Autohellas S.A. (OTOEL) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. I'm Constantino, your Chorus Call operator. Welcome, and thank you for joining the Autohellas conference call to present and discuss the full year 2024 financial results. [Operator Instructions] And the conference is being recorded [Operator Instructions]. At this time, I would like to turn the conference over to Mr. Eftichios Vassilakis, CEO. Mr. Vassilakis, you may now proceed.

Yes. Thank you. Welcome, everybody, to our 2024 annual results call. Just to say that along with me today, we have our Deputy CEO, Mr. Deligiannis; our CFO, Ms. Dimitrakopoulou; and our Controller and Investor Relations Director, Zachos Vitzilaios. So welcome from all of us. '24 has been another very successful year for the company. I think we're proud to say that we never expected to have 3 consecutive years with earnings before tax that would be over EUR 100 million out of a car-related business in Greece and in the Balkans. So we are particularly proud of actually, I would say, taking an initial, let's call it, rebound effect out of COVID, which was rebound in travel and rebound in terms of used car values because of the supply chain problems at the time, which supported our initial results in 2022 and made them effectively 2x what we were making pre-COVID, and having able -- being able to sustain that result with different components going forward in '23 and '24. As you might know, by monitoring our peers whose primary business is either rent-a-car or leasing in Europe or in the U.S. indeed, you will see, monitoring their results and how they have performed in the last 3 years, that there is a significant divergence in the level of performance ranging from historical highs to historical lows in terms of results and even losses, be it either in the rent-a-car business, in particular, and some volatility also in the leasing business, both in Europe and the U.S. So within this environment, our level of profitability, having been sustained already for 3 years, yes, with a different balance year-by-year, establishes I think, for one more time, the validity of the model of Autohellas, the complementarity of the different sectors and our ability to adjust and be effective within different degrees of difficulties and different kinds of difficulties in all markets, while, of course, most importantly, being able to take very good advantage of whatever positive opportunities are found to be our way or are, more fairly so, developed to be on our way. So another successful year. Our EBITDA levels reached once again around EUR 280 million. Our profit before tax, EUR 106 million, and our profit -- EUR 105 million, sorry, and our profit after tax and minorities at EUR 84.8 million, a 9.9% increase over last year. Which is what allows us, of course, to proceed with a significant increase in the dividend from EUR 0.7 per share in 2023 to EUR 0.85 per share in 2024, and still retain a payout ratio that is around 50%, and therefore, sustainable for the future, so long as we keep producing similar results. Now if I am to make a short reference to what has worked better for us during '24 relative to the year before and what not, I would say the part of the business that has grown stronger has been leasing in Greece and retail of used car sales through our retail operations here in Greece. The part that has stayed at very high profitability and development levels but did not grow further than the market itself was rent-a-car operations in Greece and rent-a-car leasing operations in the Balkans and in Cyprus. And the part of the business which had a small retraction relative to the historical high of '23 was the wholesale trade business in the country, partially because a lot of the pent-up deliveries of 2022, '23 were exhausted in '23. And therefore, in '24, we sold more or less what we received new orders for and not some kind of backlog from the past. And where we have our most important miss, as I believe we've also mentioned in our release, has been the profitability of Portugal, which went back quite a bit due to the competition situation in the market and our relative, also, new standing in the market based on when we invested in that acquisition. So overall, we reached again a revenue that's a little bit shy of EUR 1 billion. If we add to that the joint venture, the joint control of the Stellantis-related business in Greece with our partners from Israel, then our overall revenue actually goes to EUR 1.135 billion. So a very sizable business, which now has come to employ close to 2,000 people at the peak of the summer. A significant difference in terms of what we had, both in revenues, results and employment and, I would say, diversification of sources of revenues relative to the past. One more thing, which I didn't mention -- I should have mentioned in my first analysis was that 2024 was also the year where we saw the reinitiation of direct profitability contribution from Aegean's participation which had been silent in terms of dividends towards the shareholders and therefore Autohellas as well for '20, '21, '22 and '23, so 4 years. So we saw a restart of dividends, which we certainly expect to continue going forward, coming from our significant investment in Aegean, a reminder that we hold circa 12% of the shares of Aegean in Autohellas. And also, we were gratified to see our more recent investment in Trade Estates begin to pay more significant dividends to the company. And hopefully, we expect that to continue in the future as well. So the pillars of supporting Autohellas' profitability have grown again from our 3 primary businesses, being rent-a-car and leasing in Greece, car trade in Greece, and rent-a-car and leasing internationally, to the fourth one, which is a satisfactory direct financial return from our 2 listed investments. So now we are, let's say, active again on all sides of our profitability generation. And this is how we have been able to offset the gradual degradation of the value of the used cars primarily, but we saw a peak of basically by late '22, early '23. So we see that value of the used cars in gradual decline after a 2-year spike following COVID, but that spike -- that decline is measured and gradual in our country. And with the ability that we have to wholesale and retail used cars here, we are reasonably confident that the significant contribution of this part of the activity to the conclusion of the closing of the rent-a-car and leasing cycle will continue to be significant and will continue to support our profitability, even as we expect year-by-year to have some marginal further declines. Having said that, of course, we have to remember that the basis of our primary demand here in Greece comes from 2 factors. One is the state of the economy and the other is the number of arrivals and the quality of the tourism arrival in Greece. Once again, 2024, so a healthy increase of that. It's been a repeating scenario for the last few years, and we see, again, looking at aviation capacity to the country and initial signs, positive signs going forward. So that is going to continue to support the business. Rent-a-car, there's very few businesses that are more fragmented and more competitive than rent-a-car is in our country. We have mentioned often times in the past that there are over 2,000, 2,500 rent-a-car companies in Greece. So to be able to perform in that environment is no small feat with the consistency that we have shown, not only in the last years, but frankly, since the time Autohellas has been listed and even before that. So that part of the business continues to be healthy, continues to be supported by growing arrivals and continues to be supported also, at the secondary level, by the gradual increase or improvement of the Greek economy, which continues to grow at higher rates than the European economies, that helps a little on the rent-a-car business. It helps a lot in the leasing business, where I think we've made our more significant relative strides to the year before, recovering a little bit of market share, a trend we expect to and hope to continue during the year that we're at right now. So in a nutshell, this is a very initial first description of how I would describe our activity for 2024. And I would like to stop here and take your questions for me and the rest of my colleagues so that we can be, hopefully, more helpful in your analysis. And obviously, I know that a lot of you either have already reached out or will reach out to our Investor Relations department, Mr. Vitzilaios, to get much more granular and specific analysis on any items that we might need. So please do go ahead and we'll try to be as effective as possible in answering your questions. Thank you.

