Good morning, and a very warm welcome to our Q2 and half-year update call for the HORNBACH Group. My name is Antje Kelbert, Head of Investor Relations. As usual, we published our financial results at 7:00 A.M. this morning. The reporting period comprises the first six months of our FY 2026/2027, from 1st of March to the end of August 2026. Together with me is our CFO, Dr. Joanna Kowalska. She will guide us through our latest financial results, and we will also take your questions later on. Please note that this conference call, including the Q&A session, will be recorded and made available along with the transcript on our company website. Kindly also take note of the disclaimer, which applies to the entire presentation, as well as the Q&A session. After the presentation, we will take your questions.
The technicalities will be explained by our moderator at the beginning of the Q&A session. With that, I am pleased to pass the floor to Joanna, who will now take us through the main developments in Q2 and the first of half-FY . Over to you, Joanna.
Thank you, Antje. Good morning and welcome. It is my pleasure to present you our half-year results this morning. As usual, I would like to start with a brief outline of the macroeconomic and retail environment we faced during our first half year. Consumer sentiment in Europe continues to remain subdued while geopolitical tension affect purchasing prices and logistic costs. However, we delivered strong quarterly results against this challenging backdrop. Following a good Q1, the positive trend continued over the summer season, resulting in a satisfying Q2 and first half-year. The outlines of our results were already disclosed on a preliminary basis at the beginning of September, which we confirmed with today's numbers. In a nutshell, group net sales in Q2 grew by 7.3%. With these results, we were able to once again outperform the European DIY industry.
Our bottom line also benefited from that development, and adjusted EBIT in Q2 came in 12.8% higher than last year. For me personally, it is particularly important that we maintain a clear focus in these challenging times. This means remaining committed to our expansion strategy, to invest in our existing store network, and to keep our costs very much in focus. Overall, we are very pleased with our half-year performance. Our results demonstrate the strength of our product-focused business model, our diversified European footprint, and the commitment of our entire organization. Let us now have a deeper look at today's results, from operating and strategic highlights to financials and outlook. It has been a busy quarter for us, so I would like to start with an overview of our latest operational and strategic highlights. First, our customer feedback remains very positive.
In the latest customer surveys published in September, HORNBACH again ranked number one in overall customer satisfaction in Germany and Austria. We also achieved strong results across key categories such as assortment, price, product quality, service and digital channels. This underlines that our product-focused model continues to resonate very well with our customers. Our effort to keep our stores and assortment attractive, it is paying off. Second, we are continuously following our expansion strategy and are building on a very strong foundation. We operate a highly productive store network with many well-established locations. We continue to invest in these proven assets and regions to enhance customer experience and support future growth. In particular, our established network of stores contributes to our cash flow. A recent example is the opening of new drives in Geleen, Netherlands. Another one is our new store in Graz Liebenau we just opened in September.
This store broadens our footprint in Austria, a long-established HORNBACH region. Third, we continue this expansion journey by proactively seeking new opportunities to strengthen our network. As just mentioned, one of these rare but attractive opportunities has recently become available to us in the German market. As we all know, Hellweg will leave the market and more than 100 of their stores in Germany have been affected. Out of this portfolio, at least 35 stores will be taken over by German DIY retailers. As shown on the map, we will take over six of these locations in key German regions. All stores are lease properties. The six locations are planned to be added to our portfolio as of December 2026. As a side mark, the transaction remains subject to review by the German Federal Cartel Office
As of today, we are aiming to reopen these stores in spring 2027 under the HORNBACH brand. Of course, as a consequence, we will see some limited additional CapEx for store equipment and vehicle fleet. For sure, also pre-opening cost in Q4 will be higher by mid-single digit million EUR in order to prepare for the reopenings in spring. In addition, we also have to stock these stores with our assortment. Pre-opening costs also include employee-related expenses for the six stores prior to opening. For two stores, we will take over employees as of December, and the employees for the other four stores will be hired ahead of the planned openings. This opportunity enable us to further densify our network, improve our regional footprint in Germany, and support additional market share gains. Most importantly, it will help us to serve even more customers and projects.
