Kamux Oyj (KAMUX) Earnings Call Transcript & Summary

Welcome. My name is Tapio Pajuharju, I'm the new CEO of Kamux. And next to me, we have...

Good morning. My name is Marko Lehtonen, I'm Kamux's CFO.

So welcome on board. Today we will go through a bit of the performance during the first half. We'll also reflect bit about the market. And then I think at the end of the presentation we have time and can entertain some questions and comments at the very end. All in all, I think we will have a good look on the functions and actions during the first half and especially in the second quarter, then we'll have a bit of a deeper view on the market and how Kamux has been performing in the marketplace. Marko will have a deep dive on the financial performance and at the end we will have a bit of a reflection on the market outlook, our targets and then have a summary at the very end. I think our vision is unchanged, we continue working on this one. But as we understand, lot has happened on the marketplace. We used to be #3. We've been now on the position #5 globally on the European marketplace and I think we have some ingredients and actions to do to get back on the podium. I have now been on the steering wheel exactly about 2 months and before that, I was 2 years on the Board of Directors so I had bit of an onboarding on that one. But I have to give special thanks for Juha and the whole team of Kamux for onboarding me extremely well and the warm welcome I have had. And I think on the numbers, you will see that the team has done a good job and we are gradually improving on the performance both on the actual sales, but also quite little on the margin and profitability in that respect. I'm not equally a good expert as Juha was on the global industry and I don't have exactly deep insight. But so far I think it's very clear and evident that I consider Kamux to be like a preowned car. It has had some mileage, it's been well maintained, but it deserves some systematic maintenance and some of the upgrades. I think the first and the utmost important things are on the customer experience and on the omnichannel atmosphere and I think that's where we already have had some initial plans, we will speed up the execution of those. Then the other thing is that productivity is an integral part of the performance and the profitability. We will tackle the productivity in a big way going forward. And all of the efforts we have in the pipeline, they will improve Kamux's competitiveness in our marketplaces and potential in the future of the new places as well and then at the end of the day, it should be visible also on the bottom line. So that's what Kamux team is now implementing and doing as we speak. I think on the top line rather solid performance and slightly increasing, margins improving. Operating profit adjusted at par with the prior year, slightly ahead. Like-for-like sales growing. I think later on we have a bit of a deep look on Sweden. Unfortunately, Swedish krona was not favoring us. We got bit of a, I would say, headwind on that one. But then I think at the end of the day, we've been doing good on the integrated services except the finance, which has been challenged due to the increased interest rates. But I think Marko will entertain you more on that going forward. I think after the turmoil due to the war, inflation, energy crisis; now the markets are gradually stabilizing and actually starting to grow especially on the used car marketplace and I think we've been gaining share and we've been gaining momentum on that respect. Still it's good to remember that the actual prices even though they're stabilizing, they are not ahead. They're actually below the '21 and '22 in that respect. So still some work to do on that one. On the Finnish marketplace, we increased rather nicely and had a good game on that one and I think we maintained our position. On the number of cars sold, on the market share we are rather solid in our leadership in that respect. Sweden, very happy for the change on the game. I think the team in Sweden has done multiple good things and now they are gradually surfacing on top of the agenda. We see the results over there. I think the challenge is that Swedish market due to the weakening krona has been emptied by multiple other markets and the Swedish car no longer end up in Sweden and Finland. They're going even in the Southern Hemisphere in Europe; Czechia, Hungary, Germany and all of the European marketplace. So that's why the sourcing market has been extremely challenging in Sweden. Then in Germany, I think the market has been stabilizing for I don't know even the exact reason, but the northern part of Germany has been declining on the used car market sales. New car sales have been rather strong and solid, but the used cars especially in northern part of Germany has gone down and we are investigating the main reasons. I think so far the reason we have come up is that it's an extremely wealthy area. It's actually one of the wealthiest areas around Hamburg and maybe the new cars have gained more attention than the used cars. Our own game on the used cars has been rather good and solid. Then on the marketplace, as you can see, we are no longer on the Top 3, but we are hanging on the position #5. And I think during the time on the Top 3 and also the