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

Good afternoon, everybody, and most welcome to this telephone meeting around the results for the fourth quarter for Bilia. My name is Kristina Franzen, and I'm the CFO for Bilia and together with me on the line, I have...

Yes. My name is Per Avander, Managing Director for Bilia AB.

And today, in this telephone conference, actually, myself and Per will be on separate locations due to that Per was tested positive for COVID. So we would like to ask you all to mute your phones as we will not be able to do that from our side today due to the separate locations. So please mute your phones, and we will give you some highlights from the fourth quarter, and then you are, of course, welcome to put questions.

Okay. We would -- yes, yes. We would like to start with some highlights. And after that, we go a little bit deeper in our different business areas. And in the end, we can have a Q&A. And I would like to start from our side, and I'll start with the total result. We report an operating profit of SEK 558 million compared to SEK 577 million last year, a little bit worse as compared to the last year, but it is the second best quarter result ever. For full year, we had a record year last year, over SEK 2.1 billion, and we increased with over SEK 550 million. In the quarter, we had a strong margin, 6.5%. We reported a strong profitability in the Service Business, SEK 377 million. Used cars, it was a record year the last year and in quarter 4, we reported profitability of SEK 122 million, and it was an increase of SEK 26 million. It was the best quarter 4 result ever. Used car -- new cars, there we have a problem with lower profitability due to the lack of components and semiconductors. We reported SEK 85 million compared to SEK 138 million the year before. Backlogs, we had a record backlog close 23,000 new cars. And if compared to 1 year ago, it's over 9,000 cars more. And if we go to the 3 different business areas we have, we have the Service Business, we have the Car Business, and we have the Fuel Business. And today, we are talking about the Service and the Car Business. And I would like to start with the Service Business. As I said, we had a profitability of SEK 377 million, and it was the same level as the last year. In our countries, we had 1 day working day more, except Germany, it was the same days there. We reported a growth in turnover of 15% including the acquisition we made the last year. If we adjusted for acquisition, we decreased by 5%. And the main reason for that, it was Norway. There, we have a drop of 18% due to fewer deliveries of postal cars. If you remember 1 year ago, we started to have a predelivery service for Polestar, and we sold winter tires and other accessories for Polestar, and it was a peak in quarter 3 and quarter 4 2020, not the same this year. Another effect we have is we delivered fewer new cars. Where we were delivering workshops, they have not so much to do in quarter 4. And the third one, in Norway, it is the COVID-19, the Omicron affect us in December with many, many mechanics, they stayed at their homes. If I remember right, this was 15%, 20% of all mechanics. They were not at the job in December. Kristina will come back to that later on and tell how is the situation now in January, both in Sweden and Norway. For the full year, we had a growth of 1% in the Bilia Group. We have a business strategy to tie up the customer with -- when they sell a car. We sign for a contract and then our salesmen start discussion with the customer to tie up them with service subscriptions and tire and rim plans. And often, we tell you, as investors, how it's going. Today, we have 125,000 subscriptions. And the most important here is the used car business because often the used car buyer, they look at Internet and then they go to our showroom and buy a car. But -- sometimes, they don't have a relation with our workshop. But our salesmen, they tie up around 50% of all used car buyers to take service subscription. Another important area is tire hotels. And now we increased to over 400,000 units we store for our customer winter and summer tires. And if we're doing that, we see the customer between 3 to 4x per year. And owner of a car, they use the car 3, 4 years and then they buy a new car again from us. If you go over to the Car Business, as I told, a record quarter, quarter 4 for used car and a record year for used car. It's a strong demand and a high margin for used cars for the moment. And our stock of used car is low in Sweden, in Belgium and in Luxembourg, and we have a good level of used cars in Norway for the moment. We delivered 1% less used cars in the quarter 4, but we sold more expensive cars. So the average price was higher with a really good margin. New cars underlying turnover declined with 14%. As I said, we have a record backlog, close to 23,000 new cars. And all of them, we will deliver in 2022. But we don't have a peak in quarter 1 or quarter 2. It's -- under the year, we will deliver all the cars. And yes, if you go to the -- what the situation is in the different countries, we had fewer deliveries of new cars in all 5 countries, 14% in Sweden, 8% in Norway and West Europe 27%. But still the customers, they buy cars. So we reported order intake increased 27% in quarter 4. And if we take off all acquisition we made in 2021, it was 13%. And if we look into the different countries, we had a really good year in Sweden, 14%; in Norway, 9%; and in West Europe, 14% as well. Kristina, it's your time.