Overall, this transaction aligns perfectly with our well-established and proven expansion strategy. We remain focused, disciplined, and committed to investing where we see long-term value. This leads us to strong financial achievements in the last reporting period. HORNBACH Group net sales in Q2 reached EUR 1.8 billion, a strong increase of 7.3% versus prior year. For the first half, net sales amounted to EUR 3.8 billion, 6% above last year. This was driven by strong German and even better international sales growth at HORNBACH Baumarkt AG, including newly opened stores in Austria, Romania and Slovakia. As you can see, like-for-like sales, so excluding new stores, grew by 5.4% in Q2 and 4% in the first six months. HORNBACH Baumarkt once again outperformed the DIY sector. The DIY sector in Germany saw significantly weaker figures from March to August compared to our result.
Based on data of the industry association BHB, which underline our outperformance every month since beginning of our FY . But also in Europe, we at least matched or outpaced the overall sector performance. Gross profit increased by more than 6% in the second quarter. For the first half year, gross profit grew by 5% to EUR 1.3 billion in six months, resulting in a gross margin of 34.6%. Adjusted EBIT came in very strong in Q2, increasing by 12.8%. For six months, adjusted EBIT amounted to EUR 286 million, a plus year-on-year of 4.9%. Despite higher CapEx, our free cash flow improved compared to prior year's level. Now we take a deeper dive into our six months financial in more detail, starting with our top line sales performance. As mentioned, group sales increased by 6%.
Looking at sales of HORNBACH Baumarkt AG, we saw an increase of 5.9% to EUR 3.6 billion. We are again benefiting significantly from our diversified European footprint. Sales in our other European market grew by 7.7% and now account for 54% of Baumarkt sales, as you can see on the right side. However, we also saw growth in Germany picking up, increasing by a plus of 3.8% in the first half year. Our group business resilience results from a well-balanced geographical mix. We remain committed to this diversified strategic direction and will continue to push ahead with our expansion plans. As you can see also, Baustoff Union performed well and contributed to our growth, increasing in sales by 8.6%. This was driven by an improved building sector development and one new location. Let us now take a look at market share development.
Once again, we were able to further expand our market shares in all HORNBACH countries for which data is available. Let us take a look at this map. The left side shows our top three regions with the strongest performance. In Czechia, we are number one, and we were able to further increase our market share to above 40%. In the Netherlands, the positive development continued as well as customers value our project-focused offering. We also continue to improve our position in Switzerland. The right side of the map shows that we also achieved gains in highly competitive markets such as Germany and Austria. Our ambition is to continue this growth path by strengthening and expanding our presence across Europe. This is not only about expansion, but also very much about driving profitable growth in our existing retail space. A closer look at like-for-like sales development is important.
As you can see, sale on a like-for-like basis, so excluding newly opened stores, increased by 4%. This was primarily driven by robust consumer demand and increased footfall of 3.5%, but also the average basket size increased during the first half year. Other Europe remains the driving force with an increase of 4.8%. However, compared to last year, German like-for-like sales picked up notably by 3.2%. This means that we once again outperformed the German DIY market, which developed negatively from March to May compared to our Q1 performance. In the summer months, from June to August, the DIY industry in Germany saw weaker growth rates than HORNBACH. Our top three performance in the last reporting period were the Netherlands, Slovakia, and Czechia. The Netherlands continued the latest track record, achieving a strong development of nearly +10%. Also, Slovakia recorded strong growth.
In the current FY , customer sentiment improved due to higher purchase power. Czechia grew by 4.6%, driven by higher footfall as well as increase in average ticket size. In Romania, current inflation concerns and low economic growth are weighing on customer spending in general. However, we are confident that the situation will stabilize in the short term. Overall, like-for-like sales growth trends across Europe remain balanced. This supports our confidence to translate current stress into further growth. The negative calendar effect we experienced in Q1 was fully offset in Q2, resulting in a comparable number of business days in the first half-year. Sales performance was also positively supported by e-commerce. With a plus of EUR 39 million, e-commerce sales grew by 8.6% in the first half. Direct delivery accounting for the largest share of our online business growing by 4%.
Click & Collect recorded a strong increase of 19% and continuation of the positive development we saw in Q1. Click and collect remains an important channel for our customers with increasing relevance. Our strong e-commerce sales are an indicator for customer trust and loyalty for our online offerings. As a result, the e-commerce share of HORNBACH Baumarkt sales rose to 13.5% in the last six months. Compared to the pre-pandemic times, we now have doubled our e-commerce sales. Let us now look into the profits for the period. Gross profit rose by 5% or EUR 63 million, benefiting from strong sales growth. Gross margin remained under pressure due to increased logistic costs and rising purchase prices linked to the current geopolitical tensions and oil price hikes. This led to a gross margin below the prior year at 34.6%. We are closely monitoring these developments and working to mitigate their impact.
