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

Good afternoon, and welcome to the telephone call regarding Bilia's Results for the Fourth Quarter 2020. [Operator Instructions] My name is Kristina Franzen, and I'm the CFO of Bilia. And next to me, I have...

Per Avander, Managing Director for Bilia. We would like to start with some highlights from Kristina and I. And after our presentation, we can have questions and answers. And I start, Kristina.

Yes.

We report operating profit of SEK 577 million compared to SEK 415 million last year. It's an improvement on -- 44% or SEK 162 million. The margin was 6.9% compared to 4.9% last year. [Operator Instructions] It's the highest result and the highest margin ever. One highlight from the profitability is Norway, they stand out in the report and half of the improvement came from Norway. We have 3 business areas in Bilia. One is the Service Business; another is the Car Business; and the third is the Fuel Business. And now we would like to focus on the Service Business and the Car Business. If we start with the Service Business, we improved the profitability with SEK 61 million or 19%. The result was SEK 376 million compared to SEK 316 million in the last year. We had a strong growth in the Norwegian business with a good demand. And still, we have a low cost in the Bilia Group. We will follow up every month. The working days is really important because it's a production business, the Service Business. And in the quarter 4, we had 2 days more in Sweden and Norway, 1 day more in Germany and Luxembourg and the same number of days in Belgium. The adjusted growth for Sweden and Norway was in quarter 4, 5%, and for the Bilia Group, 2%. We start with Sweden. The growth was -- we declined a little bit at 7% due to the COVID-19 regulations. When the government in the beginning of the quarter had a message to the Swedish inhabitants to stay at home and work at home, we could see the booking time in our workshops declined a lot. In Norway, we had a strong growth, 27%. And one reason is we have a service contract with the Polestar cars. And in the Norwegian market, the pure electrical vehicles is really important. And the Polestar #2 is only pure electric. We do the predelivery service, we sell accessories to the car and we deliver the car in the Norwegian market. In West Europe, it was a tough period quarter 4 in the Service Business. We declined a lot, minus 31%. One month in Belgium, we have closed down our business and half months December in Germany. And we can see the regulations for coronavirus is much tougher in the 3 countries in West Europe, if we compare to Sweden. To get the loyal customer, service subscriptions and tyre hotels is really important. And every quarter, we follow up how many we have. And we have had a group of service subscriptions, 6,000 as compared to 1 year ago. Today, we have 120,000 service subscriptions. It's both new cars and used cars. And we have a target of 130,000. Number of tyres in our tyre hotel increased to 387,000, and it's 39,000 more if we compare to 1 year ago. We have a long-term target, and it's 600,000 tyres in our tyre hotels.

[Operator Instructions]

If we go over to second business area, the Car Business, the profitability was SEK 234 million compared to SEK 136 million the last year. New cars improved the business with SEK 58 million and used cars SEK 40 million. If we divide the business into used cars and new cars, and I'll start with the used cars business. The quarter 4 was the second best quarter ever when we talk profitability. We had a strong demand in the quarter, but we delivered 7% less cars. One reason is when we went into the quarter 4 in the beginning of the quarter, we had too low stock of used cars, both in Sweden and Norway. In the end of the quarter 4, we had 1,400 fuel cars in our used car stock stores if I compare to 1 year ago. But we see it's keeping that high. It's a really good level we have of used cars today. Still, we have a good margin in the business and we see the demand in quarter 1, we hope we can be the same. If we go over to a new car business, we improved the profitability in quarter 4 with SEK 58 million. We delivered 7% fuel cars, but the underlying turnover was 3% higher due to larger and more expensive cars in the quarter. The order taking was 6% less in quarter 4. And for the full year, if we compare 2020 to 2019, we reduced our order taking with 11%. It was a little bit different between the countries. In Norway, we have a really good order taking in quarter 4, plus 23%. But in Sweden, we declined 11%. The backlog in the end of the quarter was 1,700 cars more if we compare to the end of 2019. And it's the best and highest backlog we have had when we started New Year, 13,500 cars. Most of it come from Norway. We have doubled our backlog in the Norwegian market. Yes, Kristina?

If we then look at the operational cash flow, that was close to 0 for the quarter. It was actually SEK 5 million minus. The lower cash flow compared to the previous quarter did come from a higher inventory. But as Per said before, we now believe that the inventory is on a very good level. And in previous quarters, we have actually been running a little bit below the levels we would normally require for inventory. So we think that's good. If we look at the full year, we did have a record operational cash flow amounting to SEK 2.9 billion. So that's really good. It did come from the clear focus we have had on cash during the year, given the COVID crisis and the sort of uncertainty that has created throughout the year. So that focus also means that we actually have a receivable towards the banks of SEK 1.8 billion, also means that we have not utilized anything of the available credit limits amounting to SEK 1.5 billion towards banks. Of course, one should also remember that one reason for the high amount on the banks or the cash liquidity is, of course, also that we did withdraw the proposed dividend to the shareholders during the year. All in all, it means that we actually have a positive net debt amounting to SEK 278 million. And it means that the net debt has actually been lowered by a little bit above SEK 2 billion since last year. The net debt-to-EBITDA that we measure regularly is then also positive by 0.2 compared to negative with 1.1 last year. So it's a good development.

Okay, Kristina. Acquisition in the quarter 4, we acquired Jönköpings Bildemontering. It means recycling vehicle business. It's an exciting and well-run company. And the 2nd of November, we took over the company. Another is Felgteknikk Norge. It means in English, rim technician, you can say. It's rim repair. And it's a really exciting and a new business area for Bilia. We sent out a press release about it. And we will start from the beginning in Sweden in quarter 1 this year. If we go over to the total market of new cars, in Sweden, 2020, we had a forecast of 270,000 new cars. I guess it was in the summer, and they increased it a lot. But in the end of the year, it was 292,000 new cars. The forecasts from the deal Sweden, it means car Sweden association from the different brands. They guess now it will be for 2021, 300,000. In Norway, in the summer, it was a forecast from DNB Market, 100,000 new cars. But in the end of the year, it was over 140,000. It's the same level as 2019. And the forecast is at around 140,000 cars. It's a strong market, I can say. West Europe, if we start with Germany, there's no official forecast for the 3 markets we are in. But it was 3.5 million cars in 2019 in the German market. And 2020, 2.9 million. So it's really reduced of new cars in the market. Belgium, 2019, 550,000 new cars; and 2020, 430,000 new cars. In Luxembourg, a small market, 2019, 65,000; and 2020, 45,000. Kristina?