Thermador Groupe SA (T8DA.F) Earnings Call Transcript & Summary

Good evening. Welcome to our webinar for the first half year results for Thermador Groupe. You've read it in our newsletter 120, but we're going to spend an hour with you to share this information and answer your questions. We're going to start with our headcount, now 857 people in Thermador Groupe, given that 46 people have joined us from -- on 30th of June, 2025 from the company C2AI. They joined our Group. We wish them the warmest of welcomes, of course, and in their adventure with Thermador Groupe. To constant structure -- this is fairly stable compared to last year and around plus 2% in all. A few milestones for the beginning of this year. First of all, energy generation -- renovation scheme, which was great for us after the COVID and then a dip. Now [indiscernible] is a major lever for investment in energy renovation in France, and that's controlled by the housing improvement agency in France, ANAH. There's about 256,000 properties renovated, 2/3 through single unit replacements, for example, replacing a boiler for a heat pump or a store heating unit and the rest for overall projects, which obviously are of much higher value. We also see that energy savings certificates continue to operate to finance energy renovation through the private sector. And we see that this helps in particular, our subsidiary, Isocel. New housing, the curbs are improving because as the months go by, we saw -- we see more and more housing permits being granted. And we hope that we will see building starts increase over the coming months. I would say that the situation is improving in property transactions, which affects, of course, property renovation and renovation of buildings and construction of buildings. So second half -- second quarter of the year was more positive, but in particular, in the gardening sector through our subsidiary, Odrea, with watering pumps really suffered from a very wet spring like last year. So we'll see in the figures that's been a difficult time for Odrea in this first half year. Another major element -- event was signing the contract for C2AI at the end of the month. And there are other projects we are looking at with the objective of signing the acquisition of the Spanish company, Quilinox with a turnover of EUR 40 million. And the idea will be to finalize that deal before the end of October this year. A word about volumes and inflation. You see that over a period of 5 years, the orange diagram shows the increase in price with a positive price effect in 2021, 2022, '23 and a negative in the last 2 years. But we've seen an improvement at the end of the second quarter this year. And that would suggest that we've got a better period ahead for the second part of the year. We've got a graph here, which shows you the increase in building permits granted. The figures came out yesterday. So the confirmation of the increase in the number of permits granted and a slightly lower level as usual for housing starts, where there's obviously a gap between the building permits being granted and housing -- building actually beginning. Moving on to the figures from [indiscernible]. They represent the wholesalers from heating and sanitation systems in France. In spite of the fact that it's still negative, the figures are still negative in terms of turnover in that sector. It's getting closer to breakeven point, which is obviously a good sign. Then we've got -- in our other reference that we use that's for DIY stores. And we see on the second -- over last 3 months, there's a better trend than the previous years. Even though June is slightly negative, we see that in -- as a trend, first and second quarters were improved. Then we've got the PMI index, which we look at for -- to give us an indication of industry -- the manufacturing industry in France and in Europe. It's still not up to the 50 point, which tells once it gets above the 50 line, that shows that growth is occurring. Same thing in France and Eurozone. And so moving on to the turnover figures, which you've got in the letter to shareholder number 120. So for retail, we see a drop of 10.5% and -- sorry, and the pro channel, a drop of 4.6% to constant scope, and that gives an overall decline of 5.6%. We talk about constant scope because last year, we added Alto Metering and Vena Contracta last year in 2024, and they were -- they joined us in July and August last year. So I'm going to hand over to Patricia, who's going to make some comments for you about the figures. and the situation for the group.