On the right side, you can see that total costs rose by EUR 38 million or 4.9%. Our strong gross profit development was able to fully offset the increased cost base. Where did the additional cost come from? The main driver was selling and store costs. This is a consequence of expanding our store network and associated personnel costs. In addition, we were confronted with higher operating costs in our store. However, as you can see, the cost ratio improved to 22.6% of sales. General and admin cost also experienced an increase. As expected, the main driver was higher personal expenses. In addition, the development reflects higher costs for IT infrastructure and transformation projects, including SAP S/4HANA. Therefore, G&A cost ratio increased versus prior year. Since personnel costs are a key component of all cost items, let me briefly provide some further details.
Total personnel costs across all cost lines amounted to EUR 609 million, up by 4.9%. This increase was mainly driven by a larger workforce following new store opening as well as salary increases. With that, we can now turn our attention to adjusted EBIT. Adjusted EBIT increased by EUR 15.4 million or 4.9%. The graph on the left side underlines the strong contribution of our second quarter. On the right side, you can see adjusted EBIT split by geography. Other Europe contributed 64% to adjusted EBIT, and the share of Germany was 36%. Let us now turn to the cash flow statement. Looking at our organic expansion, operating cash flow plays an important role in financing this growth strategy. The increase in operating cash flow to EUR 352 million was mainly driven by a change in working capital. Tailwind came from stronger seasonal reduction of inventories and overall improved working capital measures.
Headwind came from the repayment of the reverse factoring program. Funds from operations slightly increased year-on-year. CapEx amounted to EUR 121 million, EUR 13 million above prior year. This is in line with our strategy of organic expansion. On the right side, you can see the CapEx split. Around 53% of investment related to land and real estate, preliminary tied to new store development, 34% of investments were allocated to store equipment for new and existing locations, and 14% of CapEx mainly went to software to drive digitization. Here, I would like to once again mention the migration to SAP S/4HANA, which remains a top priority for us. The elevated cash flow from financing activities includes new promissory note loan, and among others, this was used to refinance the bond of HORNBACH Baumarkt, which was redeemed early at the end of July.
Free cash flow after CapEx and dividend payments amounted to EUR 195 million. The balance sheet total is up by nearly EUR 5 billion. This results from liquid funds and reflects cash from successful working capital management and new loans. The equity ratio increased to 45.8%, and net financial debt was reduced by 14% to EUR 1.2 billion. This was mainly due to higher liquid funds. This brings us to our guidance for the current financial year. We had a very successful first half year 2026/2027, driven by robust customer demand in a challenging macroeconomic environment, both sales and earnings developed positively compared to the prior year. At the same time, many uncertainties remain. Ongoing geopolitical tensions are likely to continue affecting, among others, consumer sentiment, sourcing, and logistic costs. In addition, increased inflation puts pressure on sales and margins for the near-term future.
Given this backdrop, we remain prudent in our forecast and confirm the guidance issued in May. For the HORNBACH Holding Group, we currently expect net sales to be at or slightly above the level of the prior year. Adjusted EBIT is expected to be roughly at the previous year's level, and we will continue to invest in organic expansion across our entire network, including capturing attractive opportunities such as the one resulting from Hellweg insolvency. Therefore, we expect higher investments in the coming financial year. CapEx is likely to be significantly above the prior year level. For sure, this will put some pressure on our free cash flow compared to last year. Nevertheless, our operating cash flow remains solid. As long as this holds, investing in the future growth opportunities justifies a somewhat lower free cash flow in the current FY .
All in all, we are very pleased with the results in the first half year. The second half of the year is now underway, and we are well prepared. We have seen a good start to the autumn season so far, while continuing to support our customers in successfully realizing their projects. At the same time, we are maintaining our strategic expansion focus to further strengthen our business. Preparation for opening of the six new stores taken over from Hellweg are progressing at full speed. With the planned openings in spring, we have set ourselves ambitious goals. In parallel, we remain focused on our expansion across Europe, including Serbia. Let me conclude, there is always a job to be done.
Thank you, Joanna, for walking us through the key developments and sharing your perspective. We will now move on to the question and answer session.
