HÅNDVERKSGRUPPEN GROUP AS
From the left: Thomas Schwenke, Trond Sigurd Tørdal, Per Sjöstrand, Marina Lønning, Erik Nelson og Eirik Hjeltnes Wabø.
Nature and place of residence of the business
HG carries out everything from medium sized turnkey contracts to mainly smaller, individual assignments with the emphasis on rehabilitation work (often called rehabilitation and maintenance or R&M) in the business-to-business segment (B2B). R&M work varies significantly in scope, with everything from painting a wall after an insurance claim to in some rare cases extensive rehabilitation of several buildings, both internal surfaces and external facade rehabilitation. During 2023, the strong growth continued with the inclusion of craft businesses in Sweden, Norway and the first two in Germany into the group - a total of 32 craft businesses (40 companies) were incorporated in 2023. Growth continues as planned in 2024 and in the first quarter 5 craft businesses have been incorporated into HG - all well-run, profitable and with people and culture that fit in well with HG.
The group was established in July 2020 with 30 Norwegian craft companies which today are wholly owned subsidiaries of HG Håndverksgruppen Norge AS with Håndverksgruppen Group AS as the parent of the group. Since then, until the end of 2023, a further 104 craft businesses have been incorporated in Norway, Sweden, Denmark, and Germany.
The company's operations in Norway have covered the entire country since the formation of the group in 2020. The companies in Sweden are also spread across the country enabling us to deliver on national or regional agreements. In Denmark, two of the companies are located in Zealand and two in Jutland. HG's first two craft businesses in Germany were included into the group in 2023 and are located in the south of Germany. The group's head office is in Oslo and each country has a service office that supports, coordinates, and follows up operations per country which are also HG's main segments. During the financial year, the name of the parent company was changed to Håndverksgruppen Group AS from Håndverksgruppen Norge AS.
During 2023, the strong growth continued with the inclusion of craft businesses in Sweden, Norway and the first two in Germany into the group - a total of 32 craft businesses (40 companies) were incorporated in 2023.
Statement of the annual accounts
2023 was another good year with strong growth through especially the inclusion of craft businesses into the group, but also a good organic growth in a challenging market. As expected, the market became more demanding throughout the year driven by macro-economic conditions resulting in a decline in new construction activity across all countries where HG is represented. Although the general trend is reduced activity in the new build market, there are large local variations and thus also impact HG's companies differently. A large number of HG companies improved profits in 2023 compared to 2022. In 2023, the new construction market in Sweden had a weaker development than in Norway. The companies have continued their good cooperation on projects and sharing of best practice across the companies, which improves our resilience in a more challenging market. The increase in raw material prices was more stable than in 2022, however, the price increases continue to cause some challenges for both customers and HG's craft businesses. For the 2023 annual accounts, the group has changed the accounting standard from Norwegian GAAP to IFRS and this is described in more detail in the notes to the financial statements.
Total operating income in the group amounted to TNOK 5 958 605 and the annual profit after tax was TNOK 82 697.
The group did not carry out research and development during the year.
Total cash flow from operations in the group was TNOK 392 575, while the operating result for the group amounted to TNOK 248 333. The difference is mainly due to depreciation and amortization expense of non-current assets.
The group's cash and cash equivalents was TNOK 428 571 as of December 31, 2023. The Group's liquidity position is deemed sufficient to fund its growth and operations and is regularly assessed by the treasury function.
Additional loan financing was added in 2023 to support future growth. For more information on our credit financing see the notes to the financial statements.
Total assets at the end of the year was TNOK 4 658 815 and the equity share was 25%.
Own shares
The company does not hold any own shares.
Future development
Håndverksgruppen Group AS works to build a leading, nationwide offer to our customers, and we want to be known for quality, sustainability and responsibility. The group has the ambition to lead the way in sustainability and has established a sustainability strategy and carried out measures such as the implementation of ethical guidelines with zero tolerance against corruption, harassment of any type, and bribery. People, the environment and responsible management are priority areas for HG's sustainability strategy, and these have been chosen based on their importance to HG and that we can make a difference and show the way for the entire industry. The effort has produced results through 2023. For example, HG increased the proportion of apprentices from 9.2% to 9.7% and the number who completed the HG school increased from 342 to over 500. Throughout the year, over 7000 m2 of floor was renovated and not replaced, and this saves the environment from large amounts of waste, and the mandatory training of all employees in HG's ethical guidelines are examples of HG's high ambitions and level of activity in sustainability.
