Welcome to HusCompagniet Holdings' interim report for the first six months of 2025. Today's call is being recorded. All participants will be in a listen-only mode throughout the presentation, and afterwards, there will be a question-and-answer session. To ask a question, please press five star on your telephone keypad. I will now turn the call over to your speakers. Please begin.
Good morning and welcome to the presentation of HusCompagniet's financial result. I'm Martin Ravn-Nielsen, CEO of HusCompagniet, and as usual, CFO Allan Auning-Hansen is with me today on this call. We will begin with a view on the overall market condition and then present the result for Q2 and the first half of 2025. We will end the session by answering your questions. Let's start with a few comments on the market condition on slide two. In the first half of 2025, global political and macroeconomic turmoil continued to impact overall consumer confidence. However, the Danish housebuilding market showed great resilience with a continued pickup in sales. The detached market in Denmark continued the gradual recovery at a steady pace. This was reflected in a satisfactory number of consumer and customer leads and meeting activity throughout the period.
We want to maintain the momentum and to further strengthen our presence in Jutland, and therefore, we will open a new sales unit with a showroom in Horsens and a dedicated formal office in Aarhus. Both openings are expected in Q4. The market development was supported by a strong performance of the economy in Denmark. This was based on an unchanged high employment rate, steady core inflation, and positive views on interest rate trends. Overall, it means that we remain positive about the continued and the gradual market rebound. With this overview, Allan will take us through the highlights for Q2 and the first half of the year. Please turn to slide three.
Thank you, Martin, and good morning to everyone on the call. For the fourth quarter in a row, we saw satisfactory year-on-year revenue growth based on the continued pickup in sales. Revenue increased by 28% to DKK 714 million, driven by higher sales in recent quarters in the detached and semi-detached businesses in Denmark. The increase in revenue was driven by more deliveries and a high activity level with a good contribution from work in progress. We were pleased to note that the detached segment continued to grow sales throughout the period, even though we were at the center of critical media coverage related to issues with crumbling mortar joints in some detached houses constructed during 2017 to 2022, among other things. We have been aware of these issues in recent years, and we are handling all customer requests.
Following the media coverage, we have been approached by a limited number of customers and entered constructive dialogues to assess and accommodate cases where relevant. We have registered fewer new cases and a lower increase in provisions in H1, despite the media coverage in June. Back to the numbers. Gross profit grew by 13% to DKK 136 million for a margin of 18.4%. This is 2.3 percentage points lower than the same period last year. This development was largely due to the semi-detached business and reflected that we noted unsatisfactory margins on a few HC Elements projects, which are also seen to have some impact on Q3 2025. In addition, we did not deliver any projects in the semi-detached business in the quarter, which is a matter of timing.
I also remind you that we reclassified staff costs related to production employees at our factories in Esbjerg and Sweden in Q1 2025. Staff costs are presented as part of cost of sales instead of SG&A. EBITDA declined by DKK 4 million to DKK 23 million for a margin of 3.1% compared to 4.7% last year. This development reflects the declining gross margin and higher SG&A and staff costs due to the balance ramp-up of our organization. We have onboarded new employees to support increasing sales across the detached and semi-detached segments, as well as our ability to seize future opportunities. EBIT came to DKK 12 million, down from DKK 15 million in the same period last year. Free cash flow was by DKK -12 million in the quarter, which was a significant decline from the comparison period and as expected.
The decline was driven by changes in working capital due to the higher activity level and an increase in inventories as sales growth was higher than deliveries in a period with good momentum. Let's go to slide four and the highlights in the first half of the year. For the first half of 2025, revenue increased by 29% to DKK 1,375,000,000, driven by all segments and reflecting the continued sales progress in recent quarters, leading to higher activity levels and an increase in revenue from work in progress. The development was also supported by a slight increase in deliveries, which totaled 394 units compared to 382 units in the same period last year, driven by the detached segment. Gross profit increased by 12% to DKK 260,000,000 for a margin of 18.9%. This was 3 percentage points lower than the first half of 2024.
