Havilah Resources (ASX:HAV) Q2 2026 Earnings Call

0:00 Ladies and gentlemen, welcome to today's earnings call of the Havila Kystruten AS, following the first half-year results of 2026. I would like to welcome the company's CEO, Bent Martini, and CFO, Alexander Rönestahl, who will guide you through the figures in a moment, followed by a Q&A session via audio line and chat. And with that, I hand over to you, Bent.

0:30 Thanks a lot. Good morning, everyone. First of all, I will start to say that this is a sad morning for people in Norway. I think also people outside Norway with the recent news of the passing of His Majesty King Harald this morning. He will for sure be remembered as a great king and our thoughts this morning goes to especially Her Majesty Queen Sonia and of course the entire royal family.

1:20 We're looking forward to having a new king, King Håkon, I guess. This will be official in a few hours. So back to our first half, second quarter, 2026. The results is next slide. For those not familiar with the route, we are one of two operators on this route between Bergen and Kirkenes, the unique coastal route.

2:05 It's a concession with the Norwegian government, 34 ports going northwards and 33 ports going southwards. We have 4 out of 11 vessels on the route and the other operator is Hurtigruten with their 7 vessels. I'm quite proud that we are continuing delivering on hire services. Our vessels are high performing vessels. So 100% uptime is fantastic on this very hectic route.

2:54 It's a fantastic operation with our crew, familiar with the vessels now and continuing to deliver high performance. So the results for the second quarter is very strong. especially May and June is very very strong and all-time high for at least Havila Justrutten and both the contract revenue and the operation revenues are up and the EBITDA reached 1998 million and Alexander will come back to more details about the results on in the figures.

3:47 Also confident that we are on the right track when it comes to delivering on increased operational revenues on board the vessels, which is a firm target for the company to increase more. In the second quarter compared to last year, an increase of 32% is good. we have a way to go when it comes to kind of the overall target looking ahead but it's a very good movement and the performance is increasing day by day so that's a very positive sign and as we have said before our focus on digital on the digital platforms, selling most of our vouchers by our own channels. That's still a focus.

4:52 And we have now a very, very good balance between kind of the sales through operators and the sales through our own channels. Selling on our own channels, implies that we will have no commissions paid out, so the revenues are stronger, and the development on selling on the FIT individual travelers is going up, and also securing their own rewards revenues very, very good. Next. Yeah, so we do see that the focus we have on kind of mixing up the right customers or the guest segments is going very well. We have a strong increase, especially in the English-speaking markets, North America, UK, Oceania, and those represent more than one-third of our customers.

6:16 So it's a strong kind of movements. Maybe the World Championship in football also helped out because it's a very, very strong booking now and all-time high. activity on our web pages. So Norway is a very, very attractive market these days. And it seems also going forward that the interest of traveling to Norway and especially also on this route is very strong. When you look at the bookings on the left side. The graph you see is showing the kind of the development year by year.

7:14 The green one is 2026. It shows the strong kind of development since 2025. And the red one is what we can say about 2027. It's very strong. We are very optimistic for 2027 also. So all in all, it's a very, very positive development when it comes to the occupancy, the bookings, and as I mentioned earlier, the development on board sales, building kind of the revenues. It's a very, very positive development.

8:03 So then, Alexander, then you can go more into the details.

8:07 Thank you, Bent. A couple of words on the overall revenue and EBITDA development in the second quarter. So as Bent mentioned, very strong headline growth on revenues driven by contract revenue up more than 20%, operational revenues up 13%, where this is driven by higher volume. We have a 17% increase in passenger nights. We have an increasing ACR. and we have very strong growth in onboard sales. I think the KPIs probably suggest somewhat even stronger growth, especially on the ticket revenue side. There is, and we mentioned this in the quarterly report, there is a certain periodization effect compared to the KPIs, where we do expect a positive in Q3.

9:11 and there's also a somewhat currency effect where a large part of especially made bookings for this year were made at a higher exchange rate than the realized one. And then I think it's worthwhile mentioning that currency effects on the operational side translate into savings on the financial side where we do have debt denominated in Euro and USD. Looking at the EBITDA, 98 million, up from 79 million last year. So the positive growth in revenues is partly offset by cost increases, but especially on the bunker side, where we in the second quarter faced higher bunker costs compared to especially first quarter this year, and also compared to the expectations at the end of last year.

10:15 We are working also on efficiency initiatives on board the ships, and we do expect that these, we do see effect of that now, and we do expect these effects to materialize in the coming quarters. On the KPIs, the overall KPIs are all moving in the right direction. Occupancy is very strong in the second quarter, 83%. It's the highest occupancy we have recorded. Q3 is shaping up very well as well, and we're seeing the same type of occupancy figure for this third quarter of this year.

