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

The Bilia Q1 report for 2025. [Operator Instructions] Now I will hand the conference over to IR Carl Fredrik Ewetz. Please go ahead.

Thank you for the introduction, and welcome to Bilia's First Quarter Results presentation with CEO, Per Avander, CFO, Kristina Franzén; and I, Carl Fredrik Ewetz. We also have our Deputy CEO, CFO Stefan Nordstrom with us today. We're happy to present another solid results and a strong cash flow in the quarter. And agenda, you recognize, Per will start to go through the current situation in the car industry, followed by Q1 numbers. And Kristina will go through the financial situation, and I will conclude with an outlook. So let's start, and I'll leave the word to Per Avander.

Thank you, Carl Fredrik and next slide, please. There is good demand in the service business in Norway and Western Europe with good booking times. In Sweden, we have seen a little bit weaker demand, especially in body and paint shops. But now we are in the middle of the important tire season, and we have much better booking times. The fleet business has still a stable demand for new cars in Sweden with a market share of around 60%. Many brands started in the end of last year, strong campaigns big discounts and attractive private leasing offers. In Quarter 1, the demand and the order intake from private consumers has been much better. In Norway, we see a few signs of a better business climate. The consumer index, you can say the household confidence is on a better level. But in April, it drops again. The demand for new cars is growing, good booking times in workshops and our brands have more -- well, for the moment, strong campaigns in the Norwegian market. The demand for used cars or on a good level in Sweden and Norway, and we see stable prices for all cars, except fully electrical vehicles. At the same time, we see lower prices of fully electrical used cars, and it takes longer time to sell them. The stock of used cars is on a good level in all our countries. There has been a lot of discussion of different business models. Four, five years ago, it was really popular to test subscription, car sharing, agency model. One example is Lynk & Co. They only sold the cars through a subscription model. Now they are going over to traditional wholesale model. We have now an agreement for the Lynk & Co in 5 of our locations and start to sell them in Quarter 2. Still, we see agency models or some manufacturers, but the feeling is more that we are going back to what we had in the past. Some manufacturers hesitating and pushing production of agency model into the future. Next slide, please. Net turnover increased organically by 1%, explained by higher deliveries of new used cars and growth in the service business. We reported a result of SEK 344 million with a margin of 3.5%. We have better earnings in the service business with a higher margin. We had lower profitability for new cars, especially in Sweden and Norway. Next, please. On this waterfall chart, you can see the different business areas. All the earnings improvement is coming from the service business and less result both new and used cars. Next slide. On this slide, you can see the Quarter 1 profitability from 2019 to 2025 in each country. And in the middle, we have Norway and there you can see some improvements. On the right-hand side, you can see Western Europe delivering at a really strong level. Sweden delivered lower earnings due to the core business. Next, please. We are moving over to the important service business. As I mentioned, there is a still stable demand in the service business in all countries, except body and paint shops in Sweden. We have an organic growth for the group of 5% in the quarter in Norway as much as 16%. We reported profitability of SEK 310 million, it is 81% of the group earnings. We improved the margin from 11.9% last year to 12.2% this year. As you can see on the right-hand side, it's SEK 29 million better than last year. There are several reasons why we report a higher result. One is good booking times especially in Norway and Western Europe, another much better efficiency and solid improvements in the Norwegian workshop. And this higher result comes, despite 1 working day less in Sweden and Western Europe for the quarter. Next, please. Deliveries of new and used cars adjusted for acquired operations were 2% higher for new cars and 8% higher for used cars compared to Quarter 1 last year. For the car business, we reported a result of SEK 57 million compared to SEK 76 million last year. And the profitability for new cars in Sweden and Norway were on a low and negative level. The main explanation of that is lower gross profit margin and less bonus from the different manufacturers. For used cars, we reported profitability of SEK 55 million compared to SEK 69 million last year. In a historical perspective, it's a good level. As I mentioned in the beginning, the stock of used car is on a good level in all our countries. We started in the beginning of this year, some campaigns. So we have reduced the stock of used cars in the quarter, especially in Sweden and Norway. In a historical perspective, we are now in the strong period for used cars our customer a more active and often changed used car in the spring. The order intake of new cars, adjusted for acquired and divested operations were 31% higher compared to last year. As I mentioned, we have seen a little bit better activities in all our countries. We have in the quarter increased the backlog of new cars with 3,000 units since the end of Quarter 4. Now we have a more normalized level with a little bit over 14,000 new cars, and it's the same level as Quarter 1 last year. Over to Kristina.