If we look at the operational cash flow for the quarter, that was continued on a very good level, around SEK 350 million. And for the full year, we have generated an operational cash flow amounting to SEK 1.8 billion. So that we are happy about. That also means that we have a solid financial position, and we are currently not utilizing our credit limit of SEK 1.5 billion towards the bank. Instead, we have a receivable on our bank account towards the bank amounting to SEK 550 million. And then we should also bear in mind that we have actually paid almost SEK 1.7 billion for acquisitions during the year, and we have repurchased shares of almost SEK 600 million throughout the year. If we look at the net debt that has increased due to the purchases and buybacks of shares of around SEK 850 million since last year, it now amounts to SEK 580 million. And that also, of course, that means that we were actually in a net cash -- in a positive net cash -- net debt position last year. If we look at the target net debt to EBITDA, we still have a very good position. We are now 0.2x as a ratio. And there, our target is to not exceed 2.0x. As I mentioned that we have repurchased shares and that we did almost 1.8 million shares during the fourth quarter. And the Board has also then during January launched a new lease purchase program of 3 million shares, that we will continue to buy back. There is also a proposal from the Board that they would actually ask the Annual General Meeting to liquidate the shares that are bought back at the Annual General Meeting. Dividend, the proposal from the Board to the AGM is a dividend of SEK 8 per share, which is an increase from last year where it was SEK 6 per share. The dividend will be paid out 4x. So it will be SEK 2 per share. And the dividend is then in line with the goal to distribute at least 50% of the earnings per share on an annual basis. So that's the cash and financial position, so still very solid. Then you might have seen that we have made a divestment of our 4 remaining facilities in Germany. They actually were divested the first of January. And the reason why we are then leaving Germany as an operational country is that we have not reached the target levels in terms of profitability that we have set for our operations. And I think that we have also mentioned in previous cases, in previous calls that the operation in Germany is the acquisition where we have not reached the target that we have set up. When it comes to turnover, the operations in Germany was around SEK 800 million, and they had actual operational loss during the last 2 years of around SEK 30 million on a yearly basis. And the loss to asset divestment is around SEK 30 million. That is included in the fourth quarter results in our operational results. So Per, do you want to continue?

Yes, yes. Yes, I talked about the acquisition 2021. We acquired 6 different companies. We have a new brand in Porsche, another brand is Mercedes Benz. And together with passenger cars, Mercedes Benz, we have a truck business now, a really exciting business with a huge service business. And if we're looking forward to acquisition, we would like to acquire more in Belgium, Luxembourg, because when we took off the German business, we have a really good margin in both Belgium and Luxembourg, around 4%. And then another way to acquire can be more in Sweden and Norway with the brands we have today, and we can be a little bit curious of new countries in West Europe as well. And we say, the management team in Bilia, we can take in maybe some more strong brands into our Bilia portfolio in the future. The total market of new cars, it's important. In Sweden, it was around 300,000 new cars, 2021. BilSweden, association of the all brands, they have a forecast around 325,000 new cars for 2022. So it's, you can say, a normal market. In Norway, last year, it was a record year for new cars, 176,000 new cars. And there has not been an official forecast for the Norwegian market, but the discussion is around 150,000, 160,000 units. In Belgium, often, we can see a market around 500,000 to 550,000 new cars. The last year was a bad year. If you have to go back to maybe 25 years to find a bad year for new cars, it was 383,000 new cars because they have some effects of COVID-19 and the lack of semiconductors. Luxembourg, a normal market there. It's around 50,000, 55,000 new cars. The last year, it was 44,000 new cars. And it was the same reason as Belgium. But BMW is a really strong brand in both Belgium and Luxembourg. They are #1 in the ranking for Belgium, and they are #2 for Luxembourg market. Kristina?

During the quarter, we have not received any support in terms of COVID from government. And in previous calls, we have said that we did get such support of SEK 2 million for -- in the beginning of the year from the Western European operations. So that is still the case. There is no sort of impact on the financial results of support in terms of COVID during the year, except the SEK 2 million that we have talked about earlier. During the fourth quarter, we have not had any significant effect when it comes to Western Europe or to Sweden in terms of COVID. But as Per mentioned, in Norway, had spreading of the Omicron virus before or earlier than the Swedish -- in Sweden. And that also meant that we did have a lot of people absent from the work during the fourth quarter, which have had a negative effect on the operations. And if we then look at the first quarter, we do have a similar situation. But now both for Norway and for Sweden, right? So we have had absence both in terms of sickness, but also then since there have been relatives that have been sick and also, of course, some absence. But no effect on the financial result in terms of support, except the SEK 2 million that we have we communicated to you earlier.

Okay, if we're looking -- yes, if we're looking forward to the quarter 1 2022, we see we will still have a good demand of used cars due to -- we don't think we will deliver so many new cars in quarter 1. We see we'll have good demand in our workshops. We have had, as Kristina said, if our 25% of all mechanics, they are not at their job, it's the same for our customers because it has been a lot of regulation, both in Sweden, Norway and in West Europe. So we see the demand will grow in the rest of the quarter now. And in the end of March, the tire season is starting. It's a really good season for Bilia with many, many tires in our tire hotels. And as I said, we will acquire more in the future. And it's a lot for sale, both in Sweden, Norway. And we -- as we have done, we have acquired a tire company. We would like to acquire more of that. We see recycling plants. We would like to acquire more of that as well and more of the brands we have today and maybe another strong brand in our markets. Okay. I think it was all from our side. Now we can have Q&A. Welcome.

Are there any questions from anyone? No, perhaps...

Nothing. It was crystal clear.

Yes. Lovely. But of course, if there is any questions coming up or anything, you are most welcome to give myself or Per a call, right? And we will, of course, answer those questions in person. So if there are no questions then I guess...

Thank you very much.

Thank you very much. Thank you for calling in. Have a nice day. Bye-bye.

Bye-bye. Bye.