Økonomi

Summary

Bo Michaelsen, CFO of Davidsen, shares insights into the economic development of the company, which operates in the building materials industry. He explains the challenges faced, including fluctuating interest rates, inflation, and the impact of the Ukraine war. Despite a significant drop in revenue in 2023, Davidsen has experienced growth due to acquisitions and strategic expansions. With a focus on B2B and B2C sales, the company is positioned for further growth, including major acquisitions that will increase both turnover and staff. The company's recent acquisition by Kesko highlights the shift to a publicly listed ownership, bringing changes in financial reporting and operations.

Takeaways

• 😀 Bo Michaelsen is the CFO of Davidsen and has been with the company for seven years. He has a background in economics and finance, including an MBA from Aarhus University.
• 😀 Davidsen operates in the construction industry, which is heavily influenced by factors like interest rates and inflation. The industry saw positive growth until the Ukraine war led to significant inflation and interest rate hikes.
• 😀 The company’s revenue dropped by nearly 30% from 4 billion DKK in 2022 to 3 billion DKK in 2023, largely due to external factors like inflation and the war in Ukraine.
• 😀 Davidsen's revenue saw significant growth after acquiring a company called Optimere in 2019, boosting their revenue to 4 billion DKK in 2022 before it fell back in 2023.
• 😀 The company categorizes its revenue into three main segments: heavy building materials (timber), retail items (like tools and paints), and house-building, which is treated separately in internal reporting.
• 😀 The business can measure daily revenue precisely due to its daily sales model, which is influenced by weather conditions and external factors like snowstorms that can halt deliveries.
• 😀 Davidsen has seasonality in its business, with quieter months around December to February, and busier months when the weather is more favorable for construction and outdoor work.
• 😀 The company has three primary costs: purchasing goods, employee salaries, and operational expenses. Controlling procurement costs and employee wages is crucial for profitability.
• 😀 Key performance indicators for Davidsen include daily revenue, gross profit margin, salary costs in relation to gross margin, and net profit, all of which are closely monitored by management.
• 😀 Davidsen is set to undergo significant expansion, doubling its revenue from 3 billion DKK to 6 billion DKK and increasing its workforce from 800 to 1600 employees due to major acquisitions in 2025.
• 😀 The company’s business is primarily B2B, with 80% of revenue from business clients and 20% from private customers, who either visit the stores or shop via Davidsen's website.
• 😀 In August 2023, Davidsen was acquired by Kesko, a large publicly traded Finnish company. The transition to Kesko has led to increased reporting pressures but also introduced positive management practices and operational efficiencies.

Q & A

What role does Bo Michaelsen hold in Davidsen, and what is his background?

Bo Michaelsen is the CFO (Chief Financial Officer) at Davidsen. He has been with the company for around seven years and is part of the executive management team, alongside Henrik Clausen. His professional background includes 16 years at Solar, a company based in Denmark, and 10 years in the auditing industry with a firm named PVC. He holds an HD in Accounting and further education, including an MBA from Aarhus University.

What are some of the key factors that influence the construction industry, according to the transcript?

The key factors affecting the construction industry include interest rates and inflation. A period of low interest rates from 2019 onward helped stimulate the industry. The Covid-19 crisis in 2020 also contributed positively by prompting a surge in home renovation projects. However, the war in Ukraine led to high inflation and rising interest rates, negatively impacting the industry.

How did Davidsen's financial performance change in 2023 compared to 2022?

Davidsen's revenue dropped from 4 billion DKK in 2022 to 3 billion DKK in 2023, resulting in a loss of nearly 1 billion DKK in revenue, which is a decline of approximately 30%. This highlights the cyclical nature of the construction industry and the impact of external factors like interest rates and inflation.

What were the major acquisitions made by Davidsen in 2019, and what effect did they have?

In 2019, Davidsen made a significant acquisition of a company called Optimere. This acquisition boosted their revenue from approximately 1.8 billion DKK in 2019 to 4 billion DKK in 2022, before it fell back to 3 billion DKK in 2023 due to external market factors.

How does Davidsen categorize its revenue sources internally?

Davidsen organizes its revenue into three main categories: 1) Timber, which includes heavy building materials like foundations and windows, 2) Retail items, such as hand tools and paint, and 3) Housebuilding, which refers to large builders who focus on building houses. This helps the company track and manage its performance more effectively.

How does Davidsen track its daily business performance?

Davidsen is a day-to-day business, allowing it to closely monitor its revenue every day. As a wholesaler, the company can track its daily sales and see immediate effects from external factors, such as weather disruptions that prevent deliveries. The company's performance also fluctuates with seasonal changes, with higher activity in summer and slower activity in winter.

What are the three main types of costs Davidsen incurs?

Davidsen's main costs are: 1) Cost of goods sold (COGS), which is focused on buying products as cheaply as possible to sell them at a small profit, 2) Labor costs, which include salaries for employees, and 3) Cost reimbursements for other operational expenses.

What key performance indicators (KPIs) does Davidsen focus on?

Davidsen's key performance indicators include: 1) Revenue, which is tracked daily, 2) Gross margin, which is closely monitored in relation to budgets and previous years, 3) Labor costs in relation to gross margin, and 4) Bottom-line profit, ensuring it meets expectations. Additionally, Davidsen focuses on working capital, which measures how much is invested in the business to generate revenue.

What is the impact of Davidsen's planned acquisitions in 2025?

The planned acquisitions in 2025 are expected to increase Davidsen's revenue from 3 billion DKK to 6 billion DKK and double its workforce from 800 to 1600 employees. These acquisitions will improve economies of scale and help Davidsen negotiate better terms with suppliers. It will also make Davidsen a more attractive employer and contribute to its future growth.

What change in ownership did Davidsen undergo in 2023, and what are the implications?

In August 2023, Davidsen was sold to Kesko, a publicly traded company from Finland. Kesko is one of the largest companies in Finland and operates in the construction materials market across Scandinavia. This change in ownership means that Davidsen now reports to Kesko and must adhere to tighter reporting timelines. The new ownership is expected to bring benefits, such as increased financial discipline and better business practices.