Welcome to HusCompagniet's financial results for H1, 2023. For the first part of this call, all participants are in a listen-only mode. Afterwards, there will be a question and answer session. To ask a question, please press five star on your telephone keypad. This conference call is being recorded. I'll now hand it over to your speakers. Please begin.
Thank you. First of all, welcome to our conference call for the first six months of 2023. Based of feedback, we are doing the conference in English, and thank you for, for the feedback. My name is Martin Ravn-Nielsen, I am CEO, and with me today, I have CFO Jesper Høybye. After the disclaimer, now let's go to the summary for the first half of this year. First of all, we maintain our outlook and guidance from May, a revenue between DKK 2.25 billion and DKK 2.5 billion, and EBITDA between DKK 100 million and DKK 130 million, and EBIT at DKK 50 million to DKK 75 million. We have seen the activity on our sales are increased after a difficult second half of last year, 2022.
We have seen the sales on our core business, detached, is actually up with 43% in Q2 2023 compared to Q1 2023. Our EBITDA on DKK 57 million in H1 is on track with our expectations, despite an extraordinary provision on DKK 15 million. You can see our margins continues to be strong, which shows that we have good control on our selling prices and at the same time, at our cost prices as well. As you know, we completed a supportive capital raise and a refinance on our loan facilities. On the next page, page three, I will give you some extra words around the market update. We have seen a recovery in the demand for new build in the first six months of this year. Our sales in the first half is almost up with 100% compared to H2 2022.
We are also seeing some indicators which is more positive. For example, despite still a low level, we see the consumer confidence is absolute better than last year. We also see that the properties for sale again is up, and that's an indicator for the increasing activities going forward, also in our industry. After the sales pick up in the market back in 2021, we saw in 2022 last year, a historic low level for land plots for sale, and therefore low opportunities to build new houses. Now actually, we see that the plots for sale again are significantly increasing, and that supports the sale increasing going forward as well. Furthermore, we have more leads to work with again, and we also see more people in our show houses.
On the same time, I would say that we absolutely still are in a nervous market, and we have to be more ready, whatever we, we see. Especially in the B2B segment, it is waiting, despite we have a lot of positive meetings. That kind of sales, we also see that it often will, will be in chunks that we gain that sales. We see that the supply demand for subcontractors are more normalized, no bottlenecks as the last year, and the prices are relatively flat as compared to the last year. Supply chains we now see is much more normalized. On page four, we have our highlights for H1. We have a revenue on DKK 1.28 billion. We delivered 609 new houses.
We have a gross margin on 20.9%. EBITDA is DKK 57 million. The financial gearing is 2.5 times rolling 12 months. On page five, you see a revenue. When we're looking at the Q2 2023, we have a revenue on DKK 624 million, EBITDA on DKK 17 million, and a gross margin on 18.9%, and it is after the provision of the DKK 15 million. On page six, you here have an overview on our sales on the quarterly basis since 2020. As you can see, we have almost doubled our total sales in the last six months compared to H2 2022. Compared to previous quarter, we are slightly recover.
We have the segment split in the figures in the right side, so you can see the, the detached, the semi-detached , similar test in Sweden as well. On page seven, we have the split up in the sales in 2022, you can see the development every month over our 3 segments. The detached, our core business, in Sweden, VårgårdaHus, show some traction, but on the semi-detached, we're still waiting for some of our negotiations will be signed, and also some of the contracts we already have signed for now will be approved from the municipalities, and therefore can be a part of our order backlog and realized as sales.
On page eight, you have an overview on our, our deliveries in H1, as you can see, we delivered 342 detached houses, 145 semi-detached, and 122 in Sweden, all in line with our expectations. Now over to you, Jesper, on the, the number going forward.