To make sure we can take as many questions as possible, please limit yourself to one or two questions at a time and ask them one after another. I will now hand over to our moderator who will explain how the Q&A session will work. Moderator, please go ahead.
Thank you very much. Ladies and gentlemen, now it is your turn. Please ask your questions in person via the audio line. If you are dialing in by phone, please press star key nine to raise your hand, and when you hear your name, press star key six to unmute yourself. Otherwise, please click on the raise hand button in your toolbar to get in line. If you hear your name, please allow to speak in the pop-up window, and also click on the microphone symbol in the taskbar to unmute yourself. We have the first risen hands from Thomas Maul from DZ Bank. Please go ahead, Thomas. Unmute yourself from the phone. Yes, hello. Thomas.
Yes, good morning.
Good morning.
Thomas from DZ. Can you hear me? Good morning.
Yes, we can hear you. Welcome.
Fine. This is Thomas Maul from DZ Bank speaking. Thanks for taking my questions. I have two. The first one, just a follow-up on Hellweg. You mentioned limited additional CapEx. Does that mean that all the Hellweg locations will be leased, or can we expect you to acquire some locations as well? The second question is, in the first quarter, you reported an average basket size increase of 2.4%, and now for the first half, the increase was only 1.9%, so this implies a decline in the second quarter. Maybe you can elaborate a bit on the drivers of that decline. Thank you.
Mm-hmm. Hi, Thomas. Thank you for your question. I start with the first one. Hellweg. As I said, we will take over six locations starting with December, and all of these six are leased locations. We do not buy the buildings or land. The CapEx will only arise from an additional remodeling and equipment. This is the only small part which we have to tackle with in the next quarter. The second question was about the average basket size increase. The average basket size is always a mix of the countries, but also a different assortment. In the first quarter, we have products which we sold in another categories, which another margins. Now in the Q2, there will then have been change. This is a mix of regional different basket size and also a product mix.
Okay. Thank you. Helpful.
Thank you very much, Thomas, for your questions, and happy to answer this.
Thank you. We have the next question in line from Christian Bruns . Christian, please unmute yourself.
Hello, can you hear me?
Yeah.
Yeah.
Hello, Judith. Hello, Joanna. Hello, Antje.
Hi.
Hi.
My questions are that you are going to have some additional pre-opening costs, of course, if you now speed up your integration and the pre-opening of pre-opening costs for the Hellweg stores. On the other side, you had a very good H1, and you report a good start into Q3. That means I think it might be the pre-opening costs that let you stick to your conservative guidance. Is this the right assumption?
Mm-hmm. Thank you, Christian, for your question. The pre-opening costs are indeed one of the part why we stay at our previous guidance. But the most important one is the geopolitical tensions. We see higher transportation costs, longer transit times, and sometimes occasional capacity constraints, which means, for us, there are a lot of tension on margin. Especially the logistic cost. This is why we are very prudent in the respect of our guidance. But of course, Hellweg, it's also a huge amount, which we have to cover in the next months. So both. Pre-opening costs, but also the pressure on margin.
Yes. May I add a second question? I saw that in H1, of course, interest expenses have gone up somewhat. I think the reason is the redemption of the bond, and so they had very high liquidity and double finance, if I say that. It might be that we will see an improvement there in the second half of the year, so lower net interest expense.
Mm-hmm. Okay. Let me answer in that way. Now you see the financial results, which is EUR 8 million more than in the last year. The higher interest in expenses now are partly due to parallel financing arrangements. As I mentioned, we had some months with the previous bond and now the new loan. But mostly, this is also the negative currency effects, mainly from Romania. There were some preliminary unrealized currency effects in our P&L in this quarter. Whether we would also have this at the year-end, I cannot really make a forecast on the development of the Romanian currency. This is really hard to plan, yeah, because we have this currency effect. This is not really predictable. Nevertheless, our expenses, interest expenses on average will be higher than in the past because, of course, we have to finance our expansions. Yeah.
Mm. Maybe last, I promise.-
Yeah, please.
Last question. On Serbia, next year, do you already know how many stores you will I know that you have some stores to open, but will there be also some for the first year, so for next business year? The more general question, I think that you will own the land, so the CapEx will be higher, which is, in my view, a very good thing because you invest there, you're in a very profitable international business and, in contrast to the Hellweg stores, will limit your CapEx. So will you continue putting most of your CapEx into your more profitable international business?
