Hornbach Hldg Ag

And welcome to our update call for the second quarter and first half of 2024-25 fiscal year of Honda Holding. My name is Angel Kelbert and I'm the head of our investor relations team. Joining us today is Karen Dohm, our CFO, who will take you through some highlights and details of our six months. Before I hand over to Karin, let me remind you that the entire conference call, including the Q&A session, will be recorded and made available with a transcript on the company's website. Following Karin's remarks, the call will be open to questions. If you are unable to get your question during the call, please reach out to our investor relations department afterwards. Please also take note of this disclaimer, which is valid for the entire presentation and for the Q&A session. And now, Karin, I hand over to you.

Thank you, Antje. Good morning and a warm welcome from my side. Thank you for joining. As you saw, we delivered a solid performance in the first six months of our financial year, despite a partially challenging macroeconomic environment. Sales were stable at 3.46 billion euros, market shares rose in several countries, and our customer frequency picked up. Compared to last year's H1, we increased growth margin to 34.9%, a plus of 1.6 percentage points. This reflects predominantly normalized core commodity prices and a healthier product mix. In combination with our successful management of inventories, costs, and margins, the adjusted EBIT came in at €265 million, significantly stronger than last year's H1. On the back of this, our earnings per share stood at €10.78 at the end of our first six months of the year, thus approximately 38% above the prior year period. All in, we feel very good about these first six months, focusing on customer satisfaction, in challenging environments and cost discipline in our organization. While net sales continue to benefit from a strong spring season, macroeconomic uncertainty and inflation pressured consumer demand on a broad scale, resulting in weaker spend across home improvement projects. CapEx has been as planned below the prior year number in the first half of the year. This was caused by a different investment timetable compared to six months 2023-2024. We expect the majority of our capex coming during H2, summing up to roughly 160 to 180 million euros total capex for the current fiscal year in its entirety. It is good to see our hard work clearly shining through in our free cash flow figure that developed really well and reflects our strong operations. Our robust balance sheet and our low leverage gives us not only strength, but also room to expand further. Nevertheless, We are facing a little bit of lackluster macroeconomic environment in Europe, and we see consumer sentiment still subdued. This results in an overall softness of spending, specifically with regard to larger projects. Against that backdrop, our forecast for the full year 2024-25 remains unchanged. We continue to expect sales slightly above the previous year and an adjusted EBIT at or slightly above 2023-24. Let's now dive into some operational highlights of our first six months. Customer satisfaction is one of the key KPIs for us, as you know. We are strong believers that a great shopping experience combined with a highly productive operational setup ultimately underscores market relevance and profitability. We are therefore proud that we were ranked first in some of our core markets in the last customer service. In Germany, Kundenmonitor, the largest independent customer survey, ranked us first overall for customer satisfaction for DIY stores. Additionally, we achieved the top rank in multiple other categories like webshop and app, professional advice, and the quality of our brands. In the Netherlands, Retailer of the Year recognized us as best DIY store as well as best online shop. We see that as a great validation of our team's hard work and as a reconfirmation that we are on the right path. This also means taking our commitment to the environment seriously. That's why we as a DIY store operator are breaking ground. In the first half of the year, we have also advanced our initiatives to make our business more sustainable. In partnership with our DIY and gardening retailers in Europe, we are introducing reusable plant trays. These have the potential to save approximately 40,000 tons of plastic per year in Europe. They will be rolled out in all Hombach stores over the next few months. Ongoing investments in infrastructure are also essential to grow our business and positively impact the environment for our customers and employees. Therefore, we are not only planning to open four new stores in the upcoming year, but also to invest in existing structures. These investments include new drive-in facilities for heavy goods, the new construction of our store in Nuremberg, which in its new attire has more than 10,000 square meters of sales area, as well as installing solar panels in our stores. These are some of the areas in which we are continuously making progress to advance our sustainability efforts. Let's take a closer look at sales figures in the reporting period. Our net sales in the first six months of 2024-25 were on prior year levels. Hornbach Baumarkt contributed to this with a sales growth of 0.7% compared to the prior year period. As mentioned at the beginning of our call, we saw a positive development in customer frequency with a 1.6% increase in footfall. Average tickets were slightly down year on year, reflecting continuous softness in large projects and discretionary spending. The geographic split did not change significantly, with slightly more than half of sales coming from the eight European countries outside of Germany. Net sales at subgroup Hornbach Baustoff Union, which mainly cases for professional customers in the construction industry, decreased by 7.3%. This reflects the ongoing weakness in the German construction sector, especially regarding new construction business. Now let's turn to our like-for-like sales group. Generally, demand in most European countries benefited from better weather conditions in Q1, having a positive impact on like-for-like garden and plant sales specifically. Q1 obviously also benefited from the base effect in comparison to our previous year's first quarter. This was offset by weaker like-for-like sales in this year's Q2. The reasons were