Thank you, Martin. After having talked to a few of you on the phone already this morning, I think it will make sense to start with the provision. I started as CFO four months back, and as a natural part, I've been through all the provisions we had to deliveries up until today. We went through what we have set aside and looked at how we estimated it and came to the conclusion that we wanted to be even more cautious compared to what we have been before. It did give us an additional provision of DKK 15 million. It should be seen as an accounting technicality, and normally, in years where we generated DKK 300 million-DKK 400 million in EBITDA, we would not have highlighted as we have done this time.
Due to the fact that it's actually half of the result for the quarter, we want to highlight it, so you can also adjust the numbers based on the business as you see going forward, compared to the bigger impact from this provision. Looking at the slide where we see our net order backlog, there's a few things that's interesting on this page. First of all, we can see detached is actually going up. It's going up with DKK 74 million compared to the end of Q1 . It does mean that we are now selling more than what we're delivering to our customers. We sold 169 in Q2 , and we delivered 142 houses. We gave a guidance, as Martin said, of DKK 2.25 billion-DKK 2.5 billion on revenue for the year.
We have, for the first half, in the books, DKK 1.28 billion. In addition to that, of the DKK 1.1 billion net order backlog, a bit more than DKK 700 million of that relates to deliveries or work done in 2023. It means that already now we know that we have end of H1, DKK 2 billion in the book. In addition to that, we also gave a number on July, and we have visibility for August. Taking that into account, we could add somewhere between DKK 100 million-DKK 150 million. This is without taking into account what we will sell and what we'll start to build from September, and this is the reason why we reiterate our guidance for our revenue at the outlook for the year.
If you move on to the next slide, the cash flow slide, I would actually take one step back. We had a loan balance at the end of 2022 of DKK 768 million. We gave guidance that, with working capital improvements, both lower activity, but also from initiatives that we would start throughout the year, it would decrease with some DKK 200 million. We have now, in addition to that, raised capital, which gave us net another DKK 200 million. Rather than having a starting point in DKK 768 million, it's closer to the DKK 568 million, and then you could add what we guided before, there another DKK 200 million. We ended Q1 or Q2, as you can see, at a loan balance, including these obligations, of DKK 489 million.
It is going down as expected. This is due to 2 different reasons. One is that our natural net working capital level has decreased due to the fact that activity has also decreased. We should not expect to see more on this account, and this is back to what I explained before, that we're actually expecting to see more activity from Q2, on particular our detached markets. It will go slightly down on semi-detached and also in Sweden. All in all, it should be a wash. We still need some million, more than DKK 100 million, to actually go down to our guidance. The 3 key levers to reach that number is, 1, that's our upfront payment of DKK 75,000, that we increased to DKK 150,000.
That will have half year effect for the rest of the year. It will benefit our loan balance. The second part is our show houses. We have also given guidance that we will reduce that number down to 40 by the end of the year. We have, on our balance sheet today, 52 houses. Of the 52 houses, 12 are sold, but not delivered to our customers, and hence, cash has not been received. That will be received in the second half. The last one, but also the biggest one, is our large B2B project, which we have, close to Roskilde, where we are seeing, somewhere between 25 to 30 houses being sold and delivered to our customers in the second half.
That, those three levers, the bigger ones, should give a comfort that we're actually going down to a loan balance lever, level, that give us comfort that we are not in challenge with our leverage ratio, but we also have some room to invest in our strategy. That could be additional bigger B2B contracts, it could be land acquisitions, or investing in digitalization towards our customers. Even though it seems like ages ago that we did the capital and refinancing on the next slide, I just want to put a few words on it. What we did do back in May was refinance our loan agreements with our two banks. We had loans before, a loan of DKK 675 million and DKK 400 in the revolving facility.
That's been refinanced to be DKK 500 million and DKK 250 million in revolving facility. This should be more than enough for us to actually have access to cash compared to the EBITDA levels and the leverage ratio we have appetite to have in the future. It's a maturity of three years, with the opportunity to extend it for another two years. There are a few clauses in this, some which is a repeat of what we had before. Leverage ratio and also restriction on land acquisition. We had that before. We continue to have that in the, in the new one. In addition to that, there's a change of control clause. There's also restriction as M&A share buybacks and dividends up until the end of Q2 next year.
