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Good morning, and a very warm welcome to our Q1 2023/'24 Update Call Presentation of HORNBACH Holdings. My name is Antje Kelbert, Head of Investor Relations. This morning, we have already published our figures for the first quarter 2023/'24, comprising the period of the 1st of March until end of May 2023. Our CFO, Karin Dohm, will be our presenter today, and we'll also take your questions. Allow me one housekeeping remark. The entire conference, including the Q&A session will be recorded and will be made available as a replay and transcript on our company's website afterwards. Please allow me also, a disclaimer and take a note of that. This is valid for the entire presentation as well as for the Q&A session. And now I hand over to our CFO, Karin Dohm.
Good morning, and a very warm welcome also from my side. Let me start with a quick overview about last quarter. Overall, the first quarter was in line with what we already expected when we presented our full year guidance on May 16. Given the cold and rainy start into the year, demand in particular for plants and gardening equipment was significantly down in the first 2 months of Q1. Although May has been going well, net sales declined in total by 2.2% and adjusted EBIT declined by 26.2% compared to the previous year's quarter. However, since May, we've seen sales and also gross margin improving. At this point, we confirm our full year guidance, which expect sale around previous year's level and adjusted EBIT of minus 5% to minus 15%. Let us look at our sales development in detail. Net sales of subgroup HORNBACH Baumarkt, including online retail declined by 2.2% with a minus of 5.2% in Germany and a slight plus of 0.8% in other European countries. On Baumarkt level, the share of the international business increased to 51.5% from 50% in previous year's quarter. Net sales of subgroup Baustoff Union, which is mainly catering to professional customers in the building industry, as you know, were down by 2.4%. As said, the trend we are seeing in May and June is encouraging. The slow start into the spring season impacted like-for-like sales across almost other European regions as well. And you can see this on slide page here, which gives you an indication about the individual country's performance. Nice development was seen in the Netherlands with an increase of 7.7% like-for-like sales. In total, please note we had 1.5 business days less across the Baumarkt route compared to previous year's first quarter. Overall, we have specifically continued to gain market shares in the predominantly declining home improvement and are very proud to present those figures here to you today. Especially in our home market, we were able to gain market shares and saw an increase from 14.9% to 15.1% in the period between January and April. Based on the customer feedback, we are also tracking for online purchases, satisfaction remained at a very high level. We also saw a strong development in our market position in the Netherlands, Czech and Switzerland. And this is especially noteworthy in those inflationary time and an overarching shrinking market that we saw in the first quarter. This is also encouraging for us and drives our ambition to stay ahead of competition. When we look a bit deeper into the e-commerce development, you see that the share of HORNBACH Baumarkt stood at 13.3% in the first quarter. We are specifically seeing here that direct delivery is strong above pre-pandemic level and has established itself as a direct delivery system and a well-confirmed channel for customers in the DIY and DIFM. The decline in Click-and-Collect was absolutely expected in the following aftermath of the reopening of the stores. And thus, all in, we are here confirming that the E-commerce shares remain above pre-COVID levels. Looking into the cost structure, you see that our gross margin was down by 0.6 percentage points for the quarter, reflecting the inflationary challenges with regard to product pricing. Currently, and as well as in May, we saw a slight improvement in gross margin already. In line with our everyday low-price strategy, we have not fully passed on all costs to our customers. This is a conscious decision in order to affirm our position as a price leader and to be a reliable partner to our customers. The increase in selling and store expenses was mainly due to expansion and wage increases, including the inflation bonus. In Germany, we paid EUR 10 million between January and June to our employees based on that scheme. The cost ratio of general and administration expenses increased, mainly driven by investments into our IT infrastructure. As a result, adjusted EBIT for the group came in at EUR 109.4 million. So as expected, significantly low the previous year's period with an EBIT margin in Q1 of 6.2%. Nevertheless, I would like to point out that the improvement we saw in May on the sales side and on the gross margin side, already improved also our EBIT margin there significantly. With respect to a current adjusted EBIT, we are also seeing a positive trend. Nonoperating income at EUR 0.4 million resulted from the sale of a piece of land in Germany. Last look here on that side for the cash and the cash inflow, which you see here from operating activities, which decreased compared to the previous year, mainly due to the planned reduction of short-term liabilities. Funds from operation were 29.1 million, so around 20% down from previous year. Inventory has reduced stronger than in previous years during the spring quarter compared to the end of February, in line with what we promised to you when we spoke earlier this year. However, we are still on an elevated level and keep pushing to bring down those inventories further. CapEx was at EUR 51.1 million in Q1 2023/'24. Regarding the CapEx split, 58% of CapEx was spent on land and real estate, mainly for new stores. Moving on to the balance sheet. You see here that we have, as usual, and as a continued measure, a strong balance sheet as of May 31. Compared to February 28, the consolidated balance sheet decreased by 2.9% and to EUR 4.6 billion, in line with our decrease of inventory and short-term liabilities. The equity ratio stood at 42.8%, so even further strengthened and continues to represent an extremely comfortable level. As already mentioned, we confirm and reconfirm our guidance for fiscal year 2023/'24 to expect group net sales at about the level of the previous years. We've seen a slight improvement in sales and margin, as said in May and June and continue to focus on our cost base and stay conscious regarding operating and investing expenditure. However, uncertainty remains, especially regarding the outcome of collective wage negotiations in Germany as well as consumer spending priorities over the summer. Therefore, we still see a downside risk for the adjusted EBIT of approximately 5% to 15%, below the level of 2022/2023. Thank you very much. And now we're ready to take your questions.