11:04 which is a leap from 24 and 25. Cabin factor has risen from 1.7 level up to 1.9 and it's kind of stabilized at that level. The ACR, we are working hard on yield management and achieving a price growth of close to 10% this year. At the moment, we have about 8% growth in ACR compared to last year. And what we see is that the pricing curve this year has been very positive with the with the average price increasing throughout the year as bookings closer to departure is sold at a higher rate than earlier bookings.

11:57 The spend per packs night is also up. And we do see that the initiatives that we have implemented on board is paying off. And as Ben mentioned, we have with the very high occupancy that we now have, there's a great opportunity now to work on sales on board as we have all the guests on board. On the cost side, I think I'll jump to the next slide. I think this is more for analytical information. Looking at the cost in the second quarter, on the right-hand side, you can see the correlation between occupancy and cost, the Q2 of 26.

12:50 is on the line of cost and as expected, given the very high occupancy figure that we saw in the second quarter. And it should be mentioned that this cost overview is not adjusted for inflation. Looking at the various cost components, cost of goods sold up 30% compared to Q2 last year, driven by both a higher number of passengers on board, but also higher sales per guest. Payroll crew up 30% from second quarter last year. It's a function of higher occupancy and also wage inflation.

13:38 The LMG side, we also have an increase compared to last year, where the higher spot price from the geopolitical uncertainty in the Middle East is impacting our fuel costs. On the admin OPEX, we are maintaining the same level as earlier, and I think organizational-wise, we have scaled up the organization over the past couple of years, and I think we are now at the appropriate level in terms of staffing on shore. On the outlook, we have revised our target to approximately 500 million for the full year.

14:31 The revision is predominantly linked to the geopolitical uncertainty that we are experiencing at the moment, and especially the higher energy cost as an effect of that. We do expect, based on the current forward pricing, a much higher fuel cost in Q3 and Q4. With that said, we are on track operationally. The occupancy is trending close to 80% for the year. We are currently above 74%. We are on track on achieving an occupancy in the higher range of our target. The ACR is also trending upwards towards 10%.

15:23 With those strong underlying booking figures with the positive development, we are maintaining the long-term outlook for 6 to 800 million in 27 onwards. and we do with the indexation that we have in the government contract where approximately 70% of the fuel cost is compensated in higher revenues on the state contract but with a time lag of one to two years so we do expect the 2028 compensation to reflect the current decrease in fuel pricing. So that's the reason why we are maintaining the long-term target.

16:08 We see that this is a short-term issue. On the financing side, we did full refinancing at the end of last year, reduced effective interest rate from high double digits to just below 10%. It's a very flexible and long-term financing arrangement for us, and it puts us in a position to deliver on the operational results. And it's a platform that can be optimized as we do deliver on our results with the first call option in 2028.

17:00 On the balance sheet side, the vessels that we have, we do collect the broker valuations every quarter. This is a broker's assessment on the value based on new building costs, willing seller, willing buyer mechanisms. Vessels valued at €663 million. at the end of second quarter. That compares to book value of close to 4 billion NOK. So there's a substantial premium on the market value of the vessels. And that really reflects the movement in new building costs since the ships were ordered back in 2019.

17:47 So if you went out and ordered similar type of ships today, you would easily pay 180 million per ship. Based on that broker value, the value adjusted equity stood at 2.2 billion in the second quarter, supporting the underlying value of our share. So to sum it up, we have a record high booking situation for 2026. 2027 is firming up really well. And as we have commented on in our trading update, we see that we differentiate between...

18:37 between group bookings and individual bookings. And we see individual bookings developing very positively. So we do see that the book for next year is firmer, higher quality than a year ago. and this high occupancy creates a platform for growth in onboard spend. So the job is now really to develop the product on board and take advantage of that opportunity that lies in onboard sales. We do actively work on additional revenue streams. So we have started packaging to some extent. So we do offer shorter trips combined with flight and hotel. We are testing that out.

19:29 We are offering hop on, hop off. And with these shorter trips, with these specialized packages, we are attracting a much younger clientele than what has historically traveled on the route. The refinancing puts us in a good position so it gives us the time to deliver operationally and then we have a call option from 28 and work on that will start next year. And then finally, we do expect that the next tender for the next concession period will be announced sometime later this year or early next year.

20:17 And we are in a very great position to participate in that tender and achieve a renewal of the contract. So I think with that Ingmar, the presentation from the company is complete and then we are open for questions from the audience. Okay, thank you very much. So we move on to the Q&A session if you would like to ask a question. please raise your hand and I can allow you to unmute yourself and we already have a raised hand Tim Kruse you should be able to unmute yourself switch on the microphone and ask a question Mr.

21:04 Kruse please go ahead

21:06 Yes, good morning. Thanks, Ben. Thanks, Alexander, for the presentation. On the guidance for this year, so it would imply that you do roughly 350 plus EBITDA if we reach the 500 in the second half. Can you walk us through where that would come from? It must then only come from the booking revenue line as cost base will increase in the second half. Obviously, Q3 is your best quarter, but also Q4 must be then substantially better than last year and even the year before. That would be helpful if you...

