Hornbach Hldg Ag

Good morning and welcome to our Q3 and nine-month update call for Hornbach Holding. My name is Antje Kelbert, Head of Investor Relations. Earlier today at 7 a.m., we published our financial results for the first nine months of fiscal year 2025-26, covering the period from 1st of March until the end of November 2025. During today's call, we would like to give you additional insight into our final financial figures following our pre-release on 5th of December. I extend my warmest welcome to our CFO Dr. Joanna Kowalska, who will be your host today, presenting our latest set of numbers. After the presentation, we will take your questions. 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 and the Q&A session. To ask a question, please dial into the telephone conference using the numbers provided in your confirmation mail. The operator will provide instructions at the beginning of the Q&A session. You can join the queue to ask a question by pressing the hash key and five on your phone. With that, I'm delighted to hand over to Joanna to walk us through the key developments of our first nine months of this year. Over to you, Joanna.

Good morning, everyone, and thank you, Antje, for the kind introduction, and you're all welcome. It's a pleasure to be here again talking to you about our results. Before we get to the detail, I'd just like to take a moment to talk about the context of the macro environment and retail backgrounds to these quarterly figures. Customer sentiment has been damaged all year, especially in Germany, but also in other regions. At the same time, GDP growth rates and expectations remain moderate to low. And against this backdrop, we have stayed focused on creating value for our shareholders. Overall, we believe the last nine months have been positive against the challenging customer environment I have outlined. So, to the results, which I'm sure you have all seen, Hornbach Group net sales reached 5.1 billion euros, an increase of 3.8% from last year. Our bond market subgroup grew sales by 4%, gaining market share in Germany and across Europe. This was driven by higher customer footfall. We continue to outperform the D&Y sector in terms of like-for-like sales growth. The D&Y sector in Germany saw significantly weaker figures from January to November compared to our results. This is based on data of the industry association, DHB. Additional market research data prove that also in other countries we at least match or beat the overall sector performance. We opened four new stores and continue to invest in future growth. We remain committed to our expansion plans. And as a consequence, higher capex is reflected in our free cash flow. Gross profit increased by 4.1% or 72 million euros. This resulted in a stable gross margin of 34.7%. Adjusted EBIT for nine months was about 300 million euros matching last year's level. And now let's have a look at our Q3 performance. Here, net sales increased by 2.2% and we were hoping for a stronger top line and consequently higher quarterly results. However, against the current environment with subdued customer sentiment, we managed to outperform the D&Y industry also in Q3. Once again, it helps us gain market share. While we achieved top-line growth and maintain a satisfying gross margin, we are not able to fully offset increased costs and those adjusted average came in 7.3 million euro below last year's numbers. Looking at the remainder of this year, the full year outlook remains unchanged and we expect adjusted average to be at the level of the previous year. Before we dive deeper into financials, let me highlight some operational achievements which underline our strategy to deliver organic growth. Looking back at the past nine months, we have achieved remarkable expansion progress. We opened four new stores representing around 70,000 square meters of selling space. In March, we enlarged our German store network. Our great flagship show in this book showcases the state of the art home improvement retail. Over the course of the third quarter, we continue our international expansion and open three new mega stores, two in Romania and one in Austria. In addition, There has been the opening of the new specialist store in November. We transformed an existing homebath store in Mainz-Castell in Germany into a Bodenhaus concept. Located at the prime location, this third Bodenhaus store offers an outstanding selection of hard flooring products to our customers. Our expansion comes along with 400 new colleagues in these stores. And being a big box player, additional stores are also related with an uptick in inventories. I will refer to the increase of personnel and other costs later in the presentation. These recent openings are part of Honda's strong track record of organic growth. As you might already know, we have entered a new market in Serbia. Before we go into those details, let's have a look at our consistent expansion. Starting in 1968, we opened the first integrated D&Y store in West Germany. Besides entering former East Germany, we also draw international expansion and laid the foundation of today's European footprint. Between 1996 and 2007, eight countries throughout Europe become Hornbach regions. After that, we rolled out our online shops in all regions. We have always been willing to take bold steps and innovate while honoring our traditions. Our approach is clear. First, we identify markets with strong home improvement potential. Then, we secure attractive location with synergy potential and large catchment areas. And finally, we built a network of project-oriented D&Y stores and online shops. This strategy has made us successful in the past and we believe that it's our recipe for success also in the future. And by entering Serbia, we aim to unlock attractive growth opportunities. The Zerbia D&Y market has similar characteristics to our existing market and provides us with good opportunities for growth. Our proven strategy will guide us. Clear focus on large state-of-the-art D&Y stores with a project-based approach. We see the potential for six to eight large store formats. And as you see on the slide, we believe the country offers excellent conditions for our concept. This creates an opportunity for us to gain significant market share. We have already secured attractive locations and for each location we plan to invest between 25 and 40 million euro. We expect the first store to open no earlier than the end of 2027. We are very excited to follow our expansion path and continue our success story in this new Hornbach region. And now, let us have a look at the recent figures for the reporting periods. As already mentioned, group sales rose by 3.8% in the first nine months. This was supported by a strong spring, a solid summer, and followed by a mixed third quarter. The whole of Baumarkt's subgroup grew by 4%. Germany delivered 2.1% growth, while international operations achieved 5.8%. Customer frequency increased by 2.8%, and the average ticket also saw a slight rise. As you can see, after two years of weaker sales development, we have now returned to growth. Considering the challenging customer climate and weak industry trends, we are pleased with this result. Let's briefly review the Honda Baustoff Union, our subgroup focused on professional construction customers. Here, as you can see, sales declined slightly by 1.4%. However, we believe the construction sector in Germany