fourth one, they've done lot of actions; opening new markets and also some M&A activity in that respect whereas Kamux has been rather stable in our markets and in our way of operating. Then jumping into the actual performance on the top line and on the profitability. Sold prices increased very nicely, but the prices as said were slightly lower than on the '22 and '21. ForEx impact especially the Swedish krona, and that's the only currency we have, did a bit of a hiccup on our top line roughly in the magnitude of EUR 5 million. So at constant currencies, we would have had incremental EUR 5 million on the top line. Finland, after a bit of a struggle and hiccups, we are finally steady. We've been doing good game change on that respect and I think the team Finland has in a way build up a sustainable way how to operate the game and also the spirit of the team is on a very good mood on this respect. Sweden, very happy to see the results over there. Finally, the game is surfacing on the top line and also on the bottom line. Sad news is that Kerim Nielsen, who's been with us already some time, he's leaving us at the year end. He got an offer he can't refuse and we are very happy for him. We have started recruitment and I think the current car business in Sweden is in such a transition that we will have a good pool of good candidates, but they will be maybe towards the end of the year, Q1 of next year before we have a succession over there. Meanwhile we are beefing up the organization in Sweden and helping Kerim to perform until year end in that respect. Germany, it was not an easy game especially on the northern part of Germany. The market was declining. We had bit of a I can say maybe not so relevant inventory, which we were cleaning up at the end of the Q2 for the professional channel. And at the same time we opened a new Duren shop. It's doing extremely well, but I think the marketing expense we put on that one was rather heavy and it was focused mainly on the Q2. So that's visible on the German numbers in that respect. Then on the profitability, you can see that adjusted level, we were roughly at par and we are on the right trajectory and we'll do a good job on that respect. Then maybe the years are not alike and last year the second half was rather challenging. This year still not easy, but we see it easier than prior year in that respect. So we should have rather good comparable numbers ahead of us. Then on the pieces sold, we did a good job in Finland. That's very important because most of our incremental services are based on the pieces sold so that's helping on that respect. Sweden, good but still below prior year. And Germany good, but it's good to remember that is including some of the cleanup we did for the professional channel. And then I think on the Finland integrated services, we will entertain that in a bit more in detail during Marko's presentation. On the Kamux Plus, we have done very good job with the new upgraded version. The penetration rates are solid and increasing with the finance fees in the new environment with the higher interest rates, which in the car industry have gone from 0.99%, 1.99%, 2.99%, 4.99% and today we are trading at 7.99% or 8 and change percent. Our margins have been squeezed. Even though we're very good in selling the financial services, our margins have been squeezed. We've been able to push all the increased interest to our customers, but still our margins have been challenged on that respect. On the store openings, no major news on that respect. Some closures as you have heard. The Duren shop in Germany is in a very good location, doing good job and that's by the way our first shop outside of the northern part of Germany. It's close to Cologne and Bonn close to the Dutch and Belgium border. We've been learning during the journey that's also a major area where people are exiting big fleets on the car industry. So we are in the prime location over there and most likely can build on top of that other things. Then I think recently maybe a week ago, 10 days ago; we announced about the new opening in Tampere where we will have a tailor-made shop. Very close on the entrance on the Road #3 going north and just before entering into Tampere, that's where we're going to be building a new shop and opening that on the next spring in the month of May so to speak. And it's a tailor-made shop for us and a very good new Kamux concept to be available over there. And even currently if you have time, please visit our Tampere shop. That's one of our strongholds in the portfolio so extremely good basis over there. Then on the strategy, I think that's something we're going to be reviewing together with the management and the Board. This one is still intact. Growth is in place, but I think we pay more attention to the profitability as we speak. Growth is very important, but at the same time we improve the profitability. The building blocks and the cornerstones, they're roughly going to stay on the same level. But those we're going to review in detail and I think during end of the year, early next year, we're going to come out with our updated strategy in that respect and then we can share more news on this one. Now I think this was my wrap-up. Now we pass the word for Marko to have a deeper dive on the financials. So welcome, Marko.