Thank you, Per. So some words about our financial position. During the quarter, we had continued to have a high focus on cash flow, and we generated an operating cash flow of around SEK 450 million, which is equal to some SEK 1.6 billion on a 12-month rolling basis, which means that we are basically in line with last year's generated cash flow. Per has mentioned that we, as of December 2024, consider the inventory of used cars to be on a high level. So during the first quarter, we have decreased our inventory of used cars, and we do not consider the inventory to be on good levels in all our countries. So that we are very pleased with. During this quarter, we have also made the fourth and final payment of last year's dividend of SEK 660 per share, that means that we have made a payment of SEK 1.65 per share or some SEK 150 million. We have also acquired a new BMW operation in Varberg in Sweden for a payment of some SEK 60 million. Our net debt, excluding IFRS 16 debts are at the end of the quarter amounting to just below SEK 2.8 billion which was some SEK 120 million below our net debt as per December 2024. Our ratio of net debt in relation to EBITDA, excluding IFRS 16, was 1.4x which is unchanged compared to December 2024 and therefore, we are also in line with our financial targets to have a ratio below 2.0x. During this quarter, we did issue a new bond amounting to SEK 800 million with a maturity term of 5 years. This bond was raised to refinance our bond loan of SEK 500 million, which is maturing in October this year but we will also use it for general corporate purposes, which includes day-to-day business, but also acquisition and investments for continued growth for the future. After the new bond issue, we did utilize some SEK 860 million of our total credit facilities with banks amounting to SEK 2.3 billion. And then finally, this afternoon, we will arrange our Annual General Meeting and one of the agenda points for that meeting is to decide about the proposed dividend for 2024, amounting to SEK 5.6 per share to be paid in 4 installments. So I think that was some words about our financial position. And with that, I will leave the word to you, Carl Fredrik.

Thank you very much. And let's look into the outlook for the next quarter. The internal work on profitability and efficiency in our operations is very much ongoing. This means extra effort making sure newly acquired businesses as well as existing businesses perform according to BG standards. Furthermore, capital allocation, balanced and sufficient inventory levels are high priority across our organization. Looking at the service business, the recurring and improved results in our service business, we think proves resilience in this business. We see demand continue in the coming quarter across our business. In Q1, like Per said, the business represented 81% of our operating profit. As I said earlier, our primary focus is to work with efficiency and profitability and above all, in our service operation where we see most opportunities for continued improvements. Used cars, like Per said earlier, the demand in the quarter for used cars was divided, state of demand for hybrid and traditional cars, but lower demand for electrical cars except Norway, of course. We see that continue in Q2 but do expect more campaigns to increase demand for electrical cars. The activity level in our used car business we think will remain on a good level. Our inventory is now back to satisfactory levels, and we always work to strengthen our offering within used cars, and we'll continue to do so also in the coming quarter. It is difficult to assess the impact of on demand for new cars in the coming quarters given the uncertain environment. Having said that, we are experiencing an improved order intake for new cars. We see companies continue during 2025, we think -- which we think will support private consumption is in combination with a rather big pent-up demand. We see order intake from fleet customers continue at a stable level. So no trend shift here, like I said earlier. And maybe most important, we believe that our customers will continue to service and repair their cars in the coming quarter. Per touched upon the models. We see an increased interest in adopting and developing the traditional wholesale model again across our brands. The dealer and aftermarket network has yet again proven to be a competitive advantage for most car manufacturers. Across our 177 facilities, we will continue to work hard to make sure our customers are treated well and are happy. And we believe, over time, this will create higher value for our shareholders. This finalizes our first quarter presentation, and we can now open up for questions, please.

[Operator Instructions] The next question comes from Andreas Lundberg from SEB.

If I start with the new car operation, you talked about decent orders in the first quarter. Have you been able to deliver on that already? Or is that in the backlog? That is the first question.

We increased the backlog, as you can see. So we haven't yet delivered the cars. So we will deliver them now in quarter 2.

And given the uncertainty you talk about on the world turmoil out there, can you perhaps share some light on consumer behavior in March, April?

Yes. You talk order intake or we are talking about that, customer behavior?

Yes.

Still stable demand from the fleet business. a little bit lower in April, more private consumers, we can see, but there is not yet a problem for us. So if you look into the April this year in April last year, we are not finished yet with April, but I think we will sell a little bit more new cars in April this year compare last year. But we are humble what will happen in the future in May and June nobody can say what will happen in the car industry in the future.

And could you also talk about -- you mentioned the profitability with the new cars, I think you as had lower gross margin. Can you share more light on the drivers for the new car profitability?

Yes, it's a little bit different for our countries. Some manufacturers, they go for lower margin from the beginning more bonus. It's one explanation why we have lower gross margin for new cars and profibility in the new car sales.

