We unpacked the recent financial performance of Danescor’s HVAC services peer group against historicals. The sector continues to exhibit increasingly attractive dynamics into 2024, with improving organic growth rates and margins and M&A continuing to form an integral part of the growth mix.

Organic growth has continued to improve to an attractive GDP plus level supported increasingly by M&A

• Growth improved into 2024, with organic and inorganic growth contributing c7% and c3% respectively. Aside from the 2022 one off COVID-bounceback, organic growth has edged up from c4% in 2021

• M&A accounted for c33% of growth in FY24, up from 20% but with the proportion still off historical levels of c50%. With bandwidth for M&A activity to increase, having developed M&A strategies and processes are likely to be more and more important to achieve superior growth
EBITDA margins have improved with pricing power persisting
• Supply chain dislocations affected the sector like many others but its impacts have gradually abated by 2024. At the same time, labour constraints means pricing power remains strong for the industry. Accordingly, EBITDA margins for the industry have improved from mid single digits to an attractive 10%+ by 2024
• As more technicians retire than enter the trade, the average age of HVAC technicians now 45+ years, with implications for customer pricing and wages. With these dynamics, we believe HVAC services companies will continue to demonstrate strong pricing power
We’d be happy to discuss these and other key market insights and what they could mean for your M&A strategy in the sector.