Logitech (NASDAQ:LOGI) International SA reported strong earnings for the fourth quarter of 2024, with an earnings per share (EPS) of $1.59, surpassing the forecast of $1.37. Revenue reached $1.34 billion, exceeding expectations of $1.25 billion. Following the announcement, Logitech's stock rose 5.22% in after-hours trading, closing at $96.79. According to InvestingPro data, the company maintains excellent financial health with an overall score of 3.11 (rated as "GREAT"), supported by strong profitability metrics and robust cash flow generation.
Key Takeaways
- Logitech's Q4 2024 EPS and revenue surpassed forecasts.
- Stock surged 5.22% in after-hours, reflecting investor optimism.
- Successful merger with KMC enhanced portfolio value.
- High occupancy rates and long lease terms in the Nordic market.
- Potential challenges include future capital raises and macroeconomic pressures.
Company Performance
Logitech demonstrated robust performance in Q4 2024, driven by strategic initiatives and market expansion. The company's successful merger with KMC significantly bolstered its portfolio, contributing to a notable increase in market capitalization. Logitech's focus on high-occupancy rates and long-term leases in the Nordic region further solidified its competitive position.
Financial Highlights
- Revenue: $1.34 billion, exceeding the $1.25 billion forecast.
- Earnings per share: $1.59, beating the $1.37 forecast.
- Market cap increased by 189%.
- Net Operating Income (NOI) run rate increased by 168%.
Earnings vs. Forecast
Logitech's actual EPS of $1.59 surpassed the forecast of $1.37, marking a 16% positive surprise. Revenue also exceeded expectations, coming in at $1.34 billion against a projected $1.25 billion. This performance highlights Logitech's strong operational execution and market positioning.
Market Reaction
Logitech's stock experienced a 5.22% increase in after-hours trading, closing at $96.79. Despite a slight 0.13% decline in premarket trading, the overall market reaction remained positive. The stock's movement reflects investor confidence in Logitech's strategic direction and financial health.
Outlook & Guidance
Looking forward, Logitech plans to continue its focus on acquiring single assets and portfolios, with an emphasis on CapEx investments. The company is also exploring potential mergers and acquisitions, alongside a possible future capital raise and euro bond issuance.
Executive Commentary
CEO Niklas Sukieman emphasized the company's strategic growth, stating, "We have managed to build a portfolio of almost SEK 14,000,000,000 with an increased yield gap over time." He also highlighted the company's strong pipeline across Nordic countries.
Risks and Challenges
- Potential macroeconomic pressures affecting real estate yields.
- Risks associated with future capital raises or euro bond issuance.
- Market volatility impacting stock performance.
Q&A
During the earnings call, analysts inquired about Logitech's dividend strategy and tenant health. CEO Sukieman noted the company's small initial dividend as a signal of future shareholder returns and highlighted improved tenant health compared to the previous year.
Full transcript - Logitech International SA (LOGI) Q4 2024:
Niklas Sukieman, CEO, Logistia: Niklas Sukieman and CFO Filip Lavje. Please go ahead. Good morning, and welcome to the presentation of Logistia's year end report for the year of 2024. As usual, myself, Niklas Okkiman, CEO of the company, and Filipp Loeffgren, CFO of Logistia, presenting. As always, happy to take any questions after the presentation.
At year end, we have 143 properties at a value of roughly SEK13.2 billion. Rents per square meter stay low at below SEK700, and the occupancies still had high at almost 97%. The LTV continues to be below 50% and the NRV per share is today at SEK 15.3. 20 20 4 has been a very busy year for Logistia and worth highlighting are, of course, the merger with KMC that took place during the summer, which transformed Logistia in many aspects. We have more than doubled the property portfolio.
The market cap has increased by 189%. And this is an important factor when it comes to attract more investors and more investor types. NOI in the run rate is SEK $890,000,000, which is an increase by SEK 168 percent only in one year. We have increased the income from property management per share by 22% to SEK 1. Obviously, we've done a lot when it comes to refinancing.