Mm-hmm. Thank you for your question. The first one was about the openings of the stores and the amount of the stores. So, we plan with, or we see potential for six or eight stores. Now we plan with six. The first one we plan to open in the end of 2027. This is a question whether one month more or less, but we plan in the end of the 2027, and the other one will follow. The second question was about the CapEx and, yeah, in Serbia, indeed, we invest in land and buildings, so the CapEx will be higher than in the past. This is what I mentioned already in the last quarters. And we are of the opinion this is a very good investment money. Serbia is very profitable. We expect really successful start already in Romania and, yeah.
You also ask whether we are now invested in the very profitable growth. Of course, this is always our aim to be very prudent with our decisions about the expansion. Serbia is a really growing market for us and where we have no real competition. Therefore, we are very happy to open the first store in the next year.
Thank you very much.
Thank you, Christian, for your questions. We will move on to Johan van den Hooven with his next questions in line. Johan, you may unmute yourself now.
Yeah, good morning. Johan van den Hooven , Value8.
Hello.
A few questions from my side. If you look at follow-up on the Serbia openings, we know the first one is the end of 2027. What kind of pace can you follow there? Is it just steadily one new opening per year, or can you go faster?
Mm-hmm. Thank you, Johan. Our plan is to open the stores very quickly, because then we can cover our cost of logistic or admin and general and administrative costs. This is our aim. But of course, we are also limited to many other sectors also in the country. So the permits and also the building companies. But at the moment, we plan the first at the end of 2027, the next in 2028, one or two, and then we will see. With the first opening, we will also learn. For us, it is the first entry in the fully new country after 20 years, having no new countries in our portfolio. Therefore, we will learn, and then we will see how much speed we can have in 2028.
Okay. Yeah. Thank you.
Thank you.
Yeah. Another question about the Hellweg stores. I tried to look on the internet, finding the square meters, how big the shops are and the stores are, and I think they tend to be a bit smaller than the average HORNBACH store. Is that correct? Can you increase the space to your standards, or do we have to assume that the average revenue per store is a bit lower than HORNBACH average?
Mm-hmm. Thank you, Johan. Yeah. I see you are very well informed. Thank you for your question. Correct, the Hellweg stores, they are a bit smaller. The average is 10,000 sq m. Yeah. Our average is more. The question whether we can increase the space, it is not so easy, and, to be honest, we would not like to do this. We have already stores in our portfolio which are smaller. Yes, and the average of 10,000 sq m is nothing new for us. We have a lot of experience in that. Therefore, you can imagine the six stores has been really decided to take over because everything, so also the square meters, are very suitable to our strategy and our store format.
Yeah. Thank you.
Thank you.
Last question for now. I am from the Netherlands, I am driving around in the Netherlands, and I noticed that BAUHAUS, they have, I think now, four stores in the Netherlands and building a fifth one right in the center. You have done very well in the Netherlands in recent years. Do you notice any increasing presence of BAUHAUS, or is there space enough for more players?
Mm-hmm. Thank you. Netherlands is my favorite country. I was last week there, and you are right. BAUHAUS is in four stores there. To be honest, I do not notice any increase in the presence from BAUHAUS. You can see that we always gain our market share-
Yeah
-now even 10%, and we do not see really or we are happy with our development. Let me comment this in this way.
All right. Thank you very much.
Thank you.
Thank you, Johan van den Hooven . Ladies and gentlemen, please be reminded that this is the space for your questions. If you have any left, please press on the Raise Hand button or star nine on your phone to get in the queue. Otherwise, I will now end today's earnings call. Thank you very much.
One second. I have one closing remark. Thank you for all the questions. I would also like to thank Joanna for her insights and contributions during today's call. I just wanted to give you some heads up. If we look ahead, the coming weeks will be filled with a number of capital market events. We are very happy to see you there and having some contacts in person and some dialogue. An overview of our upcoming IR activities is available on our website, and you see also here on the right-hand side of this chart. Should you have any follow-up questions, please always feel free to contact the investor relation team at any time. Yeah, thank you very much for joining us this morning and for your continued interest in HORNBACH. We hope to see you again soon.
As we still have hopefully some sunny autumn days ahead of us, it may be just the right moment to get started another project outside in your garden. Thank you again, and have a wonderful autumn. Bye-bye.