Growth will primarily come from including new, solid craft businesses with a strong local and regional market position, and new companies will increasingly be included in the new HG markets, Denmark and Germany. HG Sweden, and to an even greater extent HG Norway, has solid national coverage, but we will also continue to include companies going forward. HG will continue to grow within the existing core business; paint, flooring, masonry and tiling, improve the standards for quality and efficiency in the industry and at the same time move the industry in a more sustainable direction. Norway is the largest segment, and the priority has shifted to further develop best practice and increasing turnover on national agreements. In 2023, the strong growth in Sweden continued with the inclusion of 35 companies and this strengthened our presence in the east and west in addition to providing coverage in the south and north. HG entered the Danish market in late 2022 with the inclusion of 13 craft businesses, and 2023 was used in Denmark to establish the foundation for further growth. Cooperation between the Danish companies began quickly, and it wasn't long before they collaborated to tender for and win a national contract for a Danish fitness chain. The preparatory work for entering into Germany has been going on for some period of time with market analyses and the establishment of contacts with relevant networks in the industry, and in 2023 the first two German crafts businesses became part of HG.
War in Europe and rising interest rates have a slowing effect on the economy in general, which has mainly had an impact on the new build construction market segment. HG is mainly exposed to the R&M market with professional customers (B2B), which has a more stable development. The intensity of competition increases in periods of lower demand, but at the same time HG operates in a customer segment where quality and efficiency are crucial and HG's craft companies have extensive experience delivering in accordance with high customer requirements. The interest rate level now seems to have leveled out and the discussion in the media has shifted to when the first interest rate cut will come. Expectations of lower interest rates and increased property prices are positive drivers for increased activity in HG's markets and HG's companies are preparing for further organic growth.
Financial risk
Through its activities, the Group is exposed to various types of financial risks. Financial risks refer to fluctuations in the Group's earnings and cash flow as a result of changes in exchange rates, interest rates, refinancing and credit risks. The objective is to mitigate the financial risk to the greatest extent possible. For more information on financial risk management see the notes to our financial statements.
Market risk
The company is exposed to changes in interest rates, as the company has floating interest rate debt. Furthermore, changes in the level of interest rates can affect investment opportunities in future periods.
Foreign currency exchange risk arises when individual Group entities enter into transactions denominated in a currency other than their functional currency. The transactions of the operating entities are denominated in the local currency, thus there is little or no currency exposure from operating activities. Translation exposure arises when foreign subsidiaries' results and net assets are translated into Norwegian kronor. For the Group translation risks arise for the subsidiaries in Sweden, Denmark and Germany. Assets and liabilities in foreign currency are translated at the closing rate.
The Group has currency exposure related to financing as the parent is funding the subsidiaries in their local currency, thus movements of SEK/NOK, DKK/NOK and EUR/NOK exchange rates impact the profit and loss statements within finance, net. The currency exposure from the financing of the subsidiary in Sweden is reduced as part of the external financing of the parent is in SEK. The Company is currently not using financial derivatives to hedge any currency risk.
Credit risk
The risk of loss on receivables is assessed as low for the group. The turnover is spread over a large number of mainly medium and small projects and customers, hence individual projects or individual customers will not have a significant impact on the group. Developments in market conditions are followed closely to capture any structural changes such as a result of the war in Ukraine. The Group limits the exposure to credit risk with upfront payments and continuous invoicing and collection.
Liquidity risk
Liquidity risk is the risk that the Group may encounter difficulty in meeting its obligations associated with financial liabilities. The objective is for the Group to be able to meet its financial commitments in upswings as well as downturns without significant unforeseen costs.
The company considers the liquidity position in the company to be good. The company continues to focus on working capital optimization, especially through faster invoicing and reduction of the credit period.
Going concern
In accordance with Section 3-3a of the Accounting Act, it is confirmed that the prerequisites for going concern are present. The assumption is based on profit and cash flow forecasts for 2024 and the group's long-term strategic forecasts for the years ahead. The group is in a healthy economic and financial position.
The parent company and disposition of the year's profit
The board proposes the following disposition of the annual profit in Håndverksgruppen Group AS:
Other equity TNOK 40 956
Total allocated TNOK 40 956
The proposal is based on the owners' assessment of the company's capital structure.
Work environment
Sickness absence in the group was 6.6% of total working hours in 2023 compared to 6.7% in 2022. There are no longer reports of COVID-related absence.