unstable weather conditions, specifically in June, no base effect compared to last year, and continued softness on consumer spending behavior. In sum, like-for-like growth for the first half year was plus 0.7%, based on an equal number of business days as the prior year period. The share of e-commerce sales of Lombard Baumarkt came in at 12.5% in the first six months of 2024-25. As I've already mentioned, Hornbach's leading role in interconnected retail has, once again, been proven by the largest independent customer survey in Germany, the so-called Kundenmonitor. Moreover, customers consider Hornbach's website and online store to be the best one in the DIY sector. We're extremely proud of this and want to thank the team for their dedication to making Hornbach a priority partner for our professional and retail customers. While this is, of course, a very gratifying result, we are not resting on our laurels. Based on the experience we gain and the feedback we get from customers, we continuously implement new features into our app. These already implemented include multiple customizable wish lists, an online configurator for customized wood cutting, as well as in-app store navigation to the shelf where the desired item is located, for example. As I mentioned at the beginning of our call, we keep expanding our market share, also in times of lower consumer spending. We feel good to see that our customer value proposition pays off and that we managed to extend our share in light of an active competition in all our countries. Let's move on to our P&L items. Our gross margin increased by 1.6 percentage points compared to the last year's first half, continuing on the higher levels that we achieved in Q1. As highlighted in previous calls, this is due to the normalization of select core commodity prices and a stronger product mix compared to this prior year period. Allow me to remind you that the trend towards an increased margin started already during winter. As you will remember, we highlighted that in our calls over the course of the last nine months. Whilst it is our aim to keep gross margins where they are, we will not continue to see the like-for-like delta in the second half if the base effect will melt. The decrease in selling and store expenses is driven by cost efficiency and reduced depreciation. These overcompensated higher personal costs, driven by necessary wage increases. In the prior year, selling and store expenses included depreciation triggered by numerous ECB interest rate increases that pressured our applicable WACs. The cost ratio of general and administration expenses remained nearly stable, And once again, we managed to offset necessary wage increases by lowering general costs. Let's now have a look at earnings. Overall, we improved our adjusted EBIT by 19.9% compared to the same period last year. This was driven by our already mentioned successful management of inventories, costs, and margins. With this overall adjusted EBIT, Margin came in at a good 7.7% compared to 6.4% in the prior year period. The higher adjustments for non-operating effects in last year's figures were mainly driven, highlighted before, by increased interest rates. On the next slide, I would like to share some insights regarding our cash flow. The one coming in from operating activity has increased substantially compared to the prior year period, primarily due to a strong Q1. Working capital changes reflect the typical seasonal changes with reductions in venturies. Last year's reduction came in higher as we were in the process of optimizing our inventories in 2023. Cash flow from investing activities was lower in H1 due to differences in the investment timetable as I explained earlier on. This fiscal year, we will see the majority coming in in H2. Regarding the gross capex list, Roughly a third was spent on land and real estate, mainly for new stores, while the rest was spent on store updates and equipment as well as software. As promised, we keep delivering on our free cash flow, which came in strongly at 112 million euros in the first six months of 2024-25, underscoring our strong operations and our cash generation capacity. Let's have a quick look at our balance sheet. Strong as before, the consolidated balance sheet total remained almost unchanged at €4.5 billion. The equity ratio was up slightly, coming in at 46.5%, once again giving comfort and reliability for all stakeholders. Low net financial debt and improving rolling 12-month EBITDA result in an improved debt ratio of 2.2 compared to 2.5 as of February 2019. All in all, our balance sheet underpins our robust financial position and the resilience of our business model. In July, S&P confirmed our credit rating as BB+, and revised the outlook from negative to stable. 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. First, catering for the trend of multifunctional living spaces that accommodate both work and life. Second, fostering energy efficiency through renovation and modernization of Europe's aging residential homes that are on average older than 20 years. Third, adopting bathrooms and other rooms for an aging society in light of demographic changes across Europe. And fourth, supporting customers in DIY and DIFM activities by offering quality goods and services for professional and retail customers as well, by linking up these two groups through our craftsman services offering. In sum, we are well-positioned to capture medium and long-term growth opportunity in the home improvement sector, and we are confident about more and more successful development in the future. Our figures show that personalized, sustainable living spaces continue to be important to people and integral to their day-to-day lives. With our everyday low-price strategy and strong private labels, We remain a reliable partner for all our customers' big and small renovation needs. Even when budgets are tight, we help our customers to successfully and cost-effectively complete their home improvement projects. This makes DIY and Do It For Me an indispensable part of everyday life for all people, and that ensures, of course, the future profitability for Hombach and its shareholders. With that, I conclude my presentation and head back to Anne here for the Q&A session.

Thank you, Carla. And I hand now over to Saskia, our operator, to explain the technicalities of our Q&A session. Please, Saskia, go ahead.