InstallatørGruppen A/S (IG) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the InstallatørGruppen Interim Financial Report H1 2026 Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Co-Founder and Group CEO, Mr. Niels Eldrup Meidahl. Please go ahead.

Yes. Good morning, and a warm welcome to InstallatørGruppen's presentation of our interim report for the first half 2. My name is Niels Eldrup Meidahl, I'm Group CEO. With me today, I have Mathias Ringsted Grüner, our Group CFO. This is our first interim report as a listed company. We were admitted to trading on NASDAQ Copenhagen on June 11. So the period covers both the run-up to the listing and the first weeks after being a public company. Let's look at what we will be covering this morning. I'll take the highlights, our growth and acquisition, then Mathias will take you through the financials and the outlook. After the presentation, we will open up for questions. Let's look at the highlights for the first half. There are 5 points we see as the most important for the first half of the year. I'll start with the listing. We were admitted to trading on NASDAQ Copenhagen on June 11, and I'm very pleased that we took that step. A very warm welcome to our new shareholders in InstallatørGruppen. The listing of the group is broadening out our shareholder base and creates visibility for our company and will help us with the next phase of our expansion. It does, however, not change the way that we run our company. Second point, our revenue. We have delivered DKK 2.2 billion, up 29.5% on the first half. The growth came from acquisition. we completed in 2025 and 2026, our Swiss platform and organic growth of 2.2%. We managed to increase our EBITDA by 34.6%, so a bit faster than the revenue. Third, Denmark. Revenue in Denmark was DKK 1.9 billion, up 15.9% on last year. We had an EBITDA margin of 9.3% against 9.1% last year. This is our consolidated platform that -- and it improves margin in the first half despite harsh weather in Q1. Fourth point, Switzerland. Here, revenue is up from DKK 77 million last year to now DKK 322 million this year. We have moved the business from a loss-making of DKK 9 million last year now to being profitable with DKK 19 million this year. Fourth point is our order book. It stands at a record high level of DKK 4.3 billion. It's up 19% since the end of the year. And when you look at on like-for-like, it's up 9.8% compared to last year. Overall, the first half was in line with our expectation. And based on that, we confirm our outlook for 2026. Let's look at the organic growth. We saw solid underlying growth across our portfolio in every discipline in the first half. First half 2026 was, however, impacted by strong comparison in the first half of 2025 as well as postponed projects into the second half of 2026, mainly due to the harsh winter we saw in the first quarter. Our organic growth ended up at 2.2% in the first half against 18.2% a year earlier. The growth we saw in the first half was in line with our expectations. We have already seen growth picking up in Q3 and the 2% to 5% organic growth that we have communicated earlier is still our expectations for 2026. This brings me to the order book. It stands at DKK 4.3 billion today, the highest level we have ever recorded. That's up 19% as of beginning of the year and 72% compared to last year. On a like-for-like basis, it's up 9.8%. The work the winter pushed out has not been lost. It is contracted work, and it sits in our order book, and we anticipated it to move into the second half of the year. The same effect that held back the growth in the first half, we anticipate to have positive effects into the second half of 2026. Bear in mind, our order book is only the signed contracts. All service work is not included in it. So the figures understand the secured revenue rather than overstating it. Let's talk a bit about our acquisitions. I will not read through the whole list, but I'll take 3 points from it. We have completed 8 acquisitions in the first half, 6 of them in Denmark and 2 in Switzerland. The majority of the companies we bought was within the electrical discipline. We have also bought a ninth company, E. Lytzen that was completed the 1st of July just after the period closed. 3 out of 8 were acquisitions by portfolio companies that we already owned. That is why 8 transactions took us from 42 to 47 and to 50. Looking at the discipline, the list is weighted towards electrical work with heating and plumbing and ventilation business alongside with it. E. Lytzen covers all the 3 disciplines. In total, the acquired companies represent DKK 630 million in revenue and DKK 55 million in EBITDA based on their last full year results. Now to the 2 segments. Denmark first. Revenue of DKK 1.9 billion, up 15.9% on last year. The margin is up from 9.1% to 9.3%. The improvement came from procurement synergies and from revenue management and pricing. Switzerland, here, we saw a revenue of DKK 322 million, up from DKK 77 million last year. And the margin has went from minus 12.1% to now being profitable with 5.8%. The country organization was built first and revenue is arriving now. The Swiss margin is still 3.5% below the Danish one and the gap will be closed when we get more scale in Switzerland. Switzerland is now 14.5% of group revenue against 4.5% last year. And we are moving it from loss-making to being profitable. That is where the business stands. Mathias, will you take over on the financials?