Work with safety and health is a high priority in HG. We want to create a safe and healthy work environment through a strong safety culture for our employees, so everyone gets home safe for dinner - every day! That's why we have intensified our focus on occupational health and safety through ongoing safety campaigns in all our companies. Safety is everyone's responsibility, and our goal is to avoid injuries, illness and ailments caused by the working environment. In the field of safety, this means avoiding work-related accidents that result in serious injuries and absenteeism, and HG's companies report monthly on injuries that lead to sick leave and regularly share examples of incidents to raise awareness of safety. When it comes to health, we strive for employees to have an ergonomically correct working situation and to avoid health-damaging stress through contact with chemicals, noise or dust. Our continuous improvement initiatives are related to ergonomics/posture, use of safe job analysis (SJA), working at heights, cutting injuries, driving safety, protective equipment and chemicals. To ensure compliance with routines and the use of safety equipment, and the awareness work takes place in several channels including the HG school, craftspeople meetings and general manager meetings to name a few. During 2023, a total of 110 injuries, predominantly minor injuries such as cuts and bruises, have been registered which have resulted in one day of absence or more. Development of employees and talent development is also a high priority in the HG companies. We offer training for employees and strive to retain our experienced and competent employees. HG is of the opinion that diversity is important to preserve a good working environment, and we believe that diversity in terms of background, skills and gender is important for our success. The group works actively to follow up the requirements as a result of the extended activity obligation under the Equality and Discrimination Act, both by training all employees in HG's ethical guidelines and ongoing working environment surveys. We also want to take care of the future development of the professions in our companies. Therefore, we have a strong focus on apprentices and aim to have an apprenticeship share of at least 10%.
The culture in Håndverksgruppen is characterized by strong cohesion within the individual company and between managers in the various subsidiaries. The culture in craft companies that wish to become part of HG is carefully assessed before they are incorporated as part of HG.
Equality and discrimination
HG aims to be a workplace where there is no discrimination due to ethnicity, gender, outlook on life or orientation. As an integral part of our leadership programs at HG school, we train our leaders in "inclusive leadership". This applies, for example, to matters relating to pay, advancement, recruitment and general development opportunities. Of the group board's seven board members, there is two women and five men, and of the eight who make up the group management, one is a woman. Of the group's employees, there are 12% women and 88% men.
The group's work to promote equality and combat discrimination is an integral part of everyday life in several areas. In our recruitment campaigns, we try to attract employees from different backgrounds by highlighting aspects of the craft profession that may not have been known to the general public. We use both women and men, young and old in our recruitment campaigns to show that the craft is suitable for everyone. The recruitment material for apprentices is fronted by one of our female apprentices. All employees undergo training in the group's ethical guidelines as part of the onboarding program, an online whistleblower channel has been set up, the working environment is regularly measured and all managers complete courses in “everyday management” to name a few. Training material and information campaigns have been prepared to increase awareness and competence to counter discrimination and to contribute to increased equality and diversity. At the HG school, equality, diversity, and discrimination are central themes. We have a good overview of salary formation at head office, as well as among our regional managers and General Managers in our subsidiaries, and ensure with an annual process that this is not discriminatory. Salary formation in the subsidiaries is local and is determined by the individual General Manager in line with local needs and our ethical guidelines.
Board liability insurance
Insurance has been taken out for the members of the board and the general manager (board liability insurance) for their possible liability towards the company and third parties.
Environment
Håndverksgruppen has the ambition to be leading and forward-looking in many areas, including the environment, social responsibility, and business ethics. In a world where increasing high demands are placed on efficiency and competition between companies is getting tougher, the environment is becoming even more important.
Environmental focus and maintenance must reflect the company's vision and contribute to the employees being inspired to meet the desired goals. Our companies must be environmental beacon certified or ISO14001 certified. We will explore solutions that promote reuse, rather than always choosing new materials. The first bid for quality is professionalism, and HG is the Nordic region's largest group within surface treatment that works targeted towards defined target groups. The HG brand is our seal of quality, and we paint, brick, wallpaper, lay floors and tiles according to the strict requirements. HG has for three years reported on greenhouse gas emissions within Scope 1 and Scope 2. In 2022, we also carried out a screening of Scope 3 and relevant areas for reporting. In 2023, we have continued to work on understanding more about where our greenhouse gas emissions come from, in addition to quarterly reporting on greenhouse gas emissions to be able to measure similar developments throughout the year. The company's statement in accordance with the Transparency Act was made available on the company's website by the statutory deadline of 30 June 2023.
No significant events have occurred after the balance sheet date, with the exception of the incorporation of new companies which HG consider to be part of normal operations.
Signed in Oslo, 28.06.2024