Bilia AB (publ) (BILIA) Earnings Call Transcript & Summary

I would like to welcome you all to this telephone meeting about the third quarter results for the year. My name is Kristina Franzén, and I'm the CFO of Bilia. And together with me here today, I have...

Per Avander, Managing Director of Bilia.

So all the results that we will talk about during this meeting will be excluding the accounting rule IFRS 16 to make it easier to compare with last year. In the press release for the fourth quarter, you will find the results, both including and excluding IFRS 16 for all the period for 2019. And if you look at footnote 1, there you will actually find a complete reconciliation between the results, including IFRS 16 and excluding.

Okay. We would like to start, as we have done the last telephone conferences with some highlights, both Kristina and I. And then we can have some questions. I thought with the profitability in the quarter 4, 2019, was the best quarter ever, both in Swedish krona and in margin. We have an operating profit of SEK 400 million compared to the last year, SEK 296 million. And the margin, it was 4.8% compared to 4.3%. The result, it comes from both the Service Business and the Car Business. I would like to start with the Service Business. And it was 75% of the total result in the year -- the last year. And the Service Business operating profit, it was over SEK 300 million compared to SEK 250 million the last year. Also, we talked about how many working days we have and in 4 of our 5 countries, we have the same days in the quarter, except Belgium. It was 1 day less in Belgium. We had a really good demand in the Service Business in the quarter. And the growth, it was close to 11%; in Sweden, a little bit over 11%. Norway, close to 10%; and West Europe, around 9% in this. To pay back the customers which are selling more to the customer, offer more service to them. We often talk about the service subscriptions and tyre hotels. And in the quarter, we increased the service subscriptions with 4,000. And today, we have 114,000 service subscription. And we increased the last year, 8%. Tyre hotel, we are close to 360,000 units, and we increased the last year, 12%. The last quarter, quarter 3, we talked about the new target for tyre hotels. And the new target is 600,000 units, and we will see that between 3 to 5 years in the future. We go over to the Car Business and the result there it was SEK 129 million compared to SEK 75 million the last year. It was an improvement of SEK 54 million. Most of it comes from the used car and the profitability was SEK 53 million compared to SEK 16 million. We have a good demand in the used car business. And you can see the gross profit is better and better. I'll come back to the used car stock a little bit later on. And then let me talk about the new car. And in Norway, we have a lot of pure electrical vehicles. And now we have launched, so we can open for orders for Volvo XC40 pure electric. And in the order taking in Norway is over 500 units, but we will deliver the cars in the end of this year, quarter 4, or some of the cars for quarter 1, 2021. Order taking for the new cars in the quarter 4 was 6% higher. And this -- the underlying order taking; Sweden, 5% lower rate, a little bit less 3% minus and [ reduce ] 35%. We grew in the new year 2020, with a really good backlog, 2,100 units more. So the forecast for us is we will have a lot of deliveries in quarter 1 and quarter 2 2020.

When we look at the cash flow for the fourth quarter, that was negative. Excluding IFRS 16, it was a negative cash flow of SEK 391 million. That comes primarily from higher inventory of cars, which actually is, to a large extent, related to the sale of new cars, where we had a high number of deliveries during the fourth quarter, which then resulted in getting used cars in return. And also that we have got the push of new cars. Well, the majority of the buildup does refer to the used car, but there was some for new. And...

Yes. And maybe you can see, we have a -- built up the stock of used car. But for us, in the new year, in Sweden, it's really good because the taxation system is changed it from 2019 to 2020. So for us, it's a asset to have a lot of used car in stock for the moment. Because to buy a new diesel and petrol engine, the tax has increased a lot for new cars, but lower for used car. So we will see in quarter 1 and quarter 2, a lot of demand for used car. Therefore, we think it's a asset to have a lot of used cars in stock.

And the reason for the build-up of the soft quarter comes from the push that became on the new cars delivered due to the new taxes. So that is one of the reasons why it came rather close to the year-end for 2019. So we believe those will be an asset, and we also believe that the stock of used cars will be back into normal levels, not later than the end of the second quarter. It would also be -- improvement by the end of the first quarter, but fully recovered by the end of the second quarter. If we then have a look at the financial position we had by the end of the year, SEK 55 million so that's the receivable on the bank. So it means that we did not utilize the available credit of SEK 1.5 billion. Adjusted for the dividend that we made in April. We have during 2019, reduced the net debt by SEK 213 million. And we have a key ratio where we compare the net debt to EBITDA that should not exceed 2x. And for the end of December, the ratio was 1.3x, which was also the same level as we had last year. There was an increase compared to the third quarter report where we actually had a ratio of 1.1. And again, the increase do relate to the build-up of the inventory that we talked about. And we have, in accordance with the decision from the Board, bought back shares during the fourth quarter. We have bought back in total 817 (sic) [ 817,210 ] shares at a total price of SEK 79 million. And then finally, there were decisions to distribute SEK 5.25 per shares for the year 2019. That means that we increased the dividend from 4.75% last year, and we will distribute around 65% or actually 66% of the profit per share, which is a similar level to what we have distributed to the shareholders during the last 3 years. The dividends will then be paid out during 2 occasions. In the past, it's been paid out one, but now it will become in 2 times and 1 in April and 1 in October. Per?

Okay. I have an outlook for this year, 2020. I'm going to start with the new cars. In Sweden, we have an association [ Deal ] Sweden. And they have a forecast of 330,000 new cars for this year. The last year, it was 366,000 cars, a little bit less, but in historic perspective, it's a really good year 2020 as well. Norway, 140,000 -- 142,000 new cars last year. And for this year, the forecast is 140,000. If you go to West Europe, Germany, 3.6 million last year, and the forecast this year is 3.4 million cars. Belgium 550,000 in 2019, and the forecast for this year is 500,000 new cars. And Luxembourg, small country with less cars, 55,000 for the last year, and the forecast is 53,000 new cars. So what we can see it will be really good new year. But if you talk about batteries, Norway, we haven't had a situation in many years, 70%, 80% of all new cars is plug-in hybrid, hybrid and pure electrical vehicles. Now, I guess, it will be a better year in Sweden as well. Deal Sweden, they have a forecast, it will be around 30% of all new cars will have the battery, plug-in hybrid or pure electric -- electrical vehicle. And we see as well that demand will be really good, as I talked about for used car mainly in Sweden because the taxation system for private person and plug-in hybrid is a little bit too expensive. So I guess, most of the customers will be fleet customer to buy new cars this year and many private person, they will buy used cars. We have had really, really good years, the last 5, 6, 7 years when we talk new car registrations. So we see -- we will have a really good demand in the Service Business, both in quarter 1 and quarter 2. And I talked about the backlog. We have 2,100 units more if compared to the last year. So we will deliver a lot of cars in quarter 1 or quarter 2. But when we talk about Volvo XC40 in Norway, we will deliver them in the end of this year and in the beginning of next year. Acquisition. It's a lot of companies for sale for the moment, but we follow the group plan we have in Bilia. But we have some discussions for the movement to acquire some companies. And in the same time the last year, we acquire a couple of companies. So for the moment now, we're working to implement them into Bilia, one in Norway, Jensen & Scheele, Volvo dealer. Another is in Belgium, Verstraeten, in the Flandern part of Belgium. And a little bit exciting business. The tire business in Swedish En Battre Dackaffar, is the name of the company. So for the moment, we have a lot to do, and we have some negotiations for the moment. Yes. I guess it was all from us.

Yes. I think so. Are there any questions from anyone?

This is Mika from Handelsbanken. Can you hear me?

Absolutely, we hear you.