And just after the merger in the summer, we have reduced the average interest cost from or 2%, five % from almost 6%. We have refinanced a secured bond at a margin of 5.15% with an unsecured bond at a margin of 2.75 We have been included in the EPRA index, and we have also seen a positive net letting for the full year of SEK 5,000,000. 6 months following the merger, we can see that the rationales behind the merger were true. We have reduced the central administration cost per square meter. We're looking to invest in several Nordic countries at the moment and the deal flow is massive.
We have reduced the financing cost of SEK61 million per annum post the merger. We have more bank contacts enabling us to grow in several markets at good financing terms. The liquidity in the share has increased by almost seven times if comparing the first half of the year with the second half of the year. We have seen a clear improvement when it comes to interest from both Nordic and international investors into the Logistia shares. And as mentioned, we were included in the EPRA index after the summer.
We've done two major deals that are worth mentioning. The first one is a greenfield development signed in Q4. We will develop 31,000 square meters of modern logistics for Intersport, and they've signed a fifteen year lease with us at Logistia. The development has started, and we're looking to finalize these projects later on this year. Total (EPA:TTEF) investment cost is roughly SEK 200,000,000, representing a yield on cost of 7.5%.
Just a few days ago, we signed a deal where we're buying a fully let property in Nijsoping. The property comprised 45,000 square meters and is fully leased to the municipality of Niskoping on a six year lease in average. Yield on this investment is in the range of 9.5%. On this slide, we are presenting the current run rate, including the most recent transactions. As you can see, there's been a large increase due to especially lower cost of financing.
The income from property management per year end share was 97 and SEK1 per share if including the NESRA project that will be completed later this year. The NIS shopping transaction alone will add 7% on the income from property management per share, giving us a total of DKK 1 per share. The portfolio composition is similar compared to the last quarter. We still have high yields in all markets and long waltz. Occupancy rates standing at roughly 97%.
We still have a high portion of triple net contracts at 91%. And as I said, long waltz with an average of nine point seven years. We're happy to report positive net lettings, in both the last quarter of this year as well as for the full year. As you can see on this slide, Norway stands out when it comes to rental uplift and increased turnover. As for the yields, we foresee that the come or we foresee these coming down during this year in all of the Nordic markets, and that's following a stronger transaction market and lower interest rates.
Filip Lavje, CFO, Logistia: Logos Dias revenue and net operating income are in line with expectations. We have a 4.5% increase in the like for like portfolio looking at the revenue. Apart from that increase, the revenue has been affected by the finalized project in Alling Source where the new lease with annual rent of $16,000,000 begun in December. The net operating income came out at SEK $216,000,000 and is down a percent from last quarter affected by both seasonality where Logistia in some properties are responsible for utility costs, which are higher during the colder months but also by some rent losses. All in all, the economic occupancy rate declined from 97.4% to 96.9%.
The operating margin showing the net operating income in relation to the total income increased to 85.1%. The main reason for the increase is the new property portfolio lease structure after the merger with KMC. If we exclude the rent supplements and compare the rental income with the net operating income, our adjusted operating margin increased to 93.2%. And during the quarter, there's been a lot of activities in the loan portfolio. We bought back the $900,000,000 NUC secured bond, which had had a margin of 500 basis points and replaced it with a $600,000,000 CEC unsecured bond at a margin of two seventy five basis points.
Together with some bank loans, these activities decreased our interest average interest rate from 5.6% to 5% in the quarter. Though these procedures came at a cost of 48,000,000 Swedish, which we in the report have classified as items affecting comparability since it's more of a onetime cost, the profit from property management per share for 2024 is more or less the same as 2023. But if we exclude the bond buy cost, we have increased the profit from property management per share by 18%. Looking at the key financial metrics, we have, through the newly issued bond and bond buyback, decreased the secured loan to value from 48% to 43.6%. The interest cover ratio, which is calculated on a last twelve months basis, increased to 2.1 times and is expected to increase even further with the decreased average interest costs.
