Belysse Group (Euronext:BELYS) Q4 2025 Earnings Call

0:00 Good morning, ladies and gentlemen. Welcome to the conference call of Belysse Group N. V. Regarding the full year 2025 results. As a reminder, all participants will be in listen only mode. After the presentation, there will be a question and answer session for analysts covering the Belysse share. Today, have with us James Newling, Chief Executive Officer and Andy Roelke, Chief Financial Officer. Gentlemen, the floor is yours. Thank you, Ren. Good morning everyone and welcome to Belysse Group's N. D. Full 2025 results call. If you have not already done so, you can download the press release and this presentation from the Investor Relations section on belysse.com.

0:47 I do need to start with bringing your attention to the disclaimer on slide two. I will not read it out, but please do make sure that you have read it. I will first talk about the financial summary of the full year 2025, and then Andy Rokiste, CFO of the Belysse Group, will take us through the financial review, and I will then give a quick update on our BEYOND programme and then also a conclusion. We will end this call with questions and answers sessions with the analysts following our stock. Please turn to slide four for the full year financial summary. From a financial standpoint, we saw in the full year '25 consolidated revenue a total of 254,200,000 Euro, which represents an organic decrease of 7.1% year on year.

1:37 Revenue of our US business declined by 7.0%, while our European faced a decline of 12.2% year on year. In profitability, the full year 2025 adjusted EBITDA was 34,400,000 which represents a decrease of 19.0% year on year. Our US business realized an EBITDA of €29,900,000 while the business in Europe realized an EBITDA of €4,500,000 The net debt at the end of the period was €128,600,000 including 19,600,000 Euro of impact from IFRS 16 lease liabilities resulting in a leverage of 4.2 at the end of 2025. I will now hand over to Andy who will go more in-depth into the financials.

2:27 Thank you, James, and good Friday thirteenth to all of you. So first let's take a closer look at our 2025 financial performance and we start with the group revenue bridge. So in 2025, we saw consolidated group revenue of €254,200,000 This is into The US, bringing revenue of €143,700,000 which is 7% lower than full year or fiscal year 2024. This decline was volume driven, but there was also unfavorable US dollar translation effects and on the positive side we have been observing increased average selling prices.

3:17 In Europe, the revenue result was and decreased year over year by 12.2% to 1 and €10,500,000 The market softness continued and negatively influenced volumes and revenues, in particular in our residential business. Looking at the full year '25 group adjusted EBITDA, the total was €34,400,000 representing an adjusted EBITDA margin of 13.5%. In 2024 we achieved an EBITDA margin of 15.1%.

4:04 The US EBITDA was €29,900,000 and we have improved the EBITDA margin to close to 21%. At the constant exchange rate, the overall adjusted EBITDA is 2.3% lower than prior year. So whilst volumes in the second half of the year were lower than the equivalent comparative figure with a Q4 twenty twenty five revenue 8.8% below prior year at constant exchange rate, we have noticed and we have seen the order book picking up at the end of the fourth quarter of twenty twenty five. With regards to Europe, we achieved an adjusted EBITDA of €4,500,000 where the lower volumes were partially mitigated by improved pricing, the higher share of the commercial business and reduced fixed expenses.

5:09 Talking now about the cash flow on slide eight. We ended the year with a cash balance of €34,500,000 compared to cash balance of €38,600,000 at the end of twenty twenty four. It's important to highlight that we had two particular effects affecting the year. First of all, we had the exchange effect, so exchange losses on cash and cash equivalents counting for 2.7 as well as we have been investing into an important upgrade and a major upgrade of the ERP system for Europe, is 5,700,000. Next to that, on the positive side, we have the adjusted EBITDA of €34,400,000 combined with an improved and a decrease in our trading working capital but improved from cash perspective of €7,100,000 We had unfavorable changes in other working capital representing €4,600,000 We paid €3,100,000 of net income taxes and we had regular recurring CapEx close to €10,000,000 Of course, we had as well important debt repayments and interest payments for a total of €19,600,000 Ending with the financial slides on leverage and

6:46 the net debt. So the net debt at the end of the period was €128,600,000 This includes €19,600,000 related to IFRS 16 lease liabilities. The net leverage increased to 4.2 times, where it was 3.1 times at the end of twenty twenty four. Our total available liquidity remains strong and this is also including the headroom under the RCF as we have at the end of twenty twenty five still €49,300,000 available. So both debt and cash movements were also strongly influenced by offsetting US dollar translation effects.

7:33 I will now hand over the floor back to James for an update on our BEYOND program. Thank you, Andy. Let's start with the first pillar of our BEYOND program, sustainability through innovation, and that's on slide 11 there. Total scope one and two CO2 emissions on a square meter basis produced 0.9 kilograms, a 23% decrease versus our 2018 baseline, increasing the share of our certified recycled content from 33.4% in 2024 to 36.4% in 2025. We've launched several initiatives, including technical modifications to reduce energy consumption, installation of EV charging infrastructure, electrification of the company vehicle fleet, including our forklifts, and we've raised our share of renewable energy.