Thank you, Tapio. So let's move to financial. And of course after the slightly or quite challenging start of the year, it is of course really nice to see that we are gradually improving the margins. And especially if you look at the performance, the metal margins so meaning so-called margin what we get from the car trading, there has been improvement when we compare to the first quarter and that has been of course very positive. So there as you saw, the sold units has been increasing quite nicely. However, the average prices have been slightly lower and that is of course impacting the revenue. On the gross margin level, we were almost on the last year level even though the integrated services revenue was slightly down so that is really coming from the metal margin of the cars and there we had of course nice improvement in Finland and Sweden. Germany was little different story as Tapio was mentioning. The income on the margin level, so in euros we were improving. However, the costs were also increasing. We had some expansion cost in Germany when we went to the new region and the marketing effort what we discussed. However, there is also what we discussed in the last quarter. We have now finalized our financial system upgrade or upgrade to the new version and that of course bears some costs. So that is now done. And general inflation we see of course the pinch there as well so that has been impacting cost. Meaning that then the adjusted operating profit was basically slightly growing, but not significantly on the line with the margin. Inventory management was relatively successful and what I'm really happy is that the composition of inventory was healthier and it was good. We were able to grow sales with lower inventory and of course it means that the structure of the inventory was better. So meaning we have been doing a better job in purchasing the cars. Balance sheet of Kamux is still very strong and continues to be strong and our equity ratio was 46.5%. And that is including also the IFRS 16 lease liabilities, which were at the end of the second quarter EUR 37.7 million. So that is quite significant amount. And all in all what I always like to underline is that our strong balance sheet is the backbone of our growth strategy. Then about the key figures. As Tapio was mentioning, the Swedish krona impact was quite significant. The translation effect was roughly minus EUR 5.2 million. If you think about on percentage terms, we would have been growing bit over 5% compared to the previous year second quarter. However, revenue was EUR 255 million and the gross profit EUR 26.3 million. So that was coming with improved margins especially from the cars. In the operating profit EUR 3.9 million, slightly down compared to previous year. There we had certain, let's call it, oneoff items. There was costs related to the CEO change in the group and there was also cost related to this financial software renewal, which were of course not continuing going forward. I would also like to draw the attention to the like-for-like growth. So as you remember the formula, that is reflecting the revenue or growth from the older stores so meaning over 24 months opened stores and that was also relatively solid 2.9% there. So the growth is not only coming from the expansion of the new stores, which is important for us. Inventory turnover 58 days, slightly above the last year. But I'd like to remind here that we are measuring the period of 12 months rolling averages so that figure does not reflect if there is changes in the business which are relatively sudden. So that comes always little bit with a delay. As I was mentioning, the inventory structure and the efficiency was in good level. Then if we go then to the segments and start with Finland. We were able to increase the number of sold cars, which was of course driving the revenue up and also the operating profit was increased. So we had a solid performance there. Finnish market was also turning slightly positive, which was of course good for us. All in all in Finland, the revenue increased 10.8% being EUR 173 million and the gross margin increased compared to previous year and was EUR 19 million or 11% of the revenue, which was also more or less last year level. And the operating profit increased by 8.1% being EUR 7.3 million. Revenue from integrated services decreased to EUR 10.4 million, last year EUR 10.5 million so not a big difference and as we discussed also in the quarter 1. So last year we had 1 partner who had a little bit different revenue recognition model or meaning that we were getting the revenue from the contracts much more forward looking, they were not spread in the longer period. So that has certain impact for the comparability of the numbers. In Sweden, market was also, let's say, stabilizing. However, as discussed, the sourcing challenges or challenges with buying cars were quite significant and that had also impact to our top line. The total revenue decreased by 3.8% and was EUR 79.2 million and the gross margin was EUR 5.5 million or 6.9% of the revenue and there we had a good improvement compared to the last year. And of course we can be satisfied with car margins. And as we discussed last time, we had this 5-point program what we have been implementing there and now we can really see some results already from that program in the Swedish numbers. Operating profit increased compared to previous year and was EUR 0.6 million or 0.8% from the total revenue. And the revenue from the integrated services was at the previous year level being EUR 1.4 million or 2.4% of the external revenue. So really this improvement of the results was in Sweden coming from the car margins. In Germany, the market situation in our main areas was relatively challenging and varying