I do want to say that with this facility in place and the raised capital, we are quite comfortable with our loan situation, our capital situation going forward. The next slide, our segments results for H1. Martin said most when he went through the overall results, but I just want to put a few words on, on what I see interesting. Detached houses came out with DKK 12 million for the first half, but if we correct it with the DKK 15 billion that we took in provision, it would actually have been DKK 27 million, and our gross margin would have increased from 16.8 up to 18.6. That's definitely satisfactory.
Our H1 2023 gross margin across the group would, with the correction of the DKK 15 million, have been 22.1%, compared to the 20.9%, which we're seeing here. All in all, I would say that our first half, and particularly our Q2 , came out stronger than what we had expected. It's in line with reported EBITDA, the DKK 17 million-DKK 18 million. That's what we expected, we have also had the opportunity to include the DKK 15 million in that number. In the end, just want to reconfirm what Martin said, that we are still expecting to reach our revenue targets, EBITDA in the range of DKK 100 million-DKK 130 million, and our EBIT, DKK 50 million-DKK 75 million.
One thing that you should definitely bear in mind here, and otherwise, I'm sure some questions could pop up, we will stop reporting on special items from 2024. We will continue to report throughout 2023, because we are comparing with 2024, where we had some bigger chunks of special items. We will not book more for the rest of the year. We had DKK 2 million booked in Q1. We had a reversal of some special items that we took some provisions we took for rent back in 2022, which has a positive impact in Q2. That's the only thing that could impact our special item line, is if we actually took some provisions back in 2022, that could be reversed in 2023. With that, I want to hand over to Q&A.
Thank you. If you do wish to ask a question, please press five star on your telephone keypad. To withdraw it, you may do so by pressing five star again. We will have a brief pause while questions are being registered. The first question will be from the line of Sebastian Graabæk from Nordea. Please go ahead. Your line will now be unmuted.
Hi, Jesper and Martin. Thank you for taking my question, and congratulations on the better than expected results. Starting on the guidance here, as you both alluded to, now including underlying provisions, i.e., it's a you can say underlying, an upgrade of the EBITDA guidance, at least. You say due to better than expected quarterly development, could you be more clear? What exactly developed better than you expected? Was it the profitability, or was it the sales levels or a combination of both? Maybe some color here could be helpful.
Yes. Thank you for your question, Sebastian. It, it actually split in two. We have seen more building activity and more deliverables than expected in Q2. In particular, Sweden has had more activity than what we expected before. When we forecasted our margins, we didn't take into account that cost prices wouldn't. We took into account that it would increase more than what we actually seen in the market, so the margins on our detached and semi-detached has been better than expected. That's the two main levers why we actually seen a better EBITDA result in Q2 than expected.
Okay, that is, that is very clear. I guess, moving on to the what you can call the million-dollar question. As you also show in on the slide here, your detached sales rates increased over, over the- has, has increased monthly over the, over the year, peaking in June, and then going down from 60 in June to 40 in July. Let's say normal seasonality with Q2 being the baseline, is 40 detached sales, is that a okay number you think? Or is it slightly below what you will say normal seasonality at this point in the slower summer months? Or what should we think about this number?
If you compare to, to the previous year, then is 40 it is, it is what we have expected. It is in line what we expected compared to also the months before in May and June. July, when it is around 40, it is 40 compared to the other months. It's, it's on the level that we have seen in the previous year.
Yeah, Sebastian, just to add, what you would normally see is that, from June, which is a more normal month, you would see a decrease going into July. You would see some recovery going back in August, but that's still impacted by summer vacation. Then September is again a level which should be closer to sales level, which we've seen in let's say June.
Yeah.
That's for September, October, November, and then slightly down again in December due to Christmas.