[Operator Instructions] The first question comes from the line of Svyriadi Natalia with Eurobank Equities.

I was wondering if you could give us like the big picture on competition and pricing and in the rental car business, which is quite big, I assume given that capacity is increasing there. And maybe give us -- remind us the CapEx plans on your fleet. You refleet in 4 to 5 years, and is this going to continue going ahead? This is a question for the rental car business. And I also have a question on the auto trade business, what are the dynamics you're seeing for 2025?

Thank you. So in terms of pricing in the rent-a-car business, looking at 2024, broadly speaking, that was -- there were downward pressures on pricing which we were able to largely offset by improving the mix of vehicles that we rent to our customers, basically improving the mix of our fleet in such a way as to offset those prices -- sorry, these effects. And at the same time us improving what we referred to as the channel mix, which is basically the sources of customers. So, as an example, direct sources of customers such as Hertz International or Autohellas' own website, or its relationship with Aegean and the generation through Aegean's website, are broadly speaking more positive sales channels in terms of lower cost and in terms of improved quality of mix, so relative to broker channels where we are exposed to the full competition effect of our peers. Therefore, for 2024, the broad tendency was for average prices, rental rate per day to go down. We were able to offset that by, as I said, improving the mix either of the fleet or the channels. For 2025, I would say we should expect a little bit of the same. I believe results in the sector, broadly speaking, do not indicate that people will be as aggressive in developing their fleet internationally. However, Greece might be an exception to that. Therefore, we still do expect our competitors to keep improving and increasing their fleet. Based on the fact that we expect something between 5% and 7% of improved arrivals in Greece, it's natural to expect that the sector will increase by roundabout 8% to 10% in the rental, at least. And this will allow competitors an opportunity either to improve utilization in winter months or to grow further overall, and through economies of scale, for us or for others, try to offset gradual price pressures. But yes, I would expect marginal additional pressure on pricing going forward. This is what we see. At the same time, as we see an improvement in seasonality, which is not unimportant in this market as well. In terms of auto trade, I would say the market, as we've seen from registration from the first 2 months already, is somewhat lower than the year before. It's clear that the prices of cars, where they are, do restrict the capacity of Greeks to purchase cars. At the same time, it's the case that the variability of the regulatory environment in terms of how much -- how many -- what level of subsidies is there and for what length of time, particularly for electric cars, creates some stops and gos. So we don't expect material growth in the car trading market. We do, however, expect by 2026 to be in the market with a minimum of 2 additional brands coming from China. So we are talking about a market in wholesale that we don't expect to have -- to see significant growth during this year. We are being reasonably successful in gradually expanding our brand portfolio. And given the time that these brands that we have already contracted or will contract in the next few months, expect to launch products in the European market and with us here in Greece, we expect our portfolio to be stronger than where it is today by early '26. So that should be a support, vis-a-vis the potential 3% to 4% trend of decline in the market that we see today. In terms of the leasing market, which is also very important, we see there, of course, the effects of the overall decline, but we see also a gradual improvement in the penetration of the fleet versus retail. So we are not particularly concerned in being able to retain a decent growth rate coming out of the leasing, particularly because our expiration schedule this year in terms of previous year leases has been rather limited relative to the year before. So even with a smaller potential intake, if the market is a little bit stronger, we do still expect our leasing fleet to grow substantially during the year. So that's as much as I can say at this time.

[Operator Instructions] Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Vassilakis for any closing comments.

I think this is the most conclusive truth, the most statement of the fact that if you have a good dividend, people don't ask many questions. I wasn't trying to have that effect, but it seems to have had that effect as well. So thank you for attending our call. Once again, I would like to refer you to Zachos Vitzilaios for any specific questions and explanations you might need on some of our numbers. I realize that as our activity across different countries develops, you might have some additional questions that are more difficult to answer on the call. Once again, we are very proud to have achieved this result this year. Our third, as I said, consecutive year over EUR 100 million EBT. And I believe our 58th consecutive profitable year without a break since Autohellas has actually gotten into business. So thank you for being with us. For those of you that are also shareholders, thank you for being shareholders as well, and I look forward to our next call. Thank you.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.