8:28 Under our beyond program, we've committed 50 fit to 50% recycled content by 2025 for Modulus and Bentley. Both sites delivered on our beyond recycled content commitment for '25, each exceeding the 50% threshold. In '25, Modulus set a new benchmark for the soft flooring sector by becoming the first flooring manufacturer to achieve the cradle to cradle certified full scope gold for our carpet tile collections according to version 4.0. All Modulus cradle to cradle certified collections are now certified full scope at the gold or silver level, whereas Bentley has reached the silver level for the majority of its portfolio. Moving to slide 12 for our lean program.

9:21 The full year '25 results amounted to 1,700,000 P and L against a target of 1,500,000. From the start of January 2022, when we've announced our lean programme, we delivered 9,300,000 Euro in savings against our own target of 8,000,000. So that's 16% above the target that we'd set. In '25, we had 23 new different initiatives contributing to these results with a key focus on quality, material, energy and labor efficiency. With respect to agility, we are working to further improve our delivery performance and service level to our customers, at the same time managing our end to end inventory.

10:10 Our Fast Track QuickShift program at Bentley, designed for maximum flexibility and expedited delivery to the client, covers a wide range of 20 styles representing 38% of modular carpet sales during the year. Orders of 1,500 square yards or less of products in this program will be ready to ship within ten business days of order. At Modulus, we also have a quick ship program, and as at as at Bentley, time is of the essence. Therefore, we've defined a quick ship program covering products across 17 collections with products ready for shipment within two to four weeks. To summarize this presentation, 2025 consolidated revenue was 254,200,000 and adjusted EBITDA was 34.4, resulting in an adjusted EBITDA margin of 13.5%.

11:07 Bentley Mills, our US division, realized for the full year 2025 a revenue of 143,700,000. The decline was volume driven and also due to unfavorable USD translation, which has been partially offset by increased average selling prices. Since the end of quarter four twenty twenty five, the order book is showing signs of improvement. In Europe, the full year 2025 revenue decreased year on year by 12.2% to £110,500,000 continued market softness negatively influenced trading in the residential business, while trading in the commercial product categories were less affected. Average selling prices improved versus prior year, following price increases and a higher share of our commercial business.

11:56 We continue to progress well in our sustainability program, achieving further reductions in CO2 emissions per square meter produced of 0.9 kilogram, a 23% decrease versus the 2018 baseline, and improved the share of our recycled content in 2025 from thirty three point four to thirty six point four, and also successfully recertified collections to the latest cradle to cradle standards. We are extremely proud to be the first flooring company in the world to achieve cradle to cradle full scope gold standard for some of our carpet tile collections. Our leverage increased to 4.2 and liquidity was 49,300,000.

12:42 I would like to thank the team who continue to work hard on commercial excellence, efficiency and costs while we are waiting for the markets to recover. I will now hand back to Lynn for the Q and A. Yes, thank you. So we will now begin our question and answer session for analysts covering the Belysse Group N. If you have a question, please raise your hand by pushing the button on your screen. And if you are dialing in via your phone, please press 9 to raise your hand. Yes. We have a question from Wim Hoste. Just a minute. I hope you hear me well. I have three questions, please. First one would be on the cost environment and and pricing environment.

13:34 Obviously, I'm making reference to what happens in The Middle East and increases in energy and gas costs, etcetera. Can you maybe elaborate on that, how that is impacting or potentially impacting Belize? And yes, how you might cover that via price increases? Then the second question is on the outlook for the European business. I think you mentioned clearly that you see positive signs in the order book in The U. S. At the start of the year. But can you maybe elaborate a little bit on European business, both the order books for the commercial part as well as maybe the footfall in shops, etcetera, for the more residential parts?

14:20 And then the third question is on CapEx and investments. Can you maybe elaborate on how much CapEx you might need in 2026? And also linking that to the ERP system and investments that you're doing, are there additional requirements for investments in the ERP system also in 2026? And maybe what the effect of that ERP system might be to your working capital, for example, or to your overall efficiency? If you can also touch upon that, that would be very helpful. Thank you. Thank you, Wim. Let's talk about the Iran situation. Obviously, it's a very hot topic. We're nearly two weeks into a war and there's a lot of uncertainty around that. I I can say a couple of things.

15:15 The the we we're all aware of the public information. Right? Oil sitting at a $100. Qatar shutting down their gas supplies. And although Europe is not a purchaser of gas from Qatar, that has a secondary effect on the European market. So we see the inflationary figures coming in fast. But what we also know from past experience when we look at what happened, it was about a year ago when we had these hootie pirate situation and the Red Sea was closed for a while, we we think a lot of the same things will happen that we saw disruptions in supply chains. And we saw sort of short medium effects, and and there was a kind of short term effect of shipments being delayed somewhat, and then we saw a secondary effect of container availability as products come out of Middle East or if we have products coming from Asia needing to reroute and container availability became an issue.