a lot from the nationwide development. However, we were able to increase the revenue 5% to EUR 26.3 million and external revenue was also increasing 6.3%. The gross margin was decreasing compared to the previous year and was EUR 1.8 million or 6.8% of the revenue and that was really coming from the metal margins or car margins and especially the cleanup on the inventory and selling to the professional sources the cars. At the same time, also operating income decreased compared to the previous year and was minus EUR 0.9 million and that was impacted by the decrease in margins and of course our investment to the regional expansion. And as Tapio mentioned, we had a quite significant marketing effort there as well as we were not really known in this area before. Revenue from the integrated services decreased to EUR 0.7 million or 2.7% of external revenue. And of course when we are doing these kind of actions to clean up or straighten the inventory and put cars through professional channels, of course to those cars we are not able to sell any integrated services. So that is very visible there. Then when we go to inventory. With inventory, we managed pretty well. I'm always happy or smiling when the inventory is growing less than the revenue, which means that our inventory is in good and efficient use. In the net working capital, we can see little bit different development there. We had with 1 major financing partner in Finland certain challenges with the new system and processing the new agreements so that was little bit increasing temporarily our receivables, but that is a temporary situation with them. The purchasing market was working relatively well excluding Sweden where the weak krona is impacting the market. But also the new car deliveries, as you saw the European-wide levels, there has been relatively positive development. However, have to keep in mind what we hear from the new car dealers that the new orders so meaning the new orders for future deliveries have been relatively weak. So I wouldn't yet be super excited about the new car situation. Then when we look about the cash flow. Cash flow was negative EUR 8.1 million and that is that when we look compared to the quarter 1, we saw that the market is developing positively especially in Finland and we were raising the inventory amid the recovering market. Investment side or cost in the central functions. In the second quarter investments were EUR 0.5 million and we invested EUR 0.4 million to tangible assets so mainly to the store expansion or renewal to stores and EUR 0.1 million, which is basically our digital environment. And in the group functions, the costs were relatively high and as I was mentioning, there were certain oneoff or let's say onetime impacts. There was a cost related to the CEO change roughly EUR 0.6 million and also there were costs related to the renewal of the financial system. And as I was reminding also before that when you are investing or when you are renewing SaaS-based systems so those costs are mainly expensed immediately. So those are not as investments what you activate to the balance sheet now according to the IFRS standards. Also on the investments and group functions, you can see that we have been improving and enhancing our own digital capabilities quite significantly and that you see that the group costs have been slightly increasing and the investments has been slightly decreasing. So we are doing currently more ourselves. Dividend: the Annual General Meeting decided that the dividend is EUR 0.15 per share and payout ratio is 55% and we have now in May paid the first installment, which was EUR 0.05 per share. Then I move to the outlook and financial targets. When we were creating the strategy for the period of '21 to '23, that strategy was made into relatively different situation in the world. So we didn't really foresee the war in Ukraine and of course that's an impact as well. However, when we look at the results so in the first half the revenue growth was negative so the revenue was declining 1.2%. Adjusted operating profit was EUR 5.4 million, last year same period EUR 10.2 million. I would like to remind here what Tapio was also saying is that last year the start was stronger and the situation was getting more and more difficult every quarter when we went towards the end of the year and this year we have so far seen a little bit different pattern. Adjusted operating profit margin 1.1%, return on equity 5.9% and the dividend payout 55%. Outlook for 2023 is unchanged. I would like to remind that there is still in the car markets and of course in the consumer business a lot of uncertainties. Consumer confidence is still relatively low. Interest rates are high. Inflation is also still running high. And lately, there has been also more concerns about the employment in the society. So there we will hopefully not see too dramatic things, but that has been also a concern for the people. And therefore, our outlook for the 2023 is unchanged and it is that we are growing from the year '22 when we had EUR 17.5 million adjusted operating profit. And now I will summarize then the whole quarter. So the revenue was increasing 3.3% to EUR 355 million. Gross profit was increasing 7.5% to EUR 26.3 million. Adjusted operating profit was at previous year level and was EUR 4.5 million or 1.8% of the revenue. And like-for-like showroom revenue grew by 2.9%. And revenue from integrated services decreased and was EUR 12.4 million or 4.9% of total revenue. And the market of used cars grew moderately in Finland and Sweden, but declined in Kamux operating area in Northern Germany. And the prices of used cars were stable, but a lower level than 2022. Thank you for your attention and we are now happy to answer your questions.

