Release Date: July 18, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- BHG Group AB (FRA:7B1, Financial) reported a profit of SEK99 million for the quarter, marking an improvement over the previous year.
- The company achieved a positive cash flow of SEK328 million with a cash conversion rate close to 170%, indicating strong financial management.
- BHG Group AB has successfully reduced its inventory by almost SEK1.9 billion over the past two years, positioning itself for improved profitability.
- The company is focusing on growth initiatives, including international expansion and category expansion, which are expected to drive future profitability.
- BHG Group AB is leveraging AI to drive efficiencies in content generation, customer service, and marketing, which could lead to cost reductions and improved customer satisfaction.
Negative Points
- Sales were down approximately 30% organically compared to the same quarter last year, indicating a challenging market environment.
- The demand in BHG Group AB's categories remains subdued due to high interest rates and low disposable income.
- The company anticipates a challenging market for the remainder of 2024, with a rebound not expected until 2025.
- BHG Group AB's net debt in relation to LTM adjusted EBITDA ended at 4.5x, which is relatively high.
- The company had to agree with auditors on a SEK99 million impairment of inventory, reflecting challenges in inventory management.
Q & A Highlights
Q: Given the weak market for outdoor furniture in Q2, what do you expect for the second half of 2024 in terms of category-specific campaign pressure and comparisons to Q2?
A: We anticipate the market will remain challenging for the rest of the year, primarily due to low disposable income. However, if disposable income increases slightly, we might see some positive effects, especially in Home Improvement and Premium Living. Challenges persist in Value Home, but its impact is smaller in the latter half of the year. We remain cautious and plan for a tough market but are optimistic about a market rebound in 2025. - Gustaf Oehrn, CEO
Q: In the quarter, your interest payments were roughly SEK47 million. How much of this was related to lease amortization?
A: The financial net was SEK45 million, with SEK40 million from bank interest and SEK5 million from leasing interest. Looking forward, SEK35 million would be a fair estimate for the coming quarters in total. Lease interest will see a small decrease due to restructuring, but it's a minor component. - Jesper Flemme, CFO
Q: Can we expect a decrease in lease interest due to the restructuring of warehouse space?
A: Yes, there will be some decrease, but since lease interest is only SEK5 million out of SEK40 million, the change will be small. - Jesper Flemme, CFO
Q: What are the main focus areas for improving profitability?
A: Our focus areas include growth initiatives, consolidations, and efficiency improvements. We aim to return to pre-pandemic profitability levels of 5% and eventually reach our target of 7%. This involves international expansion, category expansion, and leveraging AI for efficiencies. - Gustaf Oehrn, CEO
Q: How is the consolidation process progressing, and what are the expected outcomes?
A: We are consolidating our business into fewer platforms to realize synergies and build economies of scale. This includes reducing the number of entities and creating new platforms like the Nordic do-it-yourself powerhouse and Hemfint Group. The process is ongoing and expected to take another 15 months. - Gustaf Oehrn, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
