Hornbach Hldg Ag

Good morning and a very warm welcome to our Q1 2023-24 update call presentation of Hornbach Holding. My name is Antje Kelbert, Head of Investor Relations. This morning, we have already published our figures for the first quarter 2023-24, comprising the period of the 1st of March until end of May 2023. Our CFO Karin Dohm will be our presenter today and will also take your questions. Allow me one housekeeping remark. The entire conference, including the Q&A session, will be recorded and will be made available as a replay and transcript on our company's website afterwards. Please allow me also a disclaimer and take a note of that. This is valid for the entire presentation as well as for the Q&A session. And now I head over to our CFO, Karin Dohn.

Good morning and a very warm welcome also from my side. Let me start with a quick overview about last quarter. Overall, the first quarter was in line with what we already expected when we presented our full year guidance on May 16. Given the cold and rainy start into the year, demand in particular for plants and gardening equipment was significantly down in the first two months of Q1. Although May has been going well, net sales declined in total by 2.2% and adjusted EBIT declined by 26.2% compared to the previous year's quarter. However, since May, we've seen sales and also gross margin improving. At this point, we confirm our full-year guidance, which expects sale around previous year's level and adjusted EBIT of minus 5% to minus 15%. Let us look at our sales development in details. Net sales of subgroup Hornbach Baumarkt, including online retail, declined by 2.2%, with a minus of 5.2% in Germany and a slight plus of 0.8% in other European countries. On Baumarkt level, the share of the international business increased to 51.5% from 50% in previous year's quarter. Net sales of subgroup Baustoff Union, which is mainly catering to professional customers in the building industry, as you know, we're down by 2.4%. As said, the trend we are seeing in May and June is encouraging. The slow start into the spring season impacts it like for like sales across almost other European regions as well. And you can see this on slide page here, which gives you an indication about the individual country's performance. Nice development was seen in the Netherlands with an increase of 7.7% like for like sales. In total, Please note we had 1.5 business days less across the Baumark route compared to previous year's first quarter. Overall, we have specifically continued to gain market shares in the predominantly declining home improvement and are very proud to present those figures here to you today. Especially in our home market, we were able to gain market shares and saw an increase from 14.9% to 15.1% in the period between January and April. Based on the customer feedback, we are also tracking for online purchases. Satisfaction remained at a very high level. We also saw a strong development in our market position in the Netherlands, Czech, and Switzerland. And this is especially noteworthy in those inflationary time and an overarching shrinking market that we saw in the first quarter. This is also encouraging for us and drives our ambition to stay ahead of competition. When we look a bit deeper into the e-commerce development, you see that the share of Hohenbach Baumarkt stood at 13.3% in the first quarter. We are specifically seeing here that direct delivery is strong above pre-pandemic level and has established itself as a direct delivery system and a well-confirmed channel for customers in the DIY and DIFM. The decline in click and collect was absolutely expected in the following aftermath of the reopening of the stores. And thus, all in, we're here confirming that the e-commerce shares remain above pre-COVID levels. Looking into the cost structure, you see that our gross margin was down by 0.6 percentage points for the quarter, reflecting the inflationary challenges with regard to product pricing. Currently, and as well as in May, we saw a slight improvement in gross margin already. In line with our everyday low price strategy, we have not fully passed on all costs to our customer. This is a conscious decision in order to affirm our position as price leader and to be a reliable partner to our customers. The increase in selling and store expenses was mainly due to expansion and wage increases, including the inflation bonus. In Germany, we paid 10 million euros between January and June to our employees based on that scheme. The cost ratio of general and administration expenses increased, mainly driven by investments into our IT infrastructure. As a result, adjusted EBIT for the group came in at 109.4 million, so as expected, significantly low below the previous year's period with an EBIT margin in Q1 of 6.2%. Nevertheless, I would like to point out that the improvement we saw in May on the sales side and on the gross margin side already improved also our EBIT margin there significantly. With respect to a current adjusted EBIT, we are also seeing a positive trend. Non-operating income at 0.4 million resulted from the sale of a piece of land in Germany. Last look here on that side for the cash and the cash inflow. which you see here from operating activities, which decreased compared to the previous year, mainly due to the planned reduction of short-term liabilities. Funds from operation were at 129.1 million, so around 20% down from previous year. Inventory has reduced stronger than in previous years during the spring quarter compared to the end of February, in line with what we promised to you when we spoke earlier this year. However, we are still on an elevated level and keep pushing to bring down those inventories further. CapEx was at 51.1 million in Q1 2023-24. Regarding the CapEx split, 58% of CapEx was spent on land and real estate, mainly for new stores. Moving on to the balance sheet, you see here that we have, as usual and as a continued measure, a strong balance sheet as of May 31st. Compared to February 28th, the consolidated balance sheet decreased by 2.9% to 4.6 billion in line with our decrease of inventory and short-term liabilities. The equity ratio stood at 42.8%, so even further strengthened and continues to represent an extremely comfortable level. As already mentioned, we confirm and reconfirm our guidance for fiscal year 2023-24 to expect group net sales at about the level of the previous years. We've seen a slight improvement in sales and margin as set in May and June and continue to focus on our cost base and stay conscious regarding operating and investing expenditure. However, uncertainty remain, especially regarding the outcome of collective wage negotiations in Germany, as well as consumer spending priorities over the summer. Therefore, we still see a downside risk for the adjusted EBIT of approximately 5% to 15% below the level of 2022-2023. Thank you very much, and now we're ready to take your questions.

Thank you, Karin. And with that, we will start our Q&A session. I hand over to Nathalie, our operator.