21:53 if you could yeah give a bit more color on that and then secondly I'm also looking at sort of your midterm targets there again that would imply for the 800 million another 300 million plus in revenue uh sort of from this current year level which you are saying you're heading to 80 percent um maybe 80 occupancy so what What occupancy level and what other sort of onboard sales, activities, pricing, et cetera, would you need to reach that? And yeah, what sort of timeframe would you think that could be possible? Thank you.

22:39 Yeah, so I think on the target for this year, Tim, the majority of our EBITDA is created in the third quarter, obviously. And if you look at the history of the last Q3s, that has been the case. We do see a positive periodization effect in Q3. on the revenue side compared to Q2, as well as a lesser currency effect compared to the headline KPIs. So the bulk of the EBTA is created in Q3. And then we do see Q4 firming up quite well.

23:25 We have, I think, the booking intake at the moment for the year is very strong. So I think we are very optimistic on top line. And then we are concerned about the cost side, which has led to a revision of the estimates. I guess on the onboard sales, Tim, we have the guests on board. We are now working on developing the product portfolio for the guests on board. as well as it's really a people's thing. So it's the sales training, it's management training, and we're also implementing sales targets and incentives for the staffing on board to achieve these goals. I don't know, Bent, if you have any things to add.

24:41 And Tim, on the longer term side, on occupancy, we see 27 firming up really well. This year, we're going to be close to 80% at the end of the year. In occupancy, we see 27 being even stronger. So we're quite confident on the... on the occupancy level, we have raised prices substantially to reflect both the increase in cost levels, but also the strengthening of the Norwegian kronor towards other currencies.

25:27 So we're quite optimistic about the operational side next year. And then if you take into account that the state contract will increase based on indexation, that leads us to maintaining that target line.

25:49 Okay, thank you. That's helpful. Ben, can you maybe comment on the competitive environment? I mean, you only have one competitor, but what the trends are there in terms of also the tender, what you're hearing. And it would also be interesting... to hear about the ecological profile in terms of what could be expected for the new concession round because my understanding was the ambitions for the ecological treatment of the current tender period was somewhat more ambitious and then didn't turn out to be that...

26:45 that comprehensive as you were prepared for with also your ships.

26:55 If you look at the concession itself, then the requirement was to reduce the CO2 emissions by 25% compared to... 2017 figures in this route. So we have managed to reduce the CO2 by plus 35%, close to 38, 40%. That's kind of the capacity or the potential now. So we have delivered on the requirements in this route.

27:46 So I think we have overperformed. That's one thing. The sad thing of the contract is that it was intended to give some environmental bonus if you actually reduce the CO2 more than those 25%. And that is something... because we have been in discussions with the government and still are on that part. But that is kind of the disappointment from our perspective on the contract. When it comes to the World Heritage Fjords, that's another but as more demonstrate that those not willing to reduce or willing to invest in environmental measures, they actually won that battle. So that was a kind of a big disappointment for us.

28:48 But we do see that actually keeping up, being... being in the forefront actually increased the focus on the company. The people traveling with us is very focused on the environmental side and We have a younger kind of guest mix, us closer to 50 years in average and the other operators maybe more closer to 70 in average age. So the people traveling with us is very focused on the environmental side of the business and willing to pay. So that kind of is something we look as our strengths going forward.

29:43 And of course, present lessons are, we are today able to reduce and deliver by the 2050. requirements. If you look at the Paris Agreement, etc., then 2015 requirements we can do today. And that put us in a strong position for the next tender because still, even though the situation or the political issues in the U.S. and others kind of have delayed the process in IMO, etc. Still, the focus on environmental measures are there.

30:31 And we will continue our kind of focus on reducing the CO2 by blending in biogas going forward. And the instrument, I think, will be that Norwegian government will implement the EU maritime, the recently said that that would be implemented by January 2028. Then, of course, we have a very, very strong incentive to continue reducing CO2 in that market. It will be very positive for the company to do that. When it comes to the next tender, we believe that The Norwegian government cannot just say that it will keep the present requirements.

31:28 They need to strengthen the focus on the environmental side. And we are not afraid for that. We will be able to deliver on day one. Did I answer your question, Tim?

31:44 Yeah, thanks. Okay. Yeah, I hope that turns out that way. And then, yeah, congratulations on the operational performance. I also hope the cost side is a bit in your favor in the second half of the year. Thank you. Yes, thank you very much for the questions. And I'll wait if some other participants raise their hand, having a question. That is not the case by now. So, with no further questions arising, we come to the end of today's earnings call. Thank you very much for your interest in Havila Kystulten.

32:30 Thank you very much, Bent. Thank you, Alexander, for the presentation and your time. And should further questions arise at a later time, please feel free to contact Investor Relations. I wish you all a good day from my side and handing over to you, Ben, once again for some closing remarks.

32:50 Thanks. Thanks, Ingmar. And thanks for facilitating this presentation. And thanks to everyone hearing us out.