Mm-hmm. The follow-up is, have you then seen the, the, the, the, the expected pickup here in, in, in August so far? Because I mean, I mean, the reason why I'm asking, looking out the window and, and, and listening to, to, to key peers, not only in Denmark but also in, in the UK and et cetera, et cetera, they see slower than expected summer sales or a, a slow ex- than expected pickup from, from, from summer sales. Maybe just, if that's the same for you guys, or, or, or, or, or does your business, seem to be more resilient at this point?
What we're looking into now, it is with that we're rather resilient because we see that August will be better than July.
What would be sort of? What do you think, what's the explanation here? I mean, again, looking out the window, I don't see anything really turning better at this point, in terms of macro uncertainty, high interest rates. Why are customers becoming more willing to and have more appetite to new build at this point, you think?
I think, it, it's very difficult to answer, and we are spending quite a lot of time trying to understand the dynamics in the market. What we have seen, Sebastian, is that, that the normal housing and apartment market trades has increased, and we normally see a delay in that. It seems like retail in general, that, that private house families are looking to move, looking to buy new apartments, looking to buy new houses, looking to buy some new builds. It, it's again gone up at a higher level than the terrible H2 2022, which we saw, but let's not forget that it's still way below historical average. I think that the Danish economy is doing quite well. We are seeing inflation coming more under control. We are seeing unemployment at, at quite low levels.
Some confidence, consumer confidence is also improving, still at a negative level, but still improving. I think that the Danish economy is doing quite well, whereas if you're looking towards Sweden, I see some completely different challenges that could impact the Swedish house sale much more than what we will see in Denmark.
Also to add on to, to, to, to Jesper's explanations, as, as I also mentioned, we also now see that, that there is a significant increasing in plots for sales all over Denmark in general. That is absolutely an, an underlying factor also for us. But one thing that you also have to, to remember is a lot of the customers that will sign finally a contract with us here in August, it is, it is families that we have worked with since the start of the year. Therefore, I think we have a, a bit longer work to do actually, before we have the sign on the contracts, if you are seeing on the, on the housing market, existing housing market.
Okay. No, thank you so much. I think you, you did a good job trying to, to, to, to pencil out the dynamics here. My last question is really on, on, on the, on the top line. Just trying to, to picture how the the the top line will move from here throughout the the the remainder of the year. As I understood, and you must correct, you, you have to correct me if I'm wrong here, but, but that Q2 is going to be the smallest quarter on top line, and then we're going to see incremental more top line in, in Q3 and Q4. Is that, is that correctly, or, or?
I think given the fact that we actually seen higher activity, in Q2 than what we expected, right now indications are that, it, it will be flattish throughout, where Q4 could have a pickup compared to what we see of sales in the next few months.
Okay. I guess in that light, if then in that light, your, your revenue guidance looks a bit cautious.
That's, that's an opinion.
Yeah. Okay. Okay, thank you so much. Thank you for taking my question.
Thank you, Sebastian. The next question will be from the line of Andreas Bretzman from Danske Bank. Please go ahead. Your line now will be unmuted.
Yes, thank you so much. Hi, Martin and Jesper. I have a question as well on the gross margin, in particular, the detached gross margin. If you adjust for the provision, you say you are at 18.7% gross margin for Q2, but can you give some flavor on what we can expect in the coming quarters? Do you see any improvement going forward in the gross margin on the detached segment?
Yeah. Yeah, I, I can take that, Anders, and thanks for your question. As said, Q2, Q2, there's a, there's a few, as always, technicalities to those numbers, and I know that we are guiding closer to the 20%. Q2, besides the provision, also had some expenses related to previous periods that actually hit negatively in Q2. Adjusting for all those things, you would have seen something in the range closer to between 19-20.
We are expecting a Q3, where we're also benefiting from the sales level compared to, not as increasing cost levels, due to the fact that we sold it earlier when we thought costs would increase more than what actually done, and then going back to a normalized level in Q4, where we are still aiming to have something close to the 20%, everything included.
