Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Relais Group PLC (OHEL:RELAIS, Financial) reported its seventh consecutive quarter of EBITDA growth, highlighting consistent profitability.
- The company achieved a 7% increase in net sales and a 6% growth in earnings per share, indicating strong financial performance.
- Relais Group PLC (OHEL:RELAIS) has a diversified customer base, reducing reliance on any single customer or supplier.
- The company has a strong track record of successful acquisitions, with 20 acquisitions completed in recent years, enhancing its market position.
- The gross margin improved significantly from 46% to 48%, driven by a favorable business mix and increased margins in both repair and maintenance and wholesale segments.
Negative Points
- The lighting product season started later than usual, impacting sales in Q3, although this is expected to normalize in Q4.
- Equipment sales declined by 9% year over year, attributed to a warm autumn affecting winter-related equipment demand.
- The company's cash position is slightly lower than the previous year, which may impact its ability to finance future acquisitions.
- Interest expenses remain high despite a decrease in overall interest rates, with improvements expected only in the first half of 2025.
- The acquisition market remains stable, but good companies are not available at significant discounts, posing challenges for cost-effective expansion.
Q & A Highlights
Q: The tax rate was relatively high. Should we expect a similar situation to last year's Q4 where the tax rate was close to zero?
A: The tax rate will be approximately 22% for the full year. The impact of group contributions is only booked in Q4, which will change in 2025 to be estimated every quarter.
Q: Equipment sales declined by 9% year over year. Was there a specific reason, or is the market softer?
A: The decline is partially due to the warm autumn affecting winter-related equipment sales. The Norwegian market was slower than usual for workshop equipment, although it has since recovered.
Q: Have you been able to increase revenues from larger fleet customers in repair and maintenance during Q3?
A: Yes, revenues from larger fleet customers have increased in both Finland and Sweden, particularly on the trailer side in Sweden and the truck side in Finland.
Q: Could you give an indication of how much lighting sales were shifted due to the late start of the season compared to last year?
A: Approximately a couple of million euros were shifted due to the late start of the lighting season, which was about one or two weeks delayed.
Q: Your organic growth was at 4%. How did volumes develop during the quarter, and have you seen any changes in the competitive environment?
A: Most organic growth comes from value growth rather than volume. The competitive environment remained stable with no significant changes.
Q: You saw significant growth in the repair and maintenance business even when excluding acquisitions. Can you provide a breakdown of volume and price growth for organic growth?
A: The growth is primarily due to increased capacity utilization rather than price increases. More vehicles were serviced, indicating market share gains.
Q: Do you see more room to improve capacity utilization in the repair and maintenance business from the current level?
A: There is still room to grow, especially in newly opened facilities in Sweden. However, the potential increase is not substantial, and further growth would require adding new workshops.
Q: How quickly will a decrease in interest rates impact your interest expenses?
A: Interest rate changes are reflected with a six-month delay. The current level at the end of December will affect the first half of 2025.
Q: How do you view the state of the acquisition market in terms of valuations?
A: The market is stable, with no significant changes. Good companies maintain their value, and we aim for acquisitions at an average of six to seven times EBIT, depending on company size and potential.
Q: How do you view your financial flexibility regarding larger acquisition targets?
A: We have a good toolkit for financing larger acquisitions, including equity, equity-like financing, and senior financing options.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