In October, our unsecured bond issued in 2021 matured, which has, together with a buyback of the $900,000,000 NUC bond, decreased the share of bond loans in the total loan portfolio from 14% to 9%. We are still positive towards the bond market and estimate that we have the opportunity to use the capital market going forward without stretching the loan to value ratio too much. On this page, you can see some of the effects from our financing activities. Bear in mind that we have had average interest rate of 5.9% post merger, which has now decreased down to 5%. Of the 60 basis points drop in the quarter, around 40 of them come from lowered margins and the rest from lower EBOS.
We are currently working on negotiating lower bank margins even further with existing banks. Also, we are looking into changing banks for loans that came with KMC with a goal to decrease the bank margins even further. Outside of The Nordics, we are considering and discussing local financing setups for our unencumbered assets in Germany, Poland and The Netherlands. And the key takeaways are that more decreases of the average interest are to be expected and that we have a good relationship with both existing and new banks, which are eager to lend into our real estate segment. Closing the books of the financial year of 2024, we can look at some of the outcomes for our financial targets and policies and risk limitations.
Large headroom for our loan to value targets coming in at a loan to value of 48.1%. Our interest cover ratio is projected to increase going forward. For 2024, the interest cover ratio came out at 2.1% at a time. In September, we sharpened and strengthened our financial targets. The net asset value per share increased 15% in 2024, which is in line with our new targets.
Also, the profit from property management per share, excluding the onetime effects from the bond buyback, increased by 18%. Finally, the board of directors are proposing to the annual general meeting in May that there will be a dividend of 0.1 krona per share for the financial year of 2024. The proposed dividend amounts to 47,000,000 and the dividend per share amount to about 9% of the run rates we have today.
Niklas Sukieman, CEO, Logistia: Good. Looking at the future, we see that there are still many good deals to be done in the Nordic markets. We have managed to build a portfolio of almost SEK 14,000,000,000 with an increased yield gap over time. The growth going forward will take place with a combination of buying single assets or portfolios. We will continue to do CapEx investments into our own portfolio.
Obviously, aiming to do more developments like we've done for NKT and doing for Intersport. And finally, we will continue to spend time on and analyze potential M and A activities. And to summarize, we have presented stable and good results for the full year. The run rate is currently at SEK 1.07 per share, And we're well positioned to continue to grow the business. Thank you.
And with that, we'll open up for questions.
Conference Operator: If you wish to withdraw your question, please dial 6 on your telephone keypad. As a reminder, if you wish to ask a question, please dial 5 on your telephone keypad. The next question comes from Nicholas Wetterling from DNB Markets. Please go ahead.
Nicholas Wetterling, Analyst, DNB Markets: Good morning. I have two questions. And starting off with the Divvy, if you can talk, tell us, I'd say more about the decision here to start to distribute capital here to shareholders. On the growth?
Niklas Sukieman, CEO, Logistia: Yes, sure. No, we have throughout had a policy that we should over time become a company that distributes parts of the profits to the shareholders. The board now decided that this is a good starting point. It's a small dividend. It will not affect the potential or the possibility to continue to grow the company, but we it was decided that it's a good starting point and showing that investors into Logistia should expect dividend over time.
So a small step, but a sign that we have started to send out dividend to the shareholders basically.
Nicholas Wetterling, Analyst, DNB Markets: Okay. Thanks. And then my second question is on the health of the tenants. I noticed you had one default during the quarter. And if you look ahead, do you see more risk for defaults in the tenants list?
Or how's the state of the tenant?
Niklas Sukieman, CEO, Logistia: In general, one could say that we have had a list of tenants not performing well over, say, the past two, two point five years. Most of those tenants are now, call it, taken care of. They've either gone bankrupt or they are performing well. So the list of, call it, bad payers, I. E.
Paying rent late, etcetera, that list is much shorter now compared to a year ago. Not meaning that we can promise there will be no more bankruptcies, but from what we can see today, the list is shorter and therefore the risk is slightly lower compared to the previous quarter, we have to say.
Conference Operator: There are no more questions at this time. So I hand the conference back to the speakers for the written questions.