Thank you, Niels, and welcome also from me. I will take you through the financials and the outlook before we open up for questions. Let me start with revenue and margin. Revenue for the half year was DKK 2.2 billion, up 29.5%, driven by the 2025, the '26 acquisitions, the Swiss buildup and the organic growth of 2.2%, in line with expectations. In the second quarter, revenue grew 25%. On margin, the comparison is with Q2 last year, an unusually strong quarter to be measured against. As the chart shows, the second quarter is generally busy and the higher Q2 margins reflect that. This year's split, 8.7% in Q1 and 9.9% in Q2 follows that normal pattern. Last year's was higher than normal, so the cleanest comparison is the half year, and adjusted EBITA margin of 9.3% this year, up 0.3 percentage points compared to last year. Turning to Slide 10 on cash flow. Adjusted cash conversion came in at 71.3% for the half year against 97.2% last year and 110.3% for the full year of '25. The first half is seasonally the softest period for our cash flow. 30 June remarks the peak in receivables and the working capital buildup over the first half and is released over the second. Much of the June position has, in fact, already been collected in the third quarter. Working capital tied up DKK 56 million in the period, partly the seasonal buildup of work in progress and receivable, also reflecting a much larger revenue base. CapEx remains low, consistent with the asset-light model. Adjusted free cash flow was DKK 141 million. The adjusted measure excludes acquisitions of subsidiaries and tax. It measures the operation, not the acquisitions. Cash flow is what funds our compounding model, so it has our constant attention. The cash we generate is redeployed into acquisitions and the returns on that capital are attractive, reflected in the 2025 return on capital employed of 21.1%, up from 18.4% in previous year. Reinvesting at those returns is what compounds value. Moving on to Slide 11, the capital structure. Net interest-bearing debt ended at -- for the half at DKK 1.09 billion, DKK 248 million above the year-end. The increase mainly reflects acquisitions together with the reevaluation of contingent consideration, the buyback of own shares at the listing and the seasonal working capital buildup. Leverage stands at 2x against our target of below 2.5x. The 2x is at the same level as a year ago, up from 1.7 at year-end. Regarding financing, at the listing, we put in place a new revolving credit facility of DKK 1.75 billion with a 5-year tenor. So the headroom to our leverage target is backed by committed facilities ready to fund further acquisitions. That brings me to the outlook for '26 on Slide 12. All 5 guided measures are unchanged from the listing, reported revenue of DKK 4.65 billion to DKK 4.9 billion and adjusted EBITDA of DKK 415 million to DKK 465. On the combined basis, which includes the acquired companies for a full year, we expect revenue to be between DKK 5.45 billion to DKK 5.7 billion and adjusted EBITDA of DKK 475 million to DKK 525 million and at last reported EBIT of DKK 225 million to DKK 285 million, where the first half carried the listing-related special items, which do not repeat. Results are in line with our expectations and the outlook is reiterated. Reported revenue and adjusted EBITDA both stands at about 47% of the guidance midpoint for reference, the same point last year corresponded to 46% and 43% of the eventual full year. There's still a half year to deliver, but with the seasonality stronger period ahead, the record order book and postponed work now sitting in it, we consider the outlook well underpinned. That concludes our prepared remarks. Operator, please open the line for questions.

[Operator Instructions] And our first question today comes from the line of [ Christian Tonel ] from SEB.

A couple of questions from me. I'll just do them one by one. So firstly, on growth. Maybe if you can elaborate a bit on sort of the difference between the 2% organic growth and the 10% like-for-like growth in your order book. So why hasn't the order book development pushed up the organic growth to a high extent?

So Christian, I think, first of all, it is a like-for-like comparison. So the 2.2% organic growth is generated from the same company's order book. So those companies' order book has increased with 10%. And I think some of the reasons why this hasn't materialized in the growth generated so far is due to the reasons that Niels has described here. Some of the orders come in during the half year. And secondly, we've also been impacted by this cold winter, creating some delays in the start-up of projects.

Can you help us then on the DKK 4.3 billion backlog, how much of that is expected to be recognized as revenue in the second half of the year?

To be honest, Christian, we don't have that kind of exact numbers on how the order book is played out. As you know, it's 48 companies, and it's put out on several hundred different projects. But the order book sits at a really good place. And we, for sure, anticipate a large part of this to be delivered in the second half.

All right. If I can then move to cash flow. The notable increase in your work in progress and hence, the drag on cash flow, that's materially different to the performance last year. So maybe if you can elaborate on that one.

Christian, we consider this a timing element as we've seen a lot of these receivables and work in progress coming in here in Q3. So we expect to see a catch-up in Q3.

Okay. And would that also mean that we should expect your adjusted cash conversion to end above the 85% and in line with the medium-term guidance for '26 as well?

We expect to deliver on what we've promised.

Great. And then last question for me is just a bit of commentary around your M&A pipeline and if you expect to sort of reach the acquisition equaling DKK 100 million in adjusted EBITDA for the full year.

Yes, that is, for sure, still the plan. There's a lot of activity going on at the moment, and we believe that we will be in line with our expectations put out forward around the DKK 100 million.

And maybe for some expectation management, those deals we are waiting for then when could we expect that they would close?

I think as we mentioned, I think, also earlier was that most of that will be in Q4.

And your next question today comes from the line of Sebastian Grave from Nordea.

First of all, congratulations on your first report as a listed company. Maybe for start, could you talk a bit around how you see the overall Danish and Swiss installation market shaping up currently? It appears that your Swedish peers have seen a sort of inflection point in terms of growth. I guess for your markets, we are a somewhat different place in the cycle. So maybe first start, if you could talk around the overall market development also if you would like to highlight some specific disciplines, that would be great.

Yes. I'll be happy to do that. I think compared to the Swedish market, the Swedish market has been really under pressure the last years. And there, you're seeing a strong rebound into that. The Danish market has not been falling in the same way. However, when you look from '22 and to where we stand at the moment, it is down around 14%, the Danish market. I think the Swedish market is more or less the double of that. When we look at the expectation for the market for the Danish market this year, we anticipate around 4% to 5% growth in the Danish market. In Switzerland, we anticipate a bit lower growth, around 2% market growth in Switzerland. Bear in mind, in Switzerland, there is hardly any inflation. And if you put that on top, the Swiss market are more or less developing the same pace as the Danish market.