Yes. Thank you, Karin. And with that, we will start our Q&A session. I hand over to Natalie, our operator.
Thank you very much. Ladies and gentlemen, at this time, we will begin the question-and-answer session. [Operator Instructions] And we have the first question from Thomas Maul from DZ Bank.
I actually got one. You mentioned that you saw a sequential improvement in May and June. Maybe you can give us some more details, which products and in which countries and that would be very helpful.
Sure, and thanks for your questions. So I think regarding the product groups, it was quite straightforward. The couple of things that you would expect when weather gets better, as we saw in May and now in June, weather improved substantially compared to March and April in the majority of our countries. As usual, you always have a little bit of exceptions here and there. But as a very general note, you can say there was better weather across all our regions. And as a result, we saw especially an uptick in anything that is related to garden and outdoor that can go from plants over things you need for your tariffs, garden furniture pools, things that are related to irrigation and anything I said that you might connect with the outdoor world. And of course, some of that with some of those sales also we were able to offset the non-incoming sales from March and April, but of course, quite naturally, you can't offset 2 months with 1 month. So that led to the results that you could see now in Q1. But as I said, a nice development there, and that keeps on now in the current trading as well.
The next question is from the line of Ludovic Allègre from Kepler Cheuvreux.
Just 2 questions on my side. The first one is, could you maybe give us an idea of the volume and the price impact on the top line in Q1, the broad impact of the 2 parameters. And the second one is on the adjusted EBIT. So if I remember correctly, we were talking of Q1, a bit south of the full year guidance. So maybe between minus 15% and minus 20%. We ended at minus 26% year-on-year. I just wanted to confirm that this is what you were expected and actually not below what you had in your business plan for the year? And maybe a follow-up question. So I understand that Q2 will be better, both on top line and profitability. My question is, when in the year do you expect the more positive impact on your profitability. I mean, I think that at the full year, you were expecting a more positive impact in H2 and especially in Q3. Has it moved to Q2 and Q3? Or do you still expect a big improvement in Q3?
Yes, thanks for the question. And maybe I'd to say take them backwards. #1, with regard to quarters and seasons I think you're spot on to a certain degree, Q1, as we all saw was strongly impacted by the weather. And the same usually, let's say, the same risk usually applies also to Q4. That is why we are usually not planning a strong positive impact from Q4, which is, as you know, for us, December, January, February. So yes, if we deduct that, so to say, from any swings, we would expect that the parts that will bring us additional, of course, upside is Q2, where we're currently in and then Q3. The underlying effects that drive, of course, the profitability is partially what we talked about in May already, our expectation with regard to amelioration of the gross margin driven by certain components within the gross margin that have become better and now slowly glide, so to say, through our pricing and through our -- specifically the stock as we have these gliding average prices that is also referring to the reduction of some logistical costs, some purchase prices on the supply side for us and other things. And that, as I said earlier, it takes some time until that flows through our stock and until that flows through our gross margin, but we see those things slowly coming in now. And anything, as you know, in our P&L, one of the biggest levers is, of course, gross margin although it needs to come, obviously, with also just gross revenues and sales that all fit together. That's the triangle on which we're working to make sure we equip profitability high and moving into the right direction. So that is the question mark that I'm alluding to in our business, in our region, the big question mark for Q2 now is obviously travel behavior. So how much and how far will people travel, how much of their piggy pers do they invest into that travel? Is there still what I read this morning, what the economists call rebench travel with -- in the following aftermath of the Corona crisis? Or what is happening there this summer that will be, of course, having a potential impact on our business, and we can't fully estimate that. So that could affect the sales figures. But taking it all into account, we are absolutely comfortable and that goes to your earlier question with the guidance. And yes, that includes these Q1 figures, which -- where we came in on the EBIT or adjusted EBIT side at 26%. And yes, that is as we roughly expected is. And yes, that is baked into our guidance as we gave it in May and as we reconfirm it now.