My name is Katariina Hietaranta from Kamux Investor Relations. We'll open for Q&A and we'll first take questions from the teleconference. If there are any, please?

[Operator Instructions] The next question comes from Calle Loikkanen from Danske Bank.

Just a couple of questions on the integrated services. The integrated services have decreased now for a couple of quarters. How do you see this developing going into the second half of the year?

I think on our main services and products, we've been doing still increased penetration and that's looking rather good. Then on the financial services and the margin we book on that one, we've been passing all the increases to the customer base. And I think gradually when people get more used to the new interest rate levels and when they start to be backing again, we have great ability to increase that. But for the time being, we fully focus on our Kamux Plus and the insurance and the other services we sell. The finance, we try to maximize our share on that one, but there is not a lot of leeway to improve the share on that one for the time being. Marko, maybe you have a different view.

Yes. Maybe not a different view, but maybe I'd just also remind that we have this revenue recognition topic there, which is mixing the comparability of the numbers.

Okay. But the kind of the pain point here has been with the financial side rather than Kamux Plus. Is that correct?

That's correct. Very correct.

Okay. And then perhaps continuing on the financing side. Are you willing to elaborate on how much you have been forced to squeeze your margins in these products?

It's a rather complicated question. We work with multiple partners in 3 markets so I even don't know exactly on that one. But we've been maximizing our efforts to minimize the challenge on that one. If that helps in understanding what we do.

We begin with questions from the audience. Maria?

I have few questions. Maria Wikstrom from SEB. So firstly, on the car margins. In the Q1 you commented that like metal margin was up month by month during the Q1. So how has it looked like now during Q2?

We have paid lot of attention on that one in all of the markets and we see gradual improvement on the metal margin, but underlying gradual improvement.

Good. Then a question maybe because I think if I look at the numbers right, in Finland for the first half of the year actually Saka was able to report slightly higher sales than Kamux. So do you think -- I mean like why do you think your biggest challenger is now reporting higher numbers than yourself?

We've been analyzing that on our owner competitiveness. Don't know Saka in detail so cannot comment on their behalf. But what we see, there are certain regions in the country where they've been doing extremely good, then I think also the portfolio they've been putting on the market has been slightly different than ours. Then maybe around the capital region, they've been rather active. But you can rest assured we will come back.

Good to hear. And then finally, given that almost 100 days are now done for you, Tapio, as the new CEO. So what will be the aspects that you focus on first I mean during the second half of the year?

I think reviewing our strategy together with the Board and the management is very high on the agenda and then continuing on the gradual improvement of the game in all of the existing marketplace and focusing on the customer in all of the channels we operate. So the omnichannel customer experience and to keep customer happy and exceed their expectation is high on the agenda.

And then maybe finally, can you remind us I mean what are your performance metrics set by the Board now as the CEO?

Have we disclosed all of that? But they are focused on the top line and bottom line and on some other KPIs in between.

Other questions from the audience? Pia?

Pia from Carnegie. I got the impression that you will focus on the profitability and improving that. So my questions are around the costs now and I start with Germany and you referred to the marketing cost. So should we expect them to stay elevated for long or was this a Q2 issue?

I think it was more of a oneoff for the Q2, a very special occasion for opening the new store and building reputation on a different corner of Germany. Overall, I think our marketing efforts will maintain, but we will rather do it on our own and do it more on the digital platform than on other media.

Okay. Then in the report, you said costs increased faster than revenue in Finland. What were the main reasons behind this and how can you reduce this growth rate?

Increasing productivity is high on the agenda and then we need to find ways how to tackle inflation and how to eliminate some of the inflated costs on that respect and that's what we are working on.

Okay. You also mentioned measures to enhance customer attention and improve service across channels. So can you remind me, do you publish NPS numbers or do you plan to start publishing?

I think we don't. Internally we monitor very closely and we have rather good metrics on the customer satisfaction and experience. But I think the game has also changed. What used to be good in the past is no longer good, it's mediocre so we need to gradually step up on certain parameters of the customer service.

Okay. That would be interesting to follow as an analyst.

Let's see.

Right. Then on the guidance for this year so you're looking for an improving EBIT. When do you think you have the confidence to specify that guidance?

I think now we are in the middle of a peak season. I think after the Q3, we could have a good read how this year will be ending up. On the other hand, still there is 1 more quarter to go and always whatever can happen both pluses and minuses. So towards the year end we'll get more and more confident about it. Q3 is rather important in our line of business.

Right. And then finally, your market position in Europe has deteriorated or you have maybe stayed flat whereas your competitors have sped up their expansion. So I assume that's something which will be in your focus during the strategy work. But anything you can share at this point how to speed up and strengthen your position.