will pick up again next year. Recent official statistics show a modest improvement in order, intake and building permits. How is the regional split of our sales? More than half of the sales now comes from the European countries outside Germany. This represents an increase of about 1 percentage point year on year. Let's now have a look at like-for-like sales development. So, for the first nine months, like-for-like sales rose by 2.6%, exceeding last year's results. Germany recorded 0.7% growth. Here, we outperformed the German BNY sector in every single month. Other European countries grew 4.3% on a like-for-like basis. The Netherlands and Sweden were strong, with nearly 10.4% growth, respectively. Q3, on the other hand, showed a mixed performance. Regions such as Netherlands, Sweden, Switzerland and Luxembourg have remained on a growth path. Other regions faced challenges. This includes, for example, extreme weather conditions or purchasing power decreases. Group-wide, we have seen a calendar effect of roughly one business day less in the last nine months. In Q3, there were no differences in business days. Overall, we were mostly matching or even outperforming the D&Y sector as confirmed by BHGB and GFK data. Moving on to market share. We are focused on strengthening our position across Europe. Throughout the year, we expanded our footprint in all HONBACH countries with available market share data. Let's have a look at the map. In Germany, our largest market, our share rose to 15.7%, up 0.6% each point from last year. A great result in a highly competitive market. In the Netherlands, positive footfall helped to bring our market share to 29.1%. In Czechia, we increased our market share to almost 40%, maintaining strong momentum. Also Austria and Switzerland also experienced growth. A strong track record that aligns our position and strategy. With our assortment, competency, outstanding prices and service offerings, we can best serve our customers. And a big thank you to all our colleagues on the sales floor who helped make this happen. And now to our e-commerce business, which again performed well. Customer engagement on our integrated platforms continues to grow. This confirms their status as established key sales channels. E-commerce accounted for 12.9% of total sales in the last nine months and is growing. Sales rose by 8.1%, driven by strong growth in the first six months and a solid performance in Q3. Both direct delivery and click and collect grew by about 8% each. Let's now have a look at our P&L. Gross margin was slightly higher than last year and amounted to 34.7%. Our gross margin rose by 4.1%, slightly ahead of the net sales growth of 3.8%. This was supported by a profitable product mix and innovative assortment and positive purchase price effects. Let us now turn to expenses development. As you can see on the right side of the slide, selling and store expenses rose in absolute terms but the expense ratio was nearly stable despite higher wages and new stores. Pre-opening costs increased by 6 million euros due to our expansion activities. We also worked on our IT infrastructure, which resulted in higher costs. This is important for the future proving the business. Our efforts will contribute to overall efficiency and improved working capital management. It's also reflected in our general and administrative expenses. They went up by 0.2 percentage point as a share of sales, mainly due to wage increases and IT improvements. Personal costs for the first nine months totaled 871 million euros, an increase of 4.9%. This increase was in line with our expectations and driven by wage increases, but also staff for new stores. We partially mitigated this cost increase by adjusting hand count in our current store base. In Q3, personal costs rose by around 3% as expected and communicated during our half-year call. For Q4, we expect a similar development. All these factors led to a stable development of our adjusted EBIT, which we will see on the next slide. Adjusted EBIT after nine months was at last year's level. As you may know, we had a very strong spring season and therefore excellent results in Q1. Q2 was solid, but influenced by an increase of personal costs. In Q3, the gross profit growth did not fully offset higher costs. Therefore, adjusted EBIT was about 7 million euros below the prior year's quarter. As you can see on the right side of the slide, countries outside Germany delivered 68% of adjusted EBIT, a 5 percentage point increase year over year. There were no significant non-operating items or adjustments in the first nine months of 2025. So we maintain our original guidance for the full year adjusted EBIT to be on the last year level. Now let's review the cash flow statement. Operating cash flow increased year on year. This was mainly driven by lower cash outflow from working capital. We reduced the use of our reverse factoring program. Funds from operations remained steady compared to last year. Capital expenditure reached 167 million euros, up from 107 million euros last year. This reflects our strong commitment to organic growth. 57% of CAPEX was invested in land and real estate, mainly for the new store development. The rest went into stock conversions, equipment and software. Free cash flow after net capex and dividend came in at 105 million euros, down from 150 million euros last year, which reflects our consistent ongoing investments in expansion. So let's move on to the balance sheet, which is still strong. Total assets remain steady at 4.6 billion euros compared to the year-end results in February. I would just like to share some comments on liabilities. In September, new promissory note loans were issued at the holding level. This replaced existing loans of Baumarkt level. The equity ratio rose to 47.1%, highlighting our solid financial standing. Net financial debt was lower than in February. As a result, the net financial debt to EBITDA ratio improved to times 2.5. Our balance sheet figures demonstrate the strength of our financial base and the resilience of our business models. Let us now have a look at our guidance. We consume our guidance issued in May 2025. We continue to expect net sales to be at or slightly above the level of 2024-25. Adjusted EBIT is expected to remain at the previous year's level. Reflecting our ongoing expansion strategy, we expect capex to reach up to €240 million for this year. So, solid growth, increased market share and stable EBIT. despite the challenging conditions. And before moving to Q&A, I would just like to emphasize the long-term opportunities we see for Hornbach. We are committed to price leadership and being a trusted partner for our customers. We are also committed to target investment in expansion and efficiency to help us maintain and grow our leading market positions in Europe. Therefore, we stayed focused on creating value for our shareholders, and despite economic challenges, we see medium and long-term growth opportunities in home improvement. We are pleased with the results in the first nine months of the year, and I would like to thank all our teams who have made this achievement possible.

Thank you, Joanna. Excuse me. So thank you, Joanna, and in the interest of time, Please limit yourself to one or two questions in our Q&A session. Please state one question at a time. I now hand over to Elba, our operator, to explain the technicalities of our Q&A session. Please go ahead.