Thank you, Guillaume. So we can look at the presentation of the operating results and net profit. So we've got a drop in turnover of 5.6% and the operating income, which is a high level, which is 12.7% and minus 12.6% at the end of June 2025. There's no elements to explain this. And we're going to move on to the next slide, which gives the detail, which helped us to understand in terms of profitability, we've got turnover down. We've got a margin, which is also down in absolute terms. But if you see that margin has improved from June '24 to June '25. And so that's in Pro and retail sectors. This improvement in our margin rate is down to several elements. The first one is the euro-dollar exchange rate. So for the first half of 2025, it's better for us. We've also -- the second reason will be we've established -- we've signed fixed cost contracts with transporters for transporters coming from containers coming from Asia. So that allows us to optimize our transport costs. And this started at the end of last year, but we see an advantage in terms of cost reduction in transport over the period March, April, May. So the increases in prices have been possible for some of our subsidiaries. And all these elements allow us to improve the margin rate. So if we keep on going down, we've got our charges. As you can see, we've got about 75% of our charges are fixed charges and 25% variable. So we'll be able to maintain our operations in terms of optimizing variable costs. But because we've been working on those and reducing them over a period of 3, 4 years, it's difficult to find more savings. We also had reductions in communications costs, which is a sort of variable cost because it's based on our commercial sales activity and some savings in transport. So that allowed us to reduce these variable costs. But in terms of fixed costs, our headcount, of course, has increased. We've kept our teams as they were. As Guillaume said, a slight increase in headcount to constant of 2%. And so that obviously adds to the headcount cost for Thermador Groupe and its subsidiaries. And this gives an increase in charges. So because we're at 25.3% in charges a net -- percentage of net turnover, which is up from 23.7% last year. And the rate is 5.7% for 2025 as operating profit as a percentage of net turnover. Financial result, we mentioned that at the beginning. We've increased our cash position. But in spite of this situation, because interest rates have gone down on the investments that we can make with our available cash. That means that our financial result is slightly down at the end of 2025. Tax is fairly stable between 2024 and 2025, which gives us a net profit position of 8.6% as a percentage of net turnover compared to 9.32% last year. We often -- as we see in the next slide, we talk about the property of our -- the profitability of our subsidiaries. We've got this online. And you'll see that 3 of our subsidiaries are losing money. Axelair, firstly, with a drop -- a drop in the level of loss. So that's situation improving. The fact that we had the heat wave meant that we're able to sell a lot of heat pumps for air conditioning. So we'll look at the second half, how things improve for them or not. And we'll comment on that at the end of the year, at the end of December. The other subsidiary is DPI, which is losing money. It's important to emphasize that in DPI, we've got an amortization of the goodwill cost, which is spread over the years. And if there hadn't been this line in the books, they would not be in deficit. Thermacome, another of our subsidiaries involved in new housing. And in spite of some reductions in charges on their side, it's not allowed them to improve the situation, and they've got a deficit of 18%. You've got the detail, but you'll see that the major subsidiaries, Thermador and Jetly, [indiscernible] have been able to maintain their level of profitability with Thermador, which is down, but which has gained turnover in May and June. So we'll see those performances in the second half of the year. We also emphasize that Syveco and Sectoriel seem to be reaching levels of profitability, which considers good. And on the next slide, we've got the position concerning our operating profit as a percentage of turnover. So 11.6%, which is detailed in the profit and loss account, of course, but why 11.6%? And that's mostly because of the -- of keeping hold of our employees.

I've got a question which has come in. I've not understood what Patricia said about fixed costs on containers from Asia to explain the increase in gross margin. So the costs linked to upstream transport are integrated into the prices of our products. And so when we've got a good negotiation on those costs, it has a negative impact on the cost price of the product. Okay. Back to you, Patricia.

So that was the question of the 11.6% of profitability. And now we're going to the financial structure. I'm going to stay with the financial structure, which is solid because equity represents EUR 284 million, which is an increase over 2024. So we've got net cap position, which is at stock. We've got a slight drop in stock, which is about 1%. But if we look in terms of number of months of purchases, we're on 209 days compared to 196 days last year. So it gives us an increase in the value of our stock, of course. And that's -- we've got timelines which are longer for containers coming from Asia. And that means that our -- we just have to work quicker and more in advance to be sure to have safety stock. One of our subsidiaries, [ Sferaco ], which serves its market and the market of the industry-facing subsidiaries. And in 2025, they were on lower levels, which led to stockouts and therefore, problems with service quality, which is not in adequation with our normal practice. And then there were a number of product lines where we kept overstock that concerns them Thermador. Last year, we talked about last year -- but now we -- level of overstock, which we can now estimate at about EUR 2 million, which goes in hand-in-hand with Thermador's positive turnover record. So the addition of C2AI has increased stock and cash. So in terms of the balance sheet, we've taken account of that situation. So each time we mentioned the impact of C2AI. Next, in terms of cash position, it's increased compared to 2024, June 2024. It's important to remember that we paid dividends in April -- at the beginning of April. And the loan element, the increase in