16:13 So I think maybe the first important thing to say is we have This the seems to be affecting Europe much more than The US. And that makes sense when you think about supply lines, you know, if ships have to travel through the Red Sea area and we know that traffic sea traffic is limited. It's not the Suez Canal is not closed, but we see it's much more limited. So immediate the immediate reaction is when we look at Europe, we have to think supply lines and are there alternative suppliers available and do we have a risk of shortage of materials? We have European qualified suppliers and Asian qualified suppliers for the bulk majority of our raw materials.

17:01 And at present, we do not fear a shortage of raw materials, even if our Asian supply lines were to be cut off. We're confident of our sourcing capability within a European context. That might bring a cost change, as we know European supplies tend to be higher in price than Asian commodity suppliers. But you know, the first most important thing in these situations is to ensure continuity of business. The second part is it's natural there will be cost impacts on the business and we have a confidence that we can pass through these cost impacts and, you know, we have past experience of either relating to cost increases that we've seen on our business, either longer term, or if I refer back to 2022, when there was a short term squeeze on important, particularly energy prices, that we saw a tremendous rise in gas and electricity prices, and the ability of this company to pass on energy prices, I think, is well proven.

18:06 The the third aspect that I wanna talk about is is with respect to Iran. What what we know is if if by some reason this war would end today, this very moment, the effects of this crisis or the Iran situation don't stop today. Okay? We we have seen in various past events, and if I cast your mind to the the one ship that blocked the Panama Panama Canal a a couple of years ago and how the supply chain effects of that rippled on for months and months and months. So we do not expect an immediate reaction in supply lines and prices should the situation stop. And therefore, we are planning in a way, like I've said at the beginning, thinking about continuity of supplies, you know, that's the first and most important thing, and looking at our ability to pass forward a certain level of anticipated costs.

19:06 And we already see some cost increase and we are aware of other cost increases that will happen because of that. And I think every business in Europe is seeing exactly the same things. Does that answer your question, Wim? Yes, that's clear. Thank you. Thank you. The second part is EU outlook. So yes, we see a very resilient US order book and we do see signs of improvement. You know, my first comment on The US order book is we're strangely only about six weeks away from quarter one reporting. So, I'm not going to say too much about The US order book other than it's improving. And I think as a business, we can be pleased to see a progress, particularly given the comment that volumes were dropping a bit during last year.

20:00 Europe, on the other hand, we we always have to talk about the two parts of Europe, the the contract business, which is more akin to what Bentley does. Although Bentley is truly a premium player, I think Modulus is the up and coming challenging player and improving all the time and and, you know, really making wonderful steps. But Modulus is not a Bentley, and I think you kind of see a a Modulus performing at at a at a level that, you know, everything can always be better, but given the market conditions, it's fine. The problem has been more on the residential business. And if we look at different residential businesses, whether I talk about residential flooring companies, which if there are quite a few in the neighbourhood, or if I speak of furniture, residential furniture companies, are orientated toward residential or paint supplies or ceiling, residential is going through a difficult ride.

20:57 And I think something, you know, we move with the market and I think you have insights into other residential companies and, you know, that's the factors which affect residential business, bank lending conditions, you know, and government new home builds, mortgage uptakes and things like that. So they haven't changed significantly. In fact, they have not changed at all in the last twelve months. So those are the real factors that will change positively the residential business. The other factor comes back to your first question on the golf situation. It's very clear that golf affects a war these kind of inflationary things can affect business and consumer confidence. I don't see any sign of that right now. That doesn't mean there won't be.

21:57 And that's just something we have to stay abreast of and keep looking at. Okay. Okay, that's clear. And the third one on Yeah, I will hand Andy on the CapEx question. Thank you, James. So when coming back to the question on the expected amounts on capital expenditures, We still have the intention to invest similar amounts as we have been investing over the past years. So no big changes to be expected in that part. With regards to the ERP, yes, we are very excited about the go live, which is now really very eminent. And yes, we have indeed made projections on effectiveness and efficiencies.

22:48 First of all, on inventory management and of course the new tools will be a great platform also to start introducing AI, which should then bring also operational business efficiencies. I do want to bring as a message, this will be the start date. 2026 will be the go live year, so we are all getting trained on the new system, so the effects will be there and we will be able to measure them, but it will be a number of months to say the least before these benefits will get visible in P and L and into the cash statements.

23:34 Okay. That's very clear. Thank you. Those were my questions. Are there any other questions? Please raise your hand or push star nine. I think we have no further questions. Okay, Lynn, and thank you very much and thank you for those who attended this course and thank you for the questions. As a reminder, we will publish a trading update concerning our quarter one twenty twenty six financial results in April.

24:22 So thank you for your attendance and