And the next question is from the line of Thilo Kleibauer from Warburg Research.
Yes, I have 2 questions. The first is on the general and administration expenses. You mentioned an increase due to higher investments in IT. Is there any specific project here in this area? Or do you expect structurally higher expenses for IT or maybe you can give us some more insight here? And my second question is on the cash flow statement. You had a reduction in short-term liabilities with the repayment of the reverse factoring program. So was this program, ,just a kind of onetime measure? Or when will you use reverse factoring in the future?
Yes. Thanks for those 2 questions. #1, on the reduction of the short-term liabilities, absolutely, that is the payment following the reverse factoring program, which we did early this fiscal year. And with that, that program is currently not in action, so to say. So we don't use it currently. And we used it over winter over that time of February, March to, as you know, to have that impact of the seasonal split smoothened specifically here, where we have the winter season where we buy things for spring season, and that is something which obviously then only gets sold later in -- around Easter, let's say. And that was the reason why we used it at that time and why we don't use it currently. So it might be that we use it again once -- when we are in a similar seasonal split between buying and selling goods or it might not -- it's an option, but it's not baked into some of our behaviors. And sorry, the first question, I missed the first question.
Yes, you mentioned higher costs for IT with within the admin expenses.
So higher cost for IT. Yes, we kicked off our S/4HANA project. So we are moving from R3 to S4. And specifically due to that, where we have picked that off. We had some prework already over the last 10 months, I would claim, and we officially kicked the whole program off in May. And with that now, we'll see more. So some of those things here are affecting the prework and we're now a set moving towards this. And I guess this will be with us for a small couple of years, 2, 3, 4 years, maybe, actually, I would expect 3. And that means there will be, so to say, some one-off costs with regard to that.
Next question is from the line of Miro Zuzak from JMS Invest.
I have just one question. If I look at like a bit from the helicopter perspective, and I compare the profitability of HORNBACH now versus the pre-pandemic area, I can see that the profitability has come down again to more or less the levels that you had before or at least now in Q1, it has come down. Now during the year '19 -- or let's say, '19/'20, '20/'21, '21/'22 and '22/'23, the profitability per shop was like elevated like x2 or x3, sometimes even -- is this basically the return to normal where you can say, okay, we make around EUR 800,000 to EUR 1 million of EBIT per shop as we did like the 10 years before the pandemic area? Or is there -- was this more like a one-off quarter where you say the weather was so bad that this is just -- now we are basically on a higher level in general in terms of profitability per shop. And we should basically look through this single quarter and not be concerned about the overall profitability per shop of HORNBACH.
Yes. Thanks for your question. Definitely, some of the circumstances in March and April were outstanding. If you take Germany, for example, according to public weather data, it was the wettest March since 20 years. So obviously, outstanding from a share, so to say, meteorically point of view. And of course, if you're in the gardening business. And at that time, it was not only wet, it was also specifically cold. That means that it was absolutely outstanding and nobody does when you have 8 degrees Celsius and the rain or so to say, coming from the site, nobody goes into a garden center and starts looking into flowers and other things. So of course, that was outstanding. And no, we don't see that what we currently have as figures and over -- let alone these 3 months, it's quite distorted and we don't see that as a normal picture. And I think that's one of the challenges, of course. We just came out of a couple of extraordinary years. And we have now still the challenge that some things are not as so to say, as normal as one would think. But on the other hand, and that's what I was alluding to earlier, a lot of things have normalized. So we are as confident with regard to the outlook and with the further development. We have strongly invested over the last years, and we keep investing. We have opened new stores, especially as you know, last year and the year before. This year, we will open 1 in now -- in this month, we opened one in the Netherlands, Mason. And we are currently working on opening further ones over the course of the next year due to the way that buildings sometimes take those will come in probably February, March and then onwards. So the physical expansion is ongoing. We're currently, as I said earlier, investing into our IT backbone. We have finalized the full rollout of our new web shop IT solution. You don't see that from the front end, but it gives way better scaling and performance possibilities for the future. So there's a couple of things on where we continuously invest and work to ensure that customers really have a good journey and a seamless journey between our various forms of outlets, whether that's virtual or analog, if you want to say so. So we think we're really on a good path and definitely work on a different level than compared to the pre-pandemic. T
There are no more questions at this time, and I hand back to Antje Kelbert.
Yes. It looks as if we have satisfied all the questions. So if you have some questions afterwards, please do not hesitate to contact from the IR team. We are happy to take those. We also invite you to meet us at several occasions over the coming months after a summer break, especially on the conference we have on our website, you see where we will be active. So thank you all for your interest this morning and have a pleasant summer time. Enjoy your own out store and gardening projects, and we hope to meet you soon in person. Goodbye.