Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Coor Service Management Holding AB (LTS:0R8Q, Financial) successfully prolonged several key contracts, including a large IFM contract with the Danish Police valued at SEK900 million.
- The company secured contract extensions worth around SEK1.4 billion in the first half of the year, achieving a strong year-to-date retention rate of 94%.
- Coor launched the Carbon Insights tool, which provides customers with climate data and helps them make climate impact assessments.
- The integration of the acquired Swedish cleaning company, Skaraborgs Stä, was successfully concluded, adding value as expected.
- The company reported a stable EBITDA margin of 5.1% for Q2, in line with the previous year, and maintained a solid cash conversion rate of 92%.
Negative Points
- Organic growth for the quarter was negative 1%, with newly started contracts only partially compensating for ended contracts.
- The EBITDA margin of 5.1% is still below the company's target of around 5.5%.
- The restructuring program is taking longer than expected to realize financial effects, although it is still anticipated to meet targets by the end of the year.
- Organic growth in Sweden was negative 3% due to the negative effects of ended contracts, including a significant contract with Ericsson.
- Denmark experienced negative organic growth of 4% due to ended mid-sized public contracts and lower variable volumes in the public sector.
Q & A Highlights
Q: Can you elaborate on the restructuring program and the delay in realizing financial effects?
A: Anna-carin Grandin, CEO: The restructuring involves harmonizing processes and tools across the company, particularly in HR and cleaning services. While it is taking longer than expected, we are confident that the efficiencies and quality improvements will be realized by the end of the year.
Q: Is there a common reason for the contracts that have ended this year?
A: Anna-carin Grandin, CEO: No, the pattern remains consistent with previous years. Our customer portfolio is diversified across different industrial segments and geographies.
Q: Have you noticed a trend in customers wanting to reduce their IFM spend due to the work-from-home trend?
A: Anna-carin Grandin, CEO: No, most customers are actually looking to attract employees back to the office, which may require increased facility management spending.
Q: Do you think the worst downside risk from your contract portfolio is over, given the solid variable volumes?
A: Andreas Engdahl, CFO: Yes, we believe it is fair to assume that we are past the worst downside risk, as we do not see any significant decline in variable volumes.
Q: Why are variable volumes in the public sector in Denmark slightly lower?
A: Andreas Engdahl, CFO: The slight decline is primarily due to smaller extra assignments and catering in the food and beverage part, but it is not a major trend.
Q: Are corporates now more focused on finding new efficiencies and signing bigger contracts?
A: Anna-carin Grandin, CEO: Yes, we believe that corporates are now more focused on finding efficiencies and are ready to sign bigger contracts, as evidenced by our high retention rate and new contract wins.
Q: Can you elaborate on the financial net increase this quarter and provide guidance for the future?
A: Andreas Engdahl, CFO: The increase is driven by higher interest rates and slightly higher debt. However, Q2 is likely the high point for debt due to dividend payments, and we expect a slight decrease in financial net going forward.
Q: Should we expect a headwind in Q3 due to the earlier-than-usual variable volumes in Norway's oil and gas sector?
A: Andreas Engdahl, CFO: We expect normal levels in Q3, so there should not be a significant headwind.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
