Gabriel: FY’23/24 results delayed due to short-term uncertainties from accounts in Mexican unit

On Thursday, Gabriel announced that it is postponing its FY’23/24 financial reporting from 20 November 2024 to a date in 2025 (TBC by 8 January 2025 at the latest) due to financial reporting challenges in the Group’s Mexican subsidiary, including a key employee resignation and uncertainty surrounding the subsidiary’s inventories. Gabriel’s annual general meeting will be held on 29 January 2025. 

Gabriel also maintained its full-year expectations for the 23/24 financial year, against our expectations of an upgrade. The company also announced its new guidance for 24/25 on its ongoing operations, with the management still expecting challenging market conditions. We see a high degree of short-term uncertainty before the FY’23/24 report and more news about the FurnMaster business unit is announced. Based on the news, there is some downward pressure on our previous estimates and valuation, and we will update our estimates, target price, and recommendation for Gabriel in the coming days.

Greater near-term uncertainty as FurnMaster carve-out progresses but with Mexican accounts discrepancy

The Mexican subsidiary is a production unit under the for-sale FurnMaster business unit. We cannot know the outcomes of the management review, but it may lead to potential write-downs. Moreover, the discrepancies in the accounts may also affect the sales process (transaction price, postponements, or both) of the FurnMaster business unit. However, Gabriel’s management still expects to finalize its carve-out of FurnMaster in the 24/25 accounting year.

Ongoing growth in continuing operations but larger FurnMaster drag than anticipated

Gabriel reported preliminary results for its ongoing operations realizing revenues of MDKK 483, growth of 6% y/y, and EBIT of MDKK 19.7m, a 4.1% margin, up 1.2 percentage points. The growth came against ongoing historic low activity levels in European and global housing markets. However, group guidance is maintained at revenue of MDKK 880-930 and EBIT MDKK 8-15 suggesting a negative EBIT for Q4 23/24 of MDKK -4 to -11, compared to our estimate of MDKK 2.0. Gabriel issued guidance for its ongoing operations FY’24/25 for revenue of DKK 485-530m (growth of 0-10%) and EBIT of MDKK 20-30 (4-6% margin).

We still anticipate that activity levels in the real estate market will pick up, mainly driven by lower interest rates and lower overall inflation. In turn, these higher activity levels will positively affect the demand for premium furniture products and textiles. However, the market improvements are developing more slowly than first expected. Combined with the short-term uncertainties related to FurnMaster and the Mexican subsidiary, we are more cautious about the timing of the profitability turnaround. We will update our view on Gabriel in the coming days.

Disclaimer: HC Andersen Capital receives payment from Gabriel Holding for a DigitalIR and research agreement./ Philip Coombes 08:31 (updated 08:38) 15.11.2024.