TRENDS IN OUR MARKETS

Endless opportunities for compounders in stable markets

Currently, our more than 150 companies offer services in Norway, Sweden, Denmark and Germany. Going forward, we plan to expand to additional geographies in Europe. Although the geographical markets have different outlooks, trends and competitive landscapes, they share several key dynamics and structural attributes.

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Most of the revenue in surfacing is derived from refurbishment and small to medium sized B2B customers, with a stable underlying growth. Market growth has historically been driven by resilience in refurbishment, housing shortage, aging housing stock, attention to ESG, and professionalization of industry.

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Market fragmentation

The surface treatment solutions market is highly fragmented and primarily compromises of many small local companies. The fragmentation of the market provides opportunities for compounders. There is an increasing demand from customers in terms of quality of services, ESG, digitalisation, transparency documentation as well as increased economies of scale that may further drive the consolidation in the market.

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Resilience in refurbishment

Over the course of several decades, the refurbishment segment has proven to be more stable than the new build segment. This development is explained by that some refurbishment projects cannot be postponed due to regulations, risk of additional damages being inflicted if refurbishment is not carried out, the relatively low cost for refurbishment projects in relation to overall project cost for building etc.

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Aging buildings

Håndverksgruppen’s surface treatment solutions market has a large stock of aging buildings in our markets. Additionally, the increased attention to ESG is accelerating the need for refurbishment in the aging housing stock. For example, in Germany, almost 45 percent of residential buildings need to be renovated by 2033 to meet the climate targets.

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Less undeclared work

Historically, there has been a large share of undeclared work in the industry. The market is now seeing a diminishing trend of undeclared work due to several reasons, including social unacceptance, and increasing governmental efforts. This drives customers towards professional, integrous players in the market.

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Housing shortage 

There is a European-wide housing shortage, which has been further worsened by a decline in new build due to the recent years’ economic downturn. For example, in Sweden, 180 out of 290 municipalities report a housing shortage. In Germany, there is a shortage of 600,000 apartments. 

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Shortage of skilled labour 

The surface treatment solutions market is experiencing a shortage of skilled labour, which has negatively impacted market growth. Although the labour shortage places a constraint on the overall market growth, incumbent players, such as Håndverksgruppen, benefit strongly from lack of competition for projects. In particular, such effect is strong for companies that are generally considered to be attractive to work for. Håndverksgruppen only targets to include leading companies into HG and is therefore considered to be able to capitalize on labour shortages.

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Regulatory compliance and sustainability 

Quality assurance, regulatory compliance and sustainability, are driving the need for digitalization and innovation. Despite technological improvements and innovations in this area, the overall possibility for major digital disruptions in the industry is low with only a few players, such as Håndverksgruppen, having established themselves as prominent industry leaders.