Niklas Sukieman, CEO, Logistia: Good. We just need to check if there are any written questions, and there are a few. How will you fund future acquisitions? Could you consider a capital raise? And the question on that one is that we or the answer on that question is that we have, over the years, been able to in some to some part, we pay with own shares in the acquisitions.
So we're printing shares when buying a property or portfolio that we are continue to investigate if possible. We have done a couple of capital raise the past two years, and it could absolutely be a situation where we find that doable, of course, depending on how good the pipeline is and how good the transaction are or how much they increase, for instance, NAV per share and the EPS per share. So that could well be for the future that we are looking to do a capital raise. Nothing decided though, I should say.
Filip Lavje, CFO, Logistia: And then we have a question here. Central administration costs for in Q4, it's much higher than in the earnings capacity. Why? And is it non reincurring costs? And we foresee that the central administration cost is coming down.
Looking in the current run rate, The central administration cost is based on the budget for 2025. Though in 2024, we had still some costs that we expect to disappear in 2025 or decrease not disappear but decrease, for example, admin costs for our Northern European property portfolio. Like for like rental income growth increased quite a lot in Q4. Why? Yes, we had an increase of 4.5% for the full year and an increase in Q4 as well.
I don't see the increase in Q4 being outstanding in any way. It's in line with our expectations. The things that had affected the like for like is, of course, indexations on the leases. But that has been in there since the 01/01/2024.
Niklas Sukieman, CEO, Logistia: On funding, at some point, would you consider a euro bond issue? Potentially, we as you know, we did a non secured bond recently. At that time, the we decided to do it in sec instead of euro. But provided that we grow the company and maybe in combination with more euro income, it could well be that we consider to look at the euro bond market in the future. Next (LON:NXT) one in Swedish, have you is it more difficult to buy properties when the share price is almost in line with the net asset value.
Not necessarily in I would say in maybe half of the transactions, we're paying all cash. In half, we're paying or try to pay with part shares. And as long as we're traded at NAV or above, I think that probably helps the situations. So it's not difficult to find properties as such. We have a very large pipeline in all of the Nordic countries, I would say.
We're seeing good deals, and obviously, a good example is the new shipping property that we just bought at a yield of 9.5%. Funding cost in Sweden today is, depending on how long you go, say call it 4% or slightly above. So it's a massive yield gap. And we're finding similar yield gaps in many of the Nordic countries. So we still believe there are good deals to be done, and therefore, we and you should expect future growth for the company.
Next one or one is the vacancy has increased slightly. Is that worrying? Obviously, we never want to see increased vacancies. But we had a fairly large bankruptcy in Q4. A company called DLL went bankrupt.
We have managed to sign new leases for parts of that premises, but not all, and that affects the overall vacancies. With that said, we have also signed a new lease with Intispoto of 31,000 square meters. They will start paying rent once we finalize the property later on this year. And we have had positive net lettings for both the quarter and the full year. So it's a bit of a mixed bag.
We're happy with the new leases signed, but obviously, we never want to see higher vacancy rates. But we're not it's not worrying as such. We believe that we're at a stable point and hopefully we can decrease vacancies over time. Another one, can you comment a bit on the run rate in Chinese for Morgan? Of course, so we have presented first, we presented the as per year end.
And then we've added the niche shopping property. We have also for this quarter added the income from property management per share. So increasing over time income from property management per share, quite a huge increase since the merger to be honest and that's driven by as we said, lower financing costs and that we have done a few very good deals. And as we said, just the niche of being property, that one adds 7% per share, which is obviously good. What's your view on divesting some of your non Nordic assets?
We are still in of the view that the non Nordic assets will be kept for the reason being high yielding, extremely long leases, and the properties are managed outside of our Norwegian asset management office, so kept for now. Another one on yeah, that's the one on capital raise. Let's see if there are something in you. No. We've answered all.
Yeah. No, I think we're done. We and if anything else pops up after the call, yes, let Filip or myself know, and we'll try to answer any outstanding questions. And thanks for your time. Thank you.
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