Quest Holdings S.A. (QUEST) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I am Gailey, your Chorus Call operator. Welcome, and thank you for joining the Quest Holdings conference call and live webcast to present and discuss the full year 2024 financial results. The event today provides the opportunity for participation via audio conference and live webcast where a presentation deck is provided for your convenience. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Quest Holdings management. Gentlemen, you may now proceed.

Welcome, ladies and gentlemen. My name is Alexandros Roustas, I'm the Investor Relations Officer of Quest Holdings. And as usual, I'm sitting here with our CEO, Mr. Apostolos Georgantzis; and our CFO, Mr. Markos Bitsakos. Today, we are here to present you the 12-month period of 2024 financial results and answer your questions. Now we'll give the microphone to Mr. Markos Bitsakos for his opening remarks.

Good afternoon, ladies and gentlemen. I'm Markos Bitsakos, Quest Group, Chief Financial Officer. One more interesting year came to a close for our group with challenges and successes that shaped '24. While we faced geopolitical crisis, supply chain disruptions, high energy costs and reduced consumer purchasing power, we also made new investments in Intelli and Benrubi, among other strategic moves such as the partial divestment in the Courier segment. The year was particularly challenging up until August. However, we managed to end strong with a remarkable sprint in the last quarter of the year, resulting in record-breaking achievements in consolidated revenue, EBITDA and earnings before tax. I would like to highlight now a few key factors that contributed to this success. First, the two companies that joined our group mid last year, namely IQT Romania and Epafos, positively impacted our financial performance, contributing to the results for the full 12-month period. Second, iStorm expansion. Our Apple retail chain opened three additional point of sales in Kifisia, Agia Paraskevi and Ioannina, bringing our total to 18 stores across Greece and Cyprus. Last, our public business unit in Uni Systems benefited significantly from governmental IT projects related to the EU recovery fund, which contributed to a rise in revenue. Furthermore, in mid-'24, distributed dividend of EUR 0.22 per share, totaling approximately EUR 23 million. Now let us dive into the numbers. In the 12-month period of 2024, total consolidated revenues reached approximately EUR 1.3 billion, reflecting an 11% increase compared to last year. This growth was driven by the commercial sector, including IQT Romania, which began operations in mid-March last year. Our consolidated EBITDA amounting to EUR 91.7 million is 10% higher from last year. Consolidated earnings before tax reached EUR 64.9 million, showing a year-over-year improvement of 10.3%, recovering from a significant decline of minus 14% in Q1 of 2024. Lastly, earnings after tax and noncontrolling interest reached EUR 49.1 million, marking a 9.6% increase compared to 2023. Speaking of the full year's performance, it is worth mentioning some interesting KPIs. The EBITDA margin of the whole group remained stable at 6.9%, consistent with 2023 despite the reduction in Apple wholesaling gross margins. Return on equity, ROE, for the entire group stood at 22.3%. We reduced days sales outstanding to 41, down from 49 in the previous year. The average stock days was 39 days, and the average payment days to suppliers was 42. Our capitalization at the end of the year reached EUR 642 million, a 6.6% increase compared to the previous year and 132% growth over the last 5 years, starting 2020. Quest Group finished 2024 with net cash of EUR 82 million compared to net debt of EUR 17 million at the end of 2023. The increase in net cash is primarily due to a EUR 77 million cash injections into the holding company from the sale of 20% of ACS shares to GLS. Additionally, our planned capital expenditure, our CapEx was significantly lower than initially budgeted due to the delay of Benrubi's cash outflow from December '24 to January '25. This adjustment further contributed to the strong year-end cash balance. So I will pass you now over to Alexandros, and he will give us the sector overview.

Thank you, Markos. Now diving deeper into our segments. We observed that the commercial activities segment consisting of 10 companies Info Quest, iSquare, iStorm, Quest on Line, Clima Quest, GED, FoQus, Team Candi, IQT Cyprus and Epafos continued to grow by roughly 11% at the sales level while EBT increased by 6% year-over-year, and EBT was affected, of course, by the higher interest rates. IT services sector sales, consisting mainly of Uni Systems also improved by roughly 13%, while its EBT grew by 9.4%. Demand for IT services remained strong, driven by the high number of digital transformation projects of the private and public sector. Roughly 50% of sales stem from international activities. Postal Services, that is ACS, grew by roughly 5% in sales and 8% in EBT. Growth is primarily driven by the rate of expansion of e-commerce, although at a slower-than-expected pace during 2024. Despite this, the company is estimated to have increased its market share during the same period. Last but not least, Quest Energy segment sales also grew by 6.6% in sales with improved profitability by 11.5%. Now let me pass over to Apostolos to provide the outlook.

