Hornbach Hldg Ag

Good morning and welcome to our Q1 2024-25 update call presentation of Von der Holding. My name is Antje Kelbert, Head of Investor Relations. Today at 7 a.m., we have already published our figures for the first quarter 2024-25, comprising the period of March 1st until May 31st, 2024. Welcome and good morning also to our CFO, Karin Dohm, who will be our host and presenter today, and will later also take your questions. Please note the entire conference call, including the Q&A session, will be recorded and made available with a transcript on the company's website afterwards. Please also take note of the disclaimer, which is valid for the entire presentation and for the Q&A session. To ask a question, please dial in for the telephone conference. Numbers have been provided in your confirmation emails. Asking questions in the webcast is not possible. The operator will give further advice at the beginning of the Q&A session. Now I'm delighted to hand over to you, Karin, to give us an overview of the latest set of numbers. Please go ahead.

Thanks, Antje. Good morning and a warm welcome from my side. Thank you all for joining this morning. We delivered a very good performance in the first quarter of our financial year. As expected, adjusted EBIT significantly improved compared to the same period last year due to a better spring season and our successful cost management. We are especially pleased that we managed to increase our gross margin by 1.8 percentage points in Q1 compared to last year's quarter. This development predominantly reflects lower commodity prices and the more profitable product mix. Our sales were in line with our expectations driven by more favorable weather conditions in March and April, but also continued softness in large projects and discretionary spending. Last but not least, we confirmed our full year guidance as announced in May. We continue to expect sales slightly above the previous year and adjusted EBIT at or slightly above 2023-2024. In light of a bit slow start into Q2 due to rainy weather, as well as the international sporting events this summer, We currently stay unchanged with regard to our guidance. Our net sales in Q1 were slightly up by 1.8%, driven by Hornbach Baumarkt's strong performance. Compared to last year's quarter, we saw increased demand for gardening products following the good weather in March and April. The positive development of customer frequency continued with 4.1% in Q1, while average tickets were slightly down by 1.1 year over year. The geographic split did not change significantly, with slightly more than half of Hornbach Baumarkt sales coming from the eight European countries outside of Germany. Net sales of subgroup Hornbach Baustoffunion, which mainly caters for professional customers in the construction industry, decreased by 9.2%. This reflects the ongoing negative trend within the building industry, especially new construction business in Germany. Now let's turn to our like-for-like sales growth. Generally, demand in most European countries benefited from better weather conditions in March and April, especially in Romania and Sweden, where we saw like-for-like growth of nearly 4%. For the group, like-for-like growth was 2.5% in total, despite having on average 0.6 business days less than last quarter. I would also like to point out that sales growth in Q1 has not been influenced by inflation, but is pure volume growth as sales prices were decreasing slightly. Looking at our market share, we continue to focus on growth, expanding our strong market position in Europe. Especially in the Netherlands, we further expanded market share significantly. Our new store in Nijmegen has started out very successfully, and also the stores we have opened in the past couple of years are showing strong growth. Czechia also continues to take market share without having added new space. In the first month of the year, the outperformance was based specifically on strong sales of supplies for gardening projects. In Germany, our market share remains on a high level of 15%. Let's have a look at our e-commerce development. The share of e-commerce sales of Hornbach Baumarkt came in at 12.4% in Q1, still well above pre-pandemic levels. Customer engagement across our interconnected platforms globally remains high. This shows that these platforms are well-established sales channels in DIY and do it for me. However, in line with general market trends in the e-commerce sector, online sales declined slightly year-on-year by 4%. And with that, I would like to take a closer look at the cost and expense development in our P&L. Our gross margin increased by 1.8 percentage points, continuing on the higher level we achieved over the course of the winter. This is due to the normalization of select core commodity prices and a stronger product mix compared to the previous year's quarter. For selling and store expenses, While we experienced increased wages, we realized lower store operating costs and used natural fluctuation to partially offset the given wage increases. As a consequence, selling and store expenses decreased in percentage of sales. The cost ratio of general administration expense remains stable. We continued to invest in IT headcount and also experienced here slightly wage increases. However, this was offset by lower project-based expenses. Overall, we improved our adjusted EBIT by 34% compared to Q1 last year, based on a much better spring season in March and April, combined with a strengthened gross margin and good cost discipline. With this, overall adjusted EBIT margin came in at a comfortable 8.1%. There were no non-operating items or adjustments in Q1 this year. Turning to cash flow, our cash inflow from operating activities increased almost double compared to the previous year, primarily due to the strong earnings development. The change in working capital was on previous year's level and reflects our normal seasonal swings as well as the planned repayment of short-term liabilities. CapEx summed up at $23.4 million in Q1 2024-25, compared to 51.1 million the same period last year. This is mainly due to store openings happening only at the end of this financial year and in the following year. Regarding the capex split, 29% was spent on land and real estate, mainly for new stores, while the rest was spent on store conversions and equipment as well as software. In Q1, we also received investment subsidies for our stores in Leipzig and our logistics centers in Esseng, opened last year, which reduced our cash flow from investing activities. Let's have a quick look at our balance sheet. As of May 31st, Hornbach once again delivered a very strong balance sheet. Compared to February 28th this year, the consolidated balance sheet total remained almost stable at 4.5 billion. The equity ratio was slightly up, coming in at 45.3%, continuing to represent a strong level. All in all, our balance sheet underpins our robust financial position as well as the resilience of our business model. Before we open the floor for questions, I would like to remind you of the long-term opportunities we are pursuing despite ongoing macroeconomic challenges. Those are catering for the trend of multifunctional living spaces that accommodate both work and life. fostering energy efficiency through the renovation and modernization of Europe's aging residential homes that are 20 years plus on average in age, adapting bathrooms and other rooms for an aging society in light of demographic changes in Europe, supporting customers in DIY and DFFM activities by offering quality goods and services for professional and retail customers, as well as linking up these two groups through our craftsman services offerings. In sum, we are well positioned to capture medium and long-term growth opportunities in the home improvement sector, and we are confident about Hornbach's successful development in the future. We will continue to focus our strategic and operational priorities. With our everyday low-price strategy and strong private labels, we remain a reliable partner to our customers for all their big and small renovation needs. We also will continue to emphasize cost and inventory management while making targeted investments to improve operational efficiency and maintain our strong market position. ESG is a very important topic to us, and we will continue to work to advance our sustainability efforts. For us, being successful and profitable needs to go hand in hand with advancing our ESG priorities and objectives. In the past year, we have set a goal to reduce carbon dioxide emissions in our own operations in line with the Paris Agreement by 42% until 2030. We've also published our footprint for some scope three categories for the first time this year, and we'll be able to disclose the full scope three emissions next year. With regard to our assortment, which is the biggest lever for making the company more sustainable, We will systematically screen all our product ranges for sustainability benefits. Thus, we will be able to steer our product portfolio accordingly and create transparency for our customer to help them choose sustainable products. And with that, I conclude my presentation and head back to Antje for the Q&A session. Thank you, Karin, for your remarks.

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