But I think, Andreas, I mean it was when it comes to the used car, we had a little bit lower gross margin. So when it comes to the new car, it's very much about the lower turnover.

Yes. But we can see it's a little bit different. If you look at the profitability for Western Europe, it's a really strong still, but lower.

But if you take the Swedish market, Andreas, Stefan here, you can say that the change in new parts is lower deliveries. So that is the majority of the change for the Swedish market. It's fewer deliveries of new cars. So it's more like that. So -- and then if you talk about the used car, then it's a margin thing, a little bit lower margin in the used car business. But -- so I think that is the reason.

So in Sweden is more like a fixed cost effect from lower deliveries?

Yes.

But you can see a change from our manufacturers because they are under pressure. So they try to change the margin from the beginning to more bonus into the system.

And now you receive less bonuses? Did I understand it correctly because of lower bonuses...

Yes, due to lower deliveries then it's less bonus when you have lower deliveries. But I think the exchange per is talking about is over time. It's nothing quarter-to-quarter. It's more like they want to change into more bonus, a little bit less margin, but that is a journey over time. So it's nothing -- now I can -- I would say, if you take the big drop is in then in Sweden, that is fewer deliveries.

And manufacturers try when they launch a new fully electrical vehicle to give us a lower margin for them. But as Stefan said, it's over time, but we can see a change if you go back to 2, 3 years ago.

And lastly, now you are prioritizing efficiency gains. You mentioned that several times within the service of how is the M&A market look like at the moment? Potentially, what are you looking for?

Yes, Andreas it's Carl Fredrik here. I think the M&A market is still quite active. It's an ongoing consolidation. We focus towards the bigger players. I'm pretty sure it will continue to do so. As always, we are prudent. We are cautious, but we, of course, look at what comes through.

The next question comes from Mats Liss from Kepler Cheuvreux.

Yes. Thank you Well, coming back to the car sales business here in Sweden. I mean earnings are quite limited there in this first quarter, and I guess you have the improved order intake to deliver in going forward. But have you sort of planned any efficiency measures to adjust capacity there for? Or is it more volumes fill out the capacity going forward?

We took off a lot of salesman when we drop in the sales for new cars to go back 1 or 2 years ago. So we have tried to hire people again, salesmen again in Quarter 4 and Quarter 1. But now we are more a little bit in a wait-and-see mode and see what happened in the future. But we don't think we will close down a lot of showrooms in Sweden. So still, we use every showroom we have.

Good. Then in Western Europe, you performed well. I guess you have integrated Luxembourg business there. Is this a trend? Or is it some one-offs included also to take something in market?

It has been a really strong market for us. In BMW, they are #1 in market share in volume and often top 3 in Luxembourg, we really strong brands with BMW and Mini in Belgium and Luxembourg. And we see and see it's a good market still there. We sell a lot of expensive cars in Luxembourg, BMW, and we improved the service business. The workshop if you see, we had profitability of SEK 22 million in the quarter now and compared to last year '21. But if you go back to see what we have in the past, and now we have acquired a company and they remind results. So we improved the business at least these things what we have in Belgium and Luxembourg.

Great and well, good progress there in the service business and in Norway, especially -- do you expect to see some sort of Easter impact there? I mean, it's the Easter change quarter year-over-year? Or is it, as always, a pretty good quarter to be expected here in the second quarter, I mean, ahead of the driving season and so on.

It's tough with the Easter in Norway, as you know. So in the last year, we have more of it in March and now we have it in April. But we can see the growth in the business quarter-over-quarter the last year, we have a lot of improvements because we have sort of a centralized business excellence team, help the different workshop managers. We have program ongoing now, so we see improvement from quarter-to-quarter in the Norwegian market.

Good. And finally there, I mean, you mentioned the acquisition there of the BMW dealer in the first quarter. But is it still sort of a focus on integrating the existing acquisitions you've made in recent years? Or do you see opportunities now coming up given the somewhat soft car sales, car markets?

There is a lot of what Karl Fredrik mentioned, a lot of companies for sale, but we are a little bit careful for the moment now. And we have made a lot of acquisition, and we have started some new business areas, in repair and yes, dismantling business. We are quite new in the business. So we can improve what we have more to find a lot of acquisition for the moment. But maybe it can happen in the future.

We're very much focused on making the ones we've acquired better. That's what we talked about internal efficiency, et cetera, et cetera.

[Operator Instructions] There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

All right. Thank you for that. Thank you for listening, and please come back to us if you have further questions, and wish you a good day. Thank you very much.