All right, that sounds good. Maybe we can do the same exercise on the gross margin in Sweden. In Q1, that was 37%, and in Q2 now it is 30.6%. Maybe some explanation there?
Sweden has been challenged by, producing and delivering houses which were committed one to two years back. We are struggling more than expected, as I said before, on the gross margins, but we are expecting that to normalize, maybe not in Q3. It depends on which orders been taken in, but, normalizing when we go to Q4, Q1, 2024.
Okay. Just to get that clear, is that a matter of sales price on the house compared to the cost of building it?
Yes. The dynamics in Sweden is that, you enter into a contract with the customer, and you don't have the same commitments as you have in Denmark. As long as they have something in place, then they are waiting to maybe find a plot, maybe find, or get all the permits in place. The lead time from signing something until they actually call it for production on the factory is much longer than what we see in Denmark. When we talked about Q1, that we or H2 last year, we were penalized by increasing costs compared to the sales prices. This is what has been hitting Sweden in Q1 and even more in Q2.
Okay, that sounds good. My last question is just clarification. The update on the show houses, can you just repeat how many were sold and not yet in the books? Because it sounded like that you had 52 left, and you'd already sold 12. Again, now you're actually down on the 40 that you, you need to be down on?
That's correct. Correct, Anders.
Okay, thank you so much. That's, that's all for me. Thank you.
Thank you, Anders. The next question will be from the line of Kristian Tornøe from SEB. Please go ahead. Your line now will be unmuted.
Yes, thank you. Also, a couple of questions from me. Previously, we've heard you sort of indicate that the customers who would typically sign a contract with you are customers with a stronger capital base, less dependent on, on, on securing full financing. Is, is, is that still the case? Is, is there any change to the whole discussion around the final signature of contracts?
No, nothing changed, Kristian. We are still seeing that the majority of our customers are the more capital-resistant customers who has some value from selling a previous house or bought at the right time, where some of the first-time buyers or people who doesn't have the capital available are still struggling to get into this market.
Okay, quite clear.
Yeah, sure. In addition to that, we also see our ASP actually still is on a rather high level. It is also because if you're looking into the customers for now, we have very few who is the first-time customers. They have some capital, some equity as our customers that we are seeing now. Therefore, it is the financially strong customers. Therefore, we also still see that our ASP is on a high level. Many could maybe say that, that we will have a lower ASP now because everybody has to do some lower level and so on, but it is actually not what we see now.
Success is definitely that we see ASP dropping.
Yeah.
-down towards, something closer to 2.5, 2.7, because it's opening up the market for buyers who cannot afford buying a new build today.
Maybe just follow up on that, because you also said that cost has increased less than you expected. Are you considering to lower prices to, to stimulate sale?
No, we're not looking into that. It is very important for us to. We are the market leader. Yeah, I have been in the, in this industry for more than 25 years. Back in time, we have gross margins in the level that we have now. We have seen in some couple of years in the competition that we have had lower margins than we want. Therefore, now we are on track again. We will defend that, absolutely.
We, we did, however, make some corrections back in January, the beginning of the year, but are not considering do any other adjustments to that.
All right. That's, that's quite clear. To your earlier comment on the surprises to Q2, you say that there was more activity than you expected. Can you elaborate what drove this activity?
It, it was simply that we were successful in, in, in progressing more on the houses that we're going to deliver and building for our customers than what we expected when we made the budget.
Does this reflect an easing on your subcontractors' availability and stuff like that, or how should we think about that?
When, when we make our estimates and budgets, it's of course, related to a lot of uncertainty and also deliveries, being put into our systems. As we move along, we are getting new data, new information of, what can be done and when it can be done, and that gave a positive surprise. Yes, definitely one of the levels is that, it's easier to get access to our UEs than it was last year.
Thanks. And,
Next question. Okay, what we have now are the employees that, that we have. We have make some redundancy in 2022. A part of that, it was that we also looked into. That then we have back on employees, it is absolutely the best performance. Also when we are looking about our subcontractors as well, it is also the best performance that we have now. All that combined, we can see that we actually have a stronger margins than we actually have expected because it is a best-in-class team all around.