our loans, a slight increase in EUR 3.4 million, which is linked to the loan taken out for the acquisition of C2AI of EUR 8.7 million. And of course, we continue to repay our other loans, which are in progress. So I'll come back to the cash position. It's important to compare to the end of 2024. So if you look at this next slide, this graph shows you that, that we have in April, May and June, we've been able to set up EUR 62.7 million. By the end of the end of December, we had EUR 63.3 million. And we've been able to regenerate the EUR 19 million that we spent on dividends by the end of June, which is quite a performance, which is -- includes a cash from [indiscernible]. And this cash is invested in short- and long-term investments. Going back to cash generation because it's important to see how -- we've taken on board all the different operations in the first half. Our working capital requirement, cash flow from operations, 27.8%. We've got WCA where we consume of cash for a total of EUR 4.1 million. That's supplier payables, a part of that. And we've got investment flows, that's CapEx. And in terms of investments, we've reduced our forecast for the year. And that level of investment over the first half year was EUR 0.9 million, which is very low compared to the initial forecast. We've got an impact that doesn't necessarily appear in this graph, but it does impact the C2AI because we've got a variation of scope linked to them. And that means that we paid out cash EUR 8.7 million went out, but EUR 1.2 million came in from their own cash position. You see that on our free cash flow. Free cash flow is positive at EUR 15.4 million. And those are the dividends plus a new loan of EUR 8.7 million, which came in, of course. And there's also an IFRS accounting impact of EUR 1 million. And that had an impact on our assets and liabilities for the year. So working capital to constant scope -- and we've got 43.6% operating working capital as a proportion of net turnover. So our customer payables remain strong at the end of June, but it's linked to the business that we've done recently. So a lot of business between May and June, and that's why we've got a high level of customer payables. So those remain more or less standard. And then you've got the supply debt, which is EUR 66 million, about EUR 65 million at the end of -- EUR 72 million at the end of June 2024. Just as a reminder, we -- in terms of capital expenditure, we said that we will be spending EUR 9.3 million this year. So we've revised that amount and we've revised that down to 6.6% -- EUR 6.6 million, sorry, of CapEx, of which -- we had an extension project for Sferaco in that in connection with an extension to the automization of the logistics system. So this project has been set back a little bit. And we've also got another -- a number of subsidiaries who are looking at the investments and who are being cautious about that. So 2.4% of those EUR 6.6 million were for real estate. So I'm going to pass now over to our growth -- 10-year growth targets.

So just a reminder of our growth target objectives, which we announced in 2019, ambitious objectives at the time. We thought that 7% per year will be reasonable. We maintain this objective over the long-term, given, of course, that we're in a period which is slightly more difficult, a real challenge for us. So this strategy, we look at every year, every 2 years. And that's something we'll be doing with the directors, the subsidiaries next time, but also with the Ministers because there will be challenges, the financial people because they will challenge on our budgets. 2026, sorry. Not 2016. I just said 2016, but I meant 2026. That's next year. So next is the performance of the stock. So we've got -- thank you to our shareholders who have remained faithful to us. We've got a long-term performance over -- the long-term performance is really good, 11.2% a year. So a few words about outlook, the different elements of our outlook. So in terms of new housing, we keep an eye -- a close eye on this -- on developments in the new housing permits being allocated and the building starts. And I think we are in a more dynamic -- a more positive dynamic compared to before and a few years of decline. MaPrimeRenov will be starting up again at the end of September. The public authorities, they've got a lot of major delays on the files pending. So they've stopped any new applications until 30 September. And there will be between now and the end of the year, there are approximately 60,000 in progress. And from September -- end of September, there will be just 3,000 files -- applications allowed. The public authorities are looking to or in choices, slightly less expensive single unit, what they call single unit replacements, where, for example, Thermador Groupe would be present for heat pumps and solar water heaters. The water cycle, we assure that's a positive market for the years ahead. Extremely disappointing results for Jetly on harvesting, water harvesting this year. So no natural awareness raising in that area because of the high rainfall in the spring, but the heat waves we've had have shown that we're going to have to look at those subjects in our country in the years ahead. The price of drinking water is definitely going to go up. And we've got products to deal with that, for example, water meters, which we find at Sferaco, but also Alto Metering, the company who joined us last year. Industry is a positive outlook still not because European industry is developing very quickly, but we've got a number of companies that are involved and are gaining market share in the industrial sector with increasing expertise and more and more product ranges. So the geopolitical situation. So there's a question from [ Edward ]. When will the situation in terms of Asia come back to normal? And we'll get back to a state of normalization of the group stocks. The answer is that we don't know. Unfortunately, these conflicts that are ongoing don't look like ending very soon. So it's obviously a very dramatic situation in the Gaza Strip. And the transport situation is accordingly very difficult. Talking about containers from Asia, I'd remind you that 2,000 of our -- 2/3 of our products come from Europe and negligible dependence on products from Asia. Internationally, a positive situation, especially the end part of this first half of the company for Syveco, this first half of the year, sorry, for Syveco in France and