Good afternoon from me, too. I'm Apostolos Georgantzis, Quest Group CEO. Talking about 2024, though we started the year with the first quarter being weak with a single-digit growth in sales and a drop in profitability, we have managed over the course of the remaining year to run with a double-digit growth pace in both sales and profitability. This led all our segments to grow during the 12-month period while half of them presented double-digit growth in sales and profitability. This performance for the whole year was also in line with our prediction and guidance for a better second half of the year. Hence, the overall 12-month period was quite positive. Now going to the outlook per sector for the year we are in, 2025. This is as follows. Regarding the commercial activity sectors, for the 2025 period full year, we estimate growth in sales and higher growth in EBT assisted by the acquisition of Benrubi and the gradual drop of interest rates. Regarding the IT sectors, the IT services sector, this segment is continuing to be positively affected by the strong demand in IT services, while it has a high backlog of -- signed projects. This still exceeds EUR 550 million. We, therefore, estimate that the growth pace of this sector will continue also in 2025. Going on the Postal Services sector and ACS, our estimation for the whole 2025 include the continuation of the growth in sales and profitability, mainly driven by the growth of e-commerce. Finally, for the renewable energy production sector and Quest Energy, our estimation for 2025 is for similar results as those of 2024. Now on a consolidated basis, our estimations for 2025 is for mild growth in revenues and higher growth in operational profitability, meaning EBITDA, which is also estimated to surpass EUR 100 million. Quest Group current cash position is solid. We have above EUR 350 million in cash and available credit lines, this allowing us to continue our planned growth investments and to endure any hardships. Our investment plan for 2025 includes increased CapEx for growth investments that will surpass EUR 55 million, out of which about half regards the acquisition of the 70% of Benrubi. Now let me pass back to Alexandros.

Okay. That was a brief overview for 2024 full year as well as the outlook for the full year. We are now happy to take your questions.

[Operator Instructions] The first question is from the line of Svyriadi Natalia with Eurobank Equities.

Congratulations on the full year results. I was wondering if -- well, I will start from the end as you just mentioned, your investments for this year. And I would like maybe if you could be a bit more clear on the growth investments, you said more than EUR 55 million. You have already completed the acquisition of Benrubi, which was around EUR 27 million, if I'm not mistaken. So this leaves us with around EUR 25 million to EUR 30 million for CapEx for the remaining of the group. Where will this be fed through? And what are your CapEx plans for ACS? This is one question. I also have a question on if you see -- well, obviously, you said that the Q1 last year was a tough environment. So probably your comparables are quite good. But in the current environment, what about any supply chain disruptions, geopolitical crisis and all these stuff that we also heard for 2024. What are your thoughts around this? I understand you cannot make any concrete comments since it's rolling down at the moment. And maybe if you could give us some insights on your dividend policy, how you decided to raise the dividend this much and what we should expect going ahead?

Natalia, thank you for your question. This is Markos Bitsakos speaking. I will answer your first and third question. I will start from the last one about our dividend. As you already know, we have announced that our Board will propose to the general assembly an increased -- significantly increased dividend of EUR 0.30 per share, and the decision derives from the excess cash that our group have, especially after the sale of the 20% shares of ACS. This is why we decided, the Board decided to increase the dividend from EUR 0.22 to EUR 0.30. So I hope that this answers your third question. Now as far as your first about the CapEx plan for 2025, as Apostolos said earlier, it's going to be in the range of EUR 55 million to EUR 57 million for the entire group. It is significantly higher than the previous year. As I explained, this is due to the Benrubi acquisition, which will absorb close to EUR 27 million for Quest Holding, which is the mother company. We anticipate to absorb EUR 29 million in total with Benrubi. And the rest of the CapEx, mainly concern ACS. ACS, we have allocated an amount of EUR 20 million mainly to address the rollout of the boxes throughout the whole territory of Greece. So these are the main two elements of our CapEx, EUR 29 million for acquisition for Quest Holdings, EUR 20 million for ACS and the remaining are spread among all other companies.

Okay. Great. Could you remind us the target for the boxes, the lockers? If you have a target, what's the target you would like to reach with this investment for ACS?

Yes. Apostolos will give you the details for this.

Natalia, for the lockers, we're already rolling up quickly additional lockers, trying to have full coverage of the country within the next couple of years. We've already surpassed as we speak, 800 lockers, and we expect by the end of this year to be at the levels of 1,500 lockers, ending up after, let's say, a couple of 2 or 3 years from now, according to the demand that we see for this type of service up to 3,000 lockers overall. Now going to the second question that you also have made about the -- any supply chain disruptions. It's true that we experienced over the last few days, a duty war, especially originated by the U.S. We're closely following the -- what is happening. The immediate, let's say, direct effect for our businesses is quite limited, if not 0 at the moment because we are not a big trade partner of U.S. or U.S. products. But of course, we don't know how things would evolve during -- over time. Therefore, we're following what is happening. And we hope that this will gradually, let's say, stabilize at levels that would be not bad for the global economy. As far as we're concerned, with regard to U.S. tariffs, this, at least for the moment, from what we've seen, has very limited direct relation with us or impact to us.

Okay. Great. This is very clear. What is your dividend policy going ahead? Obviously, the EUR 0.30 was one-off. Should we expect this to go back to around, I don't know, payout ratio or what it was before?

Natalia, I don't think that we are right now able to give you a concrete answer. So -- this is something that it's not yet decided. However, I would say that in general, you can rely, let's say, on the pace that Quest Group had over the last at least 3 or 4 years. We had a continuous increase, let's say, year after year -- year-over-year of the dividend distributed to our shareholders. So this is something that we aim to fulfill also in the near future.

[Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Apostolos Georgantzis for any closing comments. Thank you.

Dear all, we would like to thank you for your participation and the interest to our company and its prospects. We wish you to have all a nice afternoon. Goodbye.

Ladies and gentlemen, the conference is now concluded, and you may disconnect your telephone. Thank you for calling, and have a good afternoon.