We have just started to work on the strategy, cannot share anything because I don't have any news on that one. But I think doing the things we do, but do it better, do it faster. And then I think we have some things in the back pocket. We need to bring them to the marketplace, show them to the customers and then automatically we will have something happening both on the top line and on the bottom line. Not going to be big steps, but they're going to be more gradual steps to take it to the right direction. When we go through the history of Kamux, I think it's been more of an organic journey and I think on our future strategy most likely they will be. But most likely don't know it, but we'll review M&A most like will play a role. Then on top of the preowned cars, maybe there are some services where the frequency with the customer will be higher than the actual change of the car. So let's see what's going to come up.

Looking forward to that. Thank you.

I believe we have further questions from the audience.

Rauli from Inderes Oyj. Couple of questions from me as well. Firstly, some details on the numbers. Starting from Sweden. How was the average prices developing in the Swedish market if we look in Swedish kronas for you?

On the comparable basis, in Sweden we were basically minus 1% on the units and on the revenue minus 3.8% so slightly down, but there is of course FX impact. If I calculate that just on the top of the head, I think it would have been in kronas slightly positive.

Yes, exactly. I was just wondering that if the sourcing market is kind of crowded and cars are being pulled to the euro, that would lift the prices in kronas. So has that had any positive effect on your earnings in Sweden?

That is a little bit -- this pricing dynamics is maybe a little bit different there because in that sense that if the price is what the competition from Europe is or other operators in Europe are buying, those would not be any valid prices for the Swedish market. So meaning that the people wouldn't buy in Sweden with those prices. So anyway, that impact per se would not reflect in the local prices there.

Okay. And then another number detail. In Germany, your EBIT was down EUR 1 million I think from last year. So can you give some color on the magnitude of these marketing costs and inventory cleanup comparing to that drop?

I think we don't disclose that in detail, but the marketing cost for the size of our operation in Germany were substantial.

Okay. Fair enough. Then finally, Tapio, you mentioned a few times that you need to work and improve the efficiency and productivity going forward. Can you give some color to kind of what kind of things are you referring to? That's a pretty generic thing to improve efficiency.

I start with the customer interface and how do we serve the customers, what is the time to do something, what is the efficiency of each individual people who are dealing with that one. That goes throughout the whole process how we actually finalize the transaction with our customers. So we built some KPIs and we already have some KPIs, but we start to monitor them more closely and to set some targets and do some changes in that respect. Rather simple, but straightforward.

We have more questions from the audience?

It's [ Mathias Chel ] from [indiscernible]. Just a couple of general questions at this stage when you're fairly new in the house, Tapio. But the market position in Finland has rather seldom been questioned in Kamux, it's great and the Q2 report shows signs of strength once again. The international business I would mention have maybe not yet been fully proven. So the question here comes to, Tapio, it's been maybe seen as a rather brave move for a fairly national organization to move to Sweden and Germany with a long history within the car industry. So based on your history, Tapio, in Harvia and being part of internationalizing that business, what would you say are the must do well or must win in order to really build long-term volume and profitable organization in Sweden and Germany and maybe in the future other markets. I know it's early days, but can you leverage on something from the Harvia experience and what's your thoughts around this?

Maybe not from the Harvia experience, but then based on common knowledge and other background information. We've already been building some size in Sweden so I think we are 1 step ahead on that one. Then you need to define where you're going to be excelling and excellent compared to your peers and I think that's where we have some good inroads where we can be different than the local marketplace and the same applies in Germany as well. And the Germany market and especially the secondhand or used car or preorder market is rather versatile and very, I would say, colorful players on that one. Then to deliver a solid game on that one and make the customers happy and be transparent and be that in omnichannel, I think we can do a rather good thing also in Germany. But we need to work every step right otherwise it's not going to happen.

And then another one regarding the business of a car retailer across Europe. To my understanding, it's been communicated before that it's really a volume and data-driven business across the markets. And if I don't remember wrong, there's been quite some investments in the new ERP system. So what's your view coming in after 100-plus days? Are you satisfied with the ERP system that works across markets right now or will that also be an area of focus and improvement potential from your point of view?

Very good question. What I've seen so far in our ERP, it's a very comprehensive multidimensional data available online immediately. The way we use it, I think we can still do much better. But I think the underlying system is state-of-the-art and now we need to figure out how to really use all of the data we have on that one to make the right decisions and to make the right moves. Some people are really advanced on that one, some people we need to help to learn faster.