All right. You have previously indicated the fixed cost, SG&A cost, or whatever you want to call it, to be in the range of DKK 375 million-DKK 400 million for the full year. Is, is this still the range you're looking at?
It, it is still the range. I'm sure you're going to refer to Q2 not going down as much as you would expect if we are going to fall within this range. We have seen the redundancies we made last year had an impact in Q1, it continued to go down from Q1 to Q2 with additional 20 people. That's something we'll see a lower runway from in the second half of 2023. There's a few technicalities, I'm sure we are not the only company who struggles with that, but that's vacation money, when you actually how you put it into your books and when you release it again.
You will naturally have more piled up throughout H1 because people are not taking summer vacation in that period, and then it will start to go down through the month of July and August, so that will have another positive impact. We are still confirming our outlook for, for the rest of the year. I would be very happy to say that we're actually breaking it and spending more, but if we're going to do that, then it's because we're going to hire more building advisors and also someone to actually work on with building more houses than what we expect the activity to be right now.
Makes sense. Quite clear. The last question from me, you have mentioned this increased availability of plots, a couple of times. Can you elaborate on, on where these plots are, are coming from? What, what has happened underlying to, to, to facilitate this development?
It is the, the municipalities, it is private offices, at office. It is all over. It's just the data from, from, Boligsiden and Boliga, when we are looking on plots, we can see that the numbers is, is increasing, from around, 3,500 to, to around, 4,300 now. Therefore, it is, it is, it is a significant increase.
Makes sense. Great. That was all for me. Thank you so much.
Thank you.
Thank you, Christian. As a reminder, please press five star to ask a question. The next question will be a follow-up from the line of Sebastian Graah. Please go ahead. Your line will now be unmuted.
Yeah. Hi again, guys. Thank you for taking my question. Just a quick follow-up here. Just to touch upon the activity level in Q2 in Sweden, as you said, yes, but it's still a grim macro outlook in Sweden, but despite this, I mean, 41 units sold seems quite extraordinary in the light of, of, of, of the current macro outlook. Is this, is this activity level, is it sticky or, or is it extraordinary in Q2?
We, we, we see that, that, level is also what we're expecting, going forward, actually. So, but, but yeah, compared to what we also saw in, in, in 2022, where, where it was a very, very low number, that we also explained earlier that our agents that we have in Sweden, they have spent a lot of time in 2022, that they had done a lot of their sales, you can see it, ready for, for the factory, and they have spent a lot of time for the, that. And, and now they have more time, actually, real time also for, for using the real time to, to, to the sales.
It is also what we are, what we're looking into now, that the sales is a bit better than in 2022.
It's definitely better than 22, but I think we also need to be cautious about the sales levels. Even though 41 is a significant improvement to what we've seen before, it is still in the very low range of what we would need to keep the factory up at the earnings level as we've seen before. I'm sure that when we talk macroeconomics, and you look at the inflation, look at interest rates, look in consumer confidence, unemployment in Sweden, it, it looks quite grim compared to what we see in Denmark, so the pickup will probably come with some delay.
Okay, okay. Just so, 19 houses sold in June and then three in July. It seems like seasonal fluctuations are, are just, more, more, more extreme in Sweden. Is that, is that, how it works, or is this just a, just a coincidence?
I think, it is some coincidence. We did have, one bigger order in, June that came in, and, I think it gave, 12-14, of the 19 sales. June and July in Sweden is just very quiet and more quiet than what we've seen in Denmark, so that's, that's perfectly natural. It's, it's not a big number, but it's actually higher than what we expected in July.
Mm-hmm. Okay, okay. No, thank you for your answers.
Thank you, Sebastian. As there are no more questions, I will hand it back to the speakers for any closing remarks.
We will say, say thank you so much for dialing in to this conference call, and have a good day, everybody. Thank you for now.
Thank you.