WindowMaster International A/S (WMA) Earnings Call Transcript & Summary

Welcome to today's event where we have the pleasure to present WindowMaster. As we can see here on the front page, half year report, half year results is the topic of today. Fresh from press this, I would say morning, but it's more midday. To help us through today's presentation, we are joined by CEO, Erik Boyter; and CFO, Steen Overgaard Sorensen. Steen will do most of the financial presentation, and Erik will join us in the Q&A session. As always, there's a box down below, feel free to ask questions. We will do the Q&A in the end of the session, but do feel free to do it during the presentation. Do feel free to do it in Danish. I will translate to the best of my abilities. But for now, I'll hand the call over to you, Steen.

Thank you very much. And as you said, we sent out the financial report this morning for the first half year, and I'll just run through some of the highlights of that report. First of all, if I start actually with the pipeline, we see a strong pipeline development here in -- actually in Q2 and Q3 and especially from our partnership we have with Fieger, which is a louvre solution that supports our business also. There, we see a growth, which is also when we look into the rest of the year and also into '27 is supporting our ambitions that we want to grow for the future. But if you look at the order intake, we have this time looked a little bit differently on the way we present. We have three business areas within WindowMaster, which consists of what we call Building business area, which is project driven where we are deeply involved in the solution that is implemented. Then we also have a product segment or business area, which is more over-the-counter and also towards the key accounts, and that's where we don't necessarily have the contact to the final installation or customer. And finally, we have what is called safety business area, which is also a company called Climatic A/S. It's mainly focused on the Danish market and a bit in Germany. And also, if you have read our statement from this morning, we are looking whether to divest in this business area. And that's why we have -- we want to focus a little bit more on, you can say, the core business of WindowMaster, which is our solution within fire and also natural-ventilation. And that's why we have split it up like that because we do see quite a strong development in our order intake on this building business area where we've seen a growth over the last 12 months compared to the previous 12 months of 31%, which is pretty strong and also fit with our strategy that we set out in 2022. We unfortunately see a little bit of a decline in our Products business area. We have lost some key accounts, but we have quite an ambitious goal to regain some of that market share and that we will -- we are focusing on as we speak. And finally, the Safety business is declining in order intake, and that's also why we have taken the decision to look for potentially other owners of that activity. However, the pipeline in the safety business is strong and solid. So there's activity out there. If we jump to the next slide here, I have put also the net sales, and that's as also stated in our guidance back from May, we did see a very slow Q1, primarily linked to weather conditions a lot of building project was postponed and could not be put into the ground, and that gives a delay in the whole construction phase or refurbishment phase within the building industry. And especially also the Climatic activity was pretty hardly on that because of the weather. So we could not go on the roof due to snow on roof services. But we are back on track. And as we see here in Q2, we are pretty strong. And again, especially within the building business area, we are -- we see a strong development, and that is also continuing into what we know of Q3. So we are optimistic on that. Finally, yes, that's the EBITDA and EBIT levels, they match to the model we have in WindowMaster and there, we see, you can say, once the turnover is there, then also profitability is following. We see here an EBITDA ratio of close to 10%. It's not at the level we wish to be. We want to be at 15%, but still, we are on that track from a profit point of view. Finally, here also, we have the key figures or the key numbers as also put into the statement earlier on. There are no surprises as such. There are no special circumstances here. Net working capital, if you take that and focus on that, then it's a little bit higher, but that is due to seasonality and more activity here in the second -- sorry, in Q2. Net working capital is also a little bit on the high side. But as we normally see also for the second half of this year, activity are picking up, and that means that net working capital will decline in the second half. And that's also a pattern we saw back in 2025. And we assume and expect that pattern to also be the case for '26. And finally, equity ratio, again, linked to the poor performance in Q1, mainly Here, we also do expect that we will be back on the level we saw also in '25 in the year 2025 and expect in the range of close to 25% when we end the year as it looks right now. All in all, these numbers supports the guidance we also put forward in here as stated here. So we do expect a turnover of DKK 285 million to DKK 305 million and also an EBITDA level of DKK 30 million to DKK 40 million. That is supported again by the pipeline, but also the order intake as we see it right now. And again, coming from this strong business area of buildings where we continue to see growth occurring. So on that note, we are positive and it's also supported by the numbers we are looking into from July, but also what we see on the order intake for August as of today. I think that was it from the half year account. And I think I'll let it over to you.

Perfect. Let's jump into some questions. Yes, there are some questions about the Climatic. There's one here. Is it a possibility to close it? Has that been a possibility? Or do you think there is a value for a buyer? And there's also one asking whether -- what is the field of buyers? Is there any competitors? Is there any capital funds, equity funds that could be looking into that? So a little bit about -- is there value in Climatic you're talking about they actually have a order momentum and it is a sale and not a closure and maybe a little bit about the fields of potential buyers.

Maybe I should respond to that one. We see more value in selling the business off to potential buyers. And those could be either in Denmark or it could also be that they would be in the Nordic market in Norway or Sweden. And this -- you could say what are we -- also, if you look into the business, there's a lot of service contracts. And there is also a pipeline of opportunities. Unfortunately, they have not materialized yet, but there is going forward. So we reckon we can sell most of the business for a price [ high ] and get out of it with skin in the game, you could say. But -- and also the questions about this, about closing it down, that is not something we wish to do, and that would actually have a bigger negative impact than selling the activities off. So we are optimistic that we can find a potential buyer for the activity.

