders, in terms of future perspectives. I think what we did was, if you look at the DKK 508 million it's a combination of an increase in both white collars and blue collars. So due to the significant increase in activity in our factory in Esbjerg we have increased blue collar employees significantly as well. And from a white collar perspective, we did make a balanced ramp-up to support the increased sale and the supporting number of deliveries, which has taken place in 2026. As you can also see from our order backlog and the increase in net order backlog, which is up 20%, it requires additional FTEs to support that. So that is the main driver behind the increase in FTEs. In January, we made an adjustment in our FTE base based on the situation and what we're looking into right now and focusing very much on our core operation.

Okay. But I guess it's still fair to assume that your current FTE base should be able to sustain quite a lot higher detached unit sales than what we are currently seeing and currently looking into. I mean, can your -- the current sales force that you have, can they sustain at attached unit sale of more than 1,000 units per year?

No, they would not be able to do that.

Okay. That is very clear.

What we sold in 2020 was 780 units. So assuming that the current sales force should capture like additional 200 units is not going to happen.

Okay. That is very clear. If I may move on to the provisions that you mentioned for the detached segment that you book here in Q4. Just to be clear, can you talk about how big a provision it is you've made in terms of the future remediation cost of the motor joints? And does you making this provision change the stance that you have on the ongoing arbitration case?

So first of all, starting with the latter. No, it does not change anything. On the contrary, I would say the insights we have gained from the work leading to the provision supports our standing in this case. What I would say is that I fully understand why you want more insights on the numbers. But as in previous quarters, it's something we have not decided to share.

That's reasonable. And last question from my side then, but it's baked into one here. So we've seen some quite lumpy earnings for all the segments this year due to various reasons. And now you come with a guidance of '26. But I was wondering if you could maybe guide us even further to what gross margin assumptions one should assume, what you currently assume for the different segments for 2026.

Yes. So without being too concrete, what we're looking at was a Semi-detached margin in 2025, which was significantly negatively impacted by the write-downs that we had to do on various projects, unfortunately. So we do expect an increase in the gross margin in the Semi-detached segment. In the Detached segment, we do expect a decrease in the gross margin. First of all, we saw a market which was more under pressure in Q4 than we had expected. And therefore, also, we -- this is something the sales that we made back then is something that we are going to deliver on here in 2026. So in general, we are very much focused on our market share in combination with profitability, and we are balancing those 2 all the time.

And we have a follow-up from the line of Kristian.

Yes, no, I just want to clarify what you just said, Allan, you said you expect a lower gross margin in the debt. Is that including the provision you do in Q4, so i.e., lower than the 18.8% you report for the full year?

I expect to be somewhere without being to concrete in that range.

And as no one else has lined up for questions, I'll now hand it back to the speakers for any closing remarks.

We would like to thank all of you for your interest in HusCompagniet result. Please reach out if you have any following up questions, and have a nice day. Thank you.