Release Date: August 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Green Landscaping Group AB (FRA:2WN, Financial) surpassed SEK6 billion in revenue, marking a significant milestone.
- The company achieved a profit margin of 8.5%, which is considered strong given their asset-light business model.
- Organic growth was reported at 5%, indicating healthy performance in a challenging market.
- The company successfully integrated four new companies into the group, expanding their market presence.
- Strong performance in the rest of Europe, particularly in Germany and the Baltics, with high organic growth and profitability.
Negative Points
- Cash flow was weaker this quarter due to delayed invoicing and seasonal factors.
- Profit margins in Sweden decreased from 7% to 6.2%, partly due to a problematic contract.
- Net debt to EBITDA ratio increased to 2.7, primarily due to weaker cash flow.
- The landscaping business in Norway showed weaker profit margins due to a high level of project-based business.
- The company faces intensified competition in Sweden, impacting overall profitability.
Q & A Highlights
Q: Can you discuss the competitive landscape in Sweden and its impact on margins?
A: The competitive situation in Sweden is not worsening compared to Finland and Norway. The majority of our Swedish companies are performing well, showing positive trends in profitability. The main issue has been one specific contract, which will end by the third quarter. We expect to see an improvement in profit margins in Sweden by the fourth quarter.
Q: What is driving the strong growth in Norway, and is there price pressure to win contracts?
A: The primary driver behind the growth in Norway is the landscaping business, particularly project-based work. This has led to somewhat weaker profit margins in the second quarter.
Q: How confident are you in achieving your M&A target of 8-10 acquisitions this year, given the current leverage?
A: We are on track to meet our target of 8-10 acquisitions this year. Our net debt level is at 2.5, and we have made investments in infrastructure to facilitate increased M&A activity. We are confident in our ability to continue acquisitions without being hampered by leverage.
Q: Can you elaborate on the strong margins in the rest of Europe and their sustainability?
A: The rest of Europe has shown strong margins, particularly in Lithuania. While some companies are very profitable, we expect a normalization of profit margins as we add more companies to the group. We aim for a sustainable margin of around 8% in the long term.
Q: What is the outlook for cash flow in the coming quarters, given the invoicing delays in Q2?
A: The invoicing delays in Q2 have already been recouped, and we expect a positive effect on cash flow in Q3. Q2 and Q3 are seasonally weaker quarters for cash flow, while Q4 and Q1 are the strongest.
Q: What are the plans for further M&A in Lithuania?
A: We are looking to build clusters in Lithuania and have met with several companies. We are selective in the companies we invite into the group, seeking those that fit well culturally and have strong returns. We expect to make more investments in Lithuania in the future.
Q: Can you provide more details on the increase in central costs?
A: Central costs were up to SEK 17 million, higher than last year. This increase is due to investments in infrastructure to support our growth and M&A activities. We expect central costs to remain in this vicinity going forward.
Q: What is the outlook for project-based business in Sweden?
A: The majority of our business in Sweden is with public customers and long-term contracts, providing stability. We expect more customer activity and concrete discussions towards the end of the year and the beginning of next year, potentially leading to more projects.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