The detached and wooden houses segments contributed positively to the improved gross profit. The contribution from semi-detached was lower, mainly for the same reasons mentioned for Q2, as well as due to a changed product mix. EBITDA came to DKK 39,000,000 for a margin of 2.9% compared to DKK 49,000,000 and a margin of 4.6% in the first half of 2024. The decline was due to the lower contribution from semi-detached following the unsatisfactory low margins in HC Elements and the higher SG&A expenses and staff costs already mentioned. EBIT amounted to DKK 18,000,000, down from DKK 24,000,000 last year. Free cash flow was negative by DKK 26,000,000, and as for Q2, it was a decline compared to the first half last year, and also here driven by changes in working capital and deliveries. This is a combination of phasing.
We have increased sales and phasing in deliveries where the timing is slightly different. Free cash flow was in line with our expectations. Net interest-bearing debt came to DKK 304,000,000 at end of June with a leverage of 3.2 compared to a net debt of DKK 236,000,000 and a leverage of 2.4 in June 2024. The development was driven by changes in working capital and the decline in EBITDA. We continue to monitor our leverage closely. On a separate note, we also want to provide a brief update on our dialogue with the Danish tax authorities concerning the reversal of the deduction of marketing contributions to foreign subsidiaries in 2019 to 2020, as described in the annual report. In July, the authorities passed a ruling in line with our expectations, meaning that the effect was already reflected and recognized in the 2024 consolidated financial statements.
The authorities also revoked their initial decision to deny reopening and correction of the taxable income statement for 2020, which could potentially have entailed additional tax and interest expenses of DKK 25,000,000 in total. These developments provide some certainty, and we are currently considering if we will take further legal action. With this, let us go to slide five for an overview of sales from Martin.
Thanks, Allan. In Q2, the detached segment maintained a positive track and increased sales by 13% compared to the same period last year. We were very pleased to note the continued momentum based on high consumer satisfaction and loyalty. Total sales across segments was 6% lower and came to 345 units, but the decline was mainly due to timing of orders in semi-detached where sales were down by 34% compared to a strong Q2 2024.
The development was impacted by timing of building permits for several projects. Please note that the contract for 106 units with Tulenda announced back in October last year is still not included in semi-detached sales as the building permit is pending. In addition to this, we signed a three-stage B2B contract with Welcome for 191 units in Grindsted during Q2. The first stage comprised 83 units and are included in the sales for the quarter, and we will register the two remaining stages when they are accepted by Welcome in line with the terms of the contract. Finally, we recently signed a subcontract agreement for 160 units in Bauswerd. All relevant permits have been obtained, and these units will be expected to be included in Q3 sales. Please turn to slide six and an update on deliveries.
In Q2 2025, we delivered 199 houses, a decline of 7% compared to the same quarter last year. The detached business delivered 10 units more than last year, and wooden houses in Sweden, 7 houses more. The decline was a result of timing of projects in semi-detached segments where we did not register deliveries in Q2. Several projects are currently being executed in this segment, which will contribute with deliveries in the coming period. Let's flip to slide seven and our order backlog. Due to the good sales traction in recent quarters, we continue to build a strong, solid net order backlog, which increased by 40% to DKK 2.1 billion at the end of June compared to the same period last year and 9% up from the beginning of this year. All segments contribute to the positive development.
Detached houses account for 70% of the total order backlog, semi-detached 25%, and wooden houses in Sweden for 5%. It is worth noting that the backlog does not include the conditional B2B contracts with Tulenda for 106 units, the remaining 108 units for Welcome, or the newest order for 156 units in Bauswerd mentioned before as well. Please turn to slide eight for Allan's comments on the outlook.
Thank you, Martin. Based on our financial performance in the first half of 2025 and expectations for the remainder of the year, we narrow our guidance for the full year. We now expect revenue to be within the range of DKK 2.9 billion- DKK 3.1 billion. This is based on an increase in revenue from work in progress and deliveries assumed to be between 1,000 and 1,100 units.
Earnings are expected to reach DKK 110 million-DKK 130 million in EBITDA and DKK 70 million- DKK 90 million in EBIT following the impact of unsatisfactory margins on the projects mentioned in HusCompagniet, which will also impact Q3 to some extent. Despite the continued political and macroeconomic uncertainty, we remain positive and confident that we are on the right track to benefit from the market rebound in detached houses, and we are pleased with the performance in H1. At the same time, we are leveraging our position in the semi-detached segment and winning new contracts and more business. Our leverage was 3.2 at the end of the quarter, and we still expect to stay within the covenants of our financing agreement in 2025. As previously mentioned, dividends are not expected to be reintroduced before our leverage is below 2x net debt to EBITDA. Thank you for listening in.