in Europe, in Middle Eastern Europe. Not such good results for Sodeco, but a high level of activity -- but for our subsidiary also, which is part of the company, Odrea, which is facing a very, very challenging and a real cut-throat market for their products. Sodeco has remained stable. In terms of price impact, we think this trend will continue. We get -- as we get nearer to the breakeven position by the end of the year probably. I said made a lot of mistakes about this last year. So I'm very careful this year to make any big projections. But at the end of the first quarter -- first half year, sorry, we've got a minus 1.5% price effect. Staff. We're currently working in reducing absenteeism. Unfortunately, this is something that's really difficult to control. And we're working hard to improve that because people are obviously distressed by this and the people who are working are tired by working, replacing the others. And it's a real challenge, not just for Thermador Groupe, but throughout France. And we really need to keep our employees in good health who are always there. And of course, as I said, have to do the work of those who aren't there. Let's look at the past to imagine what might happen in the future. This negative period with negative growth through 2024 in terms of organic growth, we seem to be getting near again to the breakeven position. That curve, which fell pretty low in the first quarter of 2024, we're getting close to 0. And hopefully, our prospects will be more towards positive organic growth in the near future. So we're now -- that's the end of our presentation. So what should we -- first question -- what should we expect in terms of CapEx for next year with -- given what's happened this year? So I think Syveco will be spending next year. I think we've got the Syveco project, which is another one, which concerns [indiscernible]. That's one of the major projects, which will be -- and I think that next year, our CapEx investment 2026 will be above EUR 10 million. There's an optimization because we took the -- to build -- to sell one of our buildings, which never happens normally. We've got a building that's been in occupied in Saint-Quentin-Fallavier and so that will bring in some cash for CapEx investment that will compensate for the extension to Sferaco and also the project for Distrilabo. I've got 2 questions from our [indiscernible] friends, which concerns the loss of DPI. So concerning the loss of DPI, it's not an impairment. It's a depreciation, amortization. So we -- because we allocated the acquisition price, and there was EUR 13.9 million. We amortized that over -- that goodwill over a period. And each year, we take EUR 1.4 million out of the accounts of the Distrilabo accounts. So had this not existed, if this amortization didn't exist, then they will be positive. So that concerns -- it's not impairment. So we've done some impairment tests. We did it with DPI as well, but we didn't actually book any impairments for them. And then the other question is what are the main drivers behind the increase in our costs? So there's 3 elements, 2 elements. There's increase in our teams, also an increase in fixed salaries between 1% and 2%. Of course, that affects our costs. That's the first thing, personnel costs. Then the number of costs that we weren't able to affect, which are, of course, our fixed costs, which could be substantial. Transport, we did gain a little bit from transport, but not as much as last year because we got -- we did have slight increases in transport costs at the beginning of the year. So we weren't able to work on those costs to reduce them. And then other costs would be communications, publicity, advertising, which we reduced. But really, the wage bill is what affects these costs the most. So this is a strategic decision, of course, to maintain our headcount and even increase it a little bit because we are looking forward to a recovery in the market. So I think all the stakeholders are satisfied to see that we'll be able to jump on those opportunities as they emerge in the months ahead, and we believe in that. Okay. We've got a question about the risk with MaPrimeRenov. So more the scheme -- further the scheme goes down, the less the risk is because I think we've come to the lowest level. And I think we should see it as an opportunity as it opens up again. As you know, the public authorities are looking to save money. So you can't expect them to -- you can't expect us to go back to the fantastic years, the years after COVID. But it certainly will stabilize. And I think that's fine for us, and it will be easier for our teams to cope with if it's a more stable market. In terms of purchase acquisition projects, Edward asks about possible -- after the Quilinox purchase, we've got a number of irons in the fire, which could complement our activities. But for the moment, we're mostly interested in growth abroad. And on this subject, we have not to-date any identified target or moved forward with any identified target, but not -- at least not sufficiently advanced to talk about it here. Targets are rather rare and the companies which are often family companies, which work on niche products and could be of interest for us and could be interested in joining us because of a change of management or a change of generation. So [indiscernible], the deal was finalized with C2AI. But these are obviously in Spain for Quilinox. So the negotiation phase moving towards an agreement protocol is longer. And of course, there is a language element there, which takes us longer to negotiate these deals when they're in foreign languages. And of course, in August in Spain, nothing much happens in France, too. So we lose 3 weeks. So do you have any more questions? I can't see any more on the French webinar. None on the English one either. No? So we're not going to take up Thermador's bandwidth if you haven’t got any questions. But if you have any questions, of course, you can send them to us before the end of the week, before the holidays, and we'll be able to answer your questions. So don't hesitate to contact us if some questions come to you after the end of this webinar. So waiting for the report of the auditors. Once we've had the auditor's report, they'll be online, and I'll start with the half yearly report in French very quickly tomorrow or the day after tomorrow. So thank you to all of you, and have an excellent evening. Thank you and enjoy your evening.