Okay. And then my last question, just a small one to Marko. You mentioned the SaaS fees that I didn't quite get that. You said that upfront they are larger and aren't they annually recurring or did I misunderstand that? And a second part of that, can you give any flavor on the level of technology driven SaaS fees that you're basically outsourcing?

Yes. I was maybe bit too fast on this because I think I have been talking this topic a couple of times and didn't want to maybe repeat myself so many times. But if we are investing to our own KMS so our own ERP, which is our own software, so that investment we are capitalizing so putting basically in the balance sheet and depreciating over the years. But when we are investing so meaning when we have a project when we need to make modifications for the SaaS software, that modification work or investment that we need to write off as a cost immediately. So that you are not anymore able to capitalize because the IFRS is looking at it that way or the judgment is that there is no own IP produced and therefore it has to be capitalized. And when we talk about this whole system, we are talking about of course on hundreds of thousands of euros of these modifications. But then of course what comes to annual fees for the SaaS-based fees for the licenses and so on, those are of course much smaller what we pay.

It's David from eQ. Question about expansion in Germany. You have penetrated Finland in terms of stores, Sweden is not growing at the moment, but how will you grow stores in Germany now when it's omnichannel and you're expanding there? What kind of expansion strategy do you see?

I think those who have been operating in Germany, they realize that Germany is not fully digital as of yet and I think we need to operate also in the brick-and-mortar stores. We've been in the process of relocating some of the stores, improving the locations, improving the presence mainly in the same cities and same areas, but in different locations. Then during the journey where now the pilot is still out on the different part of Germany seems to be starting extremely well. If that's in a way solid performance, then we consider also opening outside of the northern part of Germany. But the pilot is now out and we are figuring what is the outcome of that. In Sweden, we do the same even though the store count will most likely stay the same. We are gradually in a relocation process with at least 2 of the stores to be in a better position, more prime location and to better serve the customers in Sweden.

A couple of questions from the webcast participants. You say your margins have been squeezed in finance products. What would change this? Do you think it will require rates coming down or will it take time for market to adjust?

I think it's both. It's a psychological issue. When people have been used to buy 1.99% or 2.99% or even 0.99%, to jump into 7.99% will take some time to adjust. Then when people get used to it, then you can maybe make a threshold. At the same time, I think everyone anticipates the interest rate to level or even start to decline. So I think that may help, but it's coming with a time.

Very good. Can you remind us what you did in Sweden to improve profitability in Q2 and where should we see margins in this country in 2 to 3 years?

I think the latter part of the question is easy to answer. I think the 5 point program has been delivered to service the improving profitability in Sweden. I cannot even tell which of the 5 did this and that, but I think we've been doing them all together. It's a gradual effort and we will continue gradually on that respect. Going forward I think when we have a bit of volume more in Sweden and we have more presence, we should see, I would say, average or even above average margins in Sweden as well.

All right. How has the relatively low consumer confidence impacted the used car market so far?

I think if you see what type of cars are selling, what is happening with the average price, but this is still polarized. People who have means, they will buy what they like. But then you have people who are in the way favoring or forced to buy more economical or more lower value cars and I think that's why the average price is not so easy to move upwards as we speak.

Very good. Any further questions from the audience here? Maria?

Maybe 1 question on sourcing and availability of used cars. I mean you said that the Swedish market has been tough I mean given the very weak Swedish krona. But if we talk about Finland and in Germany, how is the situation to source cars I mean which are not the so-called trade-in cars?

I think Finland, Germany rather normal. I think no major impacts in that respect. But Sweden is very unique and I think the time to act used to be a couple of hours. Now the time to act is maybe 20 minutes, 15 minutes otherwise you're late. So you need to be very early on the lead and make it fast and no room for negotiating. It's either you take it or you don't.

And then maybe final one on the guidance that you currently look for growth in adjusted EBIT, you were EUR 5 million behind for the first half of the year. So what do you think would need to happen you not being able to grow the profits for the full year?

I think if we continue on the current path, trajectory should be very doable. If something will happen with the consumer confidence, something will happen with the energy, something will happen with the inflation, then I think the latest one we started to monitor some time ago is the employment rate in all of our operating markets; they may have an impact. But I think nothing major should happen, but I think we need to monitor every single move on these levers.

Very good. Thank you. That concludes our Q2 webcast this time. Thank you.

Thank you.

Thank you...

Enjoy the day.