Now, please turn to the next slide for the Q&A session.
If you do wish to ask a question, please press five star on your telephone keypad. To withdraw your question again, you may do so by pressing five star again. The first question we have is from the line of Sebastian Grave from Nordea. Please go ahead. Your line will now be unmuted.
Hi. Good morning, Allan and Martin. Thank you for taking my questions. The first one is on the demise here on HC Elements for the quarter. Just trying to get a better understanding of the nature of the issue and also thinking of, I mean, you talk about this also impacting Q3, i.e., I don't think is it to be sort of understood in the way that it does not affect beyond Q3 and that this is sort of an isolated issue? That would be my first question.
Yeah. The thing is we had a few, and thanks for your question, Sebastian. We had a few projects with HC Elements which did not turn out the way that we originally had expected. We have taken actions to mitigate the risk of this happening again without me being able to be more firm on what was actually happening. I can tell you that we have moved a lot closer to HC Elements controlling this specific area, both from a contractual point of view and from a financial point of view. Yes, just to comment on your question regarding Q3, we do expect an impact in Q3, and we don't anticipate an impact in Q4 from these specific cases.
Okay. That's nice. Just to be very clear here, this has nothing to do with the sort of execution on your larger semi-detached projects, i.e., the ones that you highlight in your H1 report on page eight.
That is correct.
Very good. On the current trading, how does the 54 units sold in July in your detached segment square with your sort of own expectations for the year?
It is in line with what we have expected. Overall, it is positive and actually what we have expected.
Does that mean, Martin, that you've seen no larger impact on your activity from this, as you also mentioned, the negative publicity from June?
Currently, what we are seeing and following the negative publicity, we are satisfied with the performance that we are currently seeing.
Okay. That's fair. My last question for now, I will get back to the queue. The 156 semi-detached order that you've announced here this morning, noting that this is a subcontract agreement, how does that compare to a turnkey agreement? What's the difference here and what is your role in this?
Actually, our contract is that we are almost building about 90% of all the houses. It is a subcontract, but it is mainly us. We are the entrepreneur and the full contract on that.
Okay. Sounds good. Thanks for taking my questions.
Thank you.
The next question we have in the queue is from Christian Thorne from SEB. Please go ahead. Your line will now be unmuted.
Yes. Thank you. Also a couple of questions from my side. Just to the guidance change and EBITDA, the fact that you lower the higher end by DKK 30 million, can that be interpreted as this issue around HC Elements costs you DKK 30 million, or are there any other changed assumptions which drive down the upper end by DKK 30 million?
Thank you for your question, Christian. What we are, unfortunately, I have experienced here with the HC Elements is also the reason why we are taking down guidance from our original and lowering to the level that you're seeing now.
Okay. There are no other major changed assumptions behind that?
No. No. No. In addition to that, we can see now when we have those HC Elements that have an impact on the, you can see the top of the guidance. Therefore, now we can see more about the whole year for now, and therefore, we are making that change.
Makes sense. That's fine. My other question was more on the SG&A cost in detached and just sort of an update on what you think going forward. To what extent are you still expecting to ramp up your organization? You still show growth on the orders. Does that require you keep adding more people? Can you elaborate a bit on that balance?
I would say that we have taken the largest part of the ramp here by the end of 2024, second half 2024, start the first half 2025. We expect a more limited ramp throughout the year here.
When I make my SG&A estimate for next year in the detached segment, should I primarily be thinking about sort of inflation as the component, or will you also see a sort of a ramp-up on the organization there?
I think that there are a lot of things that can impact that, but we don't expect a significant ramp in the number of employees.
Very clear.
Also, in addition to that, it also depends on the sales for H2 this year. If it is a significant ramp in sales, we have to have a look on the FTE to, you can see, fulfill the orders in 2026. Of course, it depends, but as we see now, we don't see a lot of new hires that way.
At the current pace, you have the organization needed, and if things go further up, that must change the assumption.
It will be more limited, and we will always try to balance the two things.
Yeah, makes sense. All right, excellent. That was all for me. Thank you.
Thank you.
Thank you.
Let me just remind you, if you do wish to ask a question, please press five star on your telephone keypad now. It does not seem like we have any further questions from the conference call, so I'll hand it back to the speakers for any closing remarks.
Allan and I just want to say thank you again for taking an interest in HusCompagniet, and if you have any follow-up questions, please reach out to us and have a nice day.