And to stay in Climatic and maybe also a little bit about the message, but first, when I read it, it was DKK 3 million that it had cost us on the bottom line, and then you mentioned DKK 10 million. I think people are putting it together. Could we have the explanation? You're indicating that you will have -- you will go after cost savings in '27 of DKK 10 million and Climatic as a part of that, but I think that was DKK 3 million. Maybe we can specify a little bit on how that should be understood.

Yes, it's because actually the DKK 10 million relates to other costs -- also other cost savings. But what we are saying here is that last year, we had a negative impact on our financial results on DKK 3.1 million. And we expect could be similar this year, depending on what we can sell it off to and also cost savings and so on. But the impact we are trying to look at is around DKK 10 million going into '27. We have actually also had some cost reductions on employees, which was announced today to the organization. So -- and this all -- this impact -- this will impact fully around DKK 10 million, including Climatic. If we look at kind of 2025, then it's around DKK 10 million impact, yes. That's how we calculate.

So, that s the base year and then that will give you an estimated DKK 10 million. Can we talk a little bit about that because you are actually -- it looks like your order book is accelerating in your project division. And that is somewhere where you have to hire people to keep the projects there. So a little bit about how you balance this cost savings with actually the ambitions and what looks to be an accelerating project business for you.

Yes. Actually, so if we look into what we have done on the employee side, you can say as part is the Climatic overall, you can say, accounts. Then we have looked into our business all over. And we have reduced an amount of business development managers that creates specification sales around in our different markets, that's U.K., Germany and Switzerland. And we have also reduced in Denmark, where we have reduced people that have in connection with Climatic. So overall, that is the DKK 10 million. But we are -- we don't see that the reductions in the business development side will have a negative impact on our business because we are also looking at -- we have IT systems that makes our -- the rest of the business development managers around be more efficient and more on a higher performance level.

And then there's a little bit about the investments in Germany. You mentioned the DKK 20 million. There's a question here, is that in '27, '28? How should we divide in that? Is the DKK 20 million you want to put into your factory in Germany. Is that isolated to '26? Or is it also divided into the coming years '27 and '28?

Steen, maybe you just should answer first on this one, and then I'll also add on to it, yes.

Yes. So from a -- you could say, investment point of view, we have already started that process here in '26. And depending on how fast the process goes with refurbishment of the factory, then yes, we have a facility with a bank, local bank and we will use that on the go. It depends what is possible, but there's a lot of regulations in Germany that you have to apply to, and that defines a little bit the speed of that investment. But we have a plan that it will run so '26 for sure, but also full year '27, and it might be run into the second half of '28 before we are fully done with that. But exactly how the investments will occur is not set in stone. Again, that depends on the speed of the project. We are not...

Steen, our question is, is the DKK 20 million extra on top of what you already invested or...

That is the total investment.

Total investments in German facilities.

Maybe, Michael, was just adding on what are we doing here? We are updating our production facility so they can -- they have facilities actually with the potential of having two shifts to -- because that's the beauty with the production we have. We can actually -- we can double and triple with 2 shifts, 3 shifts if we really want to do that. So it's not a question about the machines, but it's a question about labor in the factory. So that capacity can move for us. But it's certainly also on the energy efficiency on the building because we are using gas at the moment in the building for heating. And here, we are going to go over to electricity for heating. And that will also have an impact on the cost levels going forward. But it's all about energy efficiency. And there is also grants into this that we'll get from the German government because that's very different from Denmark. So they will pay part of the investment we're actually doing in the building. I think Steen could elaborate what that is actually.

Yes. So for -- especially on the installation side, but also for new heating systems and solutions, we will get simply 1:1 or 80% of that investment will get as subsidiaries from the German government. And that will be paid out once you have an invoice, you get the money. So it's pretty straightforward. So the DKK 20 million is a net sum. And so actually, the overall investment is a little bit higher, but the net cost for WindowMaster will be the DKK 20 million.

And then that will not just be capacity. We will actually see some cost savings out of these investments. It's hard to me going into the future. Is that correctly understood on the energy side?

Correct.

Perfect. Then there's a little bit about the adjustment you made to guidance in earlier this year, trying to understand the building blocks and the mathematics between actually a small adjustment to the top line and a larger adjustment to the EBITDA. You have a high operational gearing, but mathematically, it looks like that was very, very high. Was there some extra cost or something that we should understand to do the building blocks on the guidance adjustments you made I think earlier this summer.

Maybe I can comment. That's the -- you say the operating model of WindowMaster. So turnover upwards and downwards hurt the bottom line pretty hard because we do have a fixed cost base that is very fixed, so to speak, unless we do adjustments as we have indicated here with employees. So that is the mechanism. But again, it's also important to say it also goes the other way. So more turnover goes fast. We have -- as also seen in the financial report, you can see our margins are solid and especially within the building business area, it's very strong. So more turnover there, but also less brings good value very fast.