Kamux Oyj (KAMUX) Earnings Call Transcript & Summary

Good day, everyone, and welcome to Kamux's Quarter 2 results information. My name is Katariina Hietaranta, and I'm Kamux's Head of Investor Relations. Today, we have our CEO, Tapio Pajuharju; and CFO, Enel Sintonen, presenting the results. And after the presentation, we'll have a Q&A session. Please go ahead, Tapio.

Thank you, Katariina. Welcome on board also on my behalf. I'm very happy to have Enel Sintonen over here. Enel is rather fresh, started August 1, but I think during the journey, you've been onboarding quite well and you will get a very good insight on the financial numbers today from Enel. I think the headline tells it all. We had a bit of a shift in the focus started on the profitability. That had a toll on the volumes. But I think today, we'll run through the actions, what we have done, what is in the pipeline and then have a bit look on the future as well. So all in all, we'll have a deep dive on the Q2 and we'll have the first half altogether, have a look on the market positioning, have the highlights and the lowlights on then the network development. We'll have a review by country, focus on the Finland and the changes in Sweden and then have a look on the German strategy. Nothing major on that one, just an update on that and then the financial development. And at the very end, we'll have a look on the long-term targets and the outlook. And then we have the time for questions and comments at the very end. So please bear with us. So all in all, I think the profitability was the focus and the highlight and that's something we improved. And I think that had a toll on the net sales. On top of that, we had a lower number of stores that had an impact also on the development of the net sales. Then on the development on the car margin, I think in all of the 3 markets, we see a good step forward on the profitability per car sold, both on the margin as well as on the integrated services. And as a result of that, we slightly improved our adjusted operating profitability for the quarter. Cash flow improving quite nicely, almost a EUR 30 million favorable delta on that. And then on the integrated services, both on the Kamux Plus as well as on the financial services, penetration staying on a very good healthy level or improving. And at the same time, the relative profitability delivered by the integrated services improving compared to the net sales quite nicely. On the customer satisfaction, which we measure with the NPS, we remain on a high level at the 58, which is good in our line of industry. And then on the market, I think the market was unfortunately not helping us. It was mainly flat or negative. And even on the markets like Finland and Sweden where the market had a slight growth, that's mainly driven by the consumer-to-consumer sales. The organized used car dealerships were either flat or declining. New car sales, I think we'll have a look on a later stage. And then I think on the number of cars sold, it's evident that we took a rather big dip on that one. Then having a bit on the look market by market. And I think now, especially regarding Finland, we had a very good turnaround on the profitability, had a bit of a dip on the volumes. On the other hand, Kamux remains the #1 in pieces sold in Finland with a quite nice lead compared to the other one. And even though they may have, as you read the advertising say they're the largest, on the pieces, Kamux is clearly #1 on that respect. Sweden, we were declining, but taking a step to the right direction. The decline is less than in the past and we remain on the top 8. Germany, I think we need to do a bit of a restart of the game and that's in the pipeline, but we are so small, didn't have a big impact on the position on the marketplace. Then I think the new car sales is an indication of the consumer confidence. And when looking at both Finland and Germany, still negative numbers. Lately, I think we've seen a big change on that one. But during the first half, that was the result. And then if you eliminate the company cars on that, the actual consumer sales, the negative is actually rather deep and that has an impact on the used car business, which means that the car park is aging. And at the same time, the import is a must and the volume of the import need to go up, not only for this quarter and forward for a longer period of time, Finland and Sweden need to import cars. Then having a look on the graphs and the pillars, I think on the left-hand side, you will see the development of net sales, clearly a dip on that respect. And then having a look on the right-hand side, we're starting with the Q4 where we had a rather soft performance on '24 last quarter. Then we had the same and we did a bit of a cleanup on the inventory on the Q1. And now we are back on track and focusing on the healthy business and doing the change on the profitability and I'm very happy for the development. And we have found a sustainable way how to eliminate most of the negative margin deals, do zero calories with low or no margin and then focus on the profitability of the cars. And I will share in more detail the 4 steps we've been doing on that one. This one is rather evident and I think impacting all the markets and we took down on the number of cars sold. And as said, the number of stores had an impact of, say, maybe 5% of the 18% or 22% on that one is dependent on the number of stores in our network. This one, I'm very happy. And when seeing the penetration numbers of the Kamux Plus, insurance, finance sales as well as the adjacent services like tires and tow bars in Sweden and tow bars in Finland, we are in the right direction and our ability to earn with the adjacent services is improving. And then on top of the thing, I think in Finland, we are in a position where we can command the interest rate we ask from the market. We've been going to the other direction as the general market where interest rates of 1.49% or even 0% is available, we've been holding our margins on the financing extremely well. And that will mean that not only for this half and this quarter, but going forward for the 24, 36 months, we have something good in the pipeline. And the same applies for the Kamux Plus. Showroom development, we, in Finland, closed Savonlinna, no other major changes. Then we've been honing some of the works' stores and then we've been honing some of the stores in the Greater Capital region. And then we are opening in Jyvaskyla end of October, maybe beginning of November, largest used car dealership in the mid part of Finland and that's where we have the state-of-the-art premises opening in the end of October, beginning of November. Sweden, no major change. We have gone through the list of stores we have. Some of them have been improving profitability, not all yet, but I think all have a game plan to survive. And I think during the fall, we'll then make a call how to go forward. And then we still have the need in the northern part of Sweden as well as on the capital region to improve our presence on the areas. Germany, last year, we closed 2 stores and now we opened 1 in Schwerin. That's the first store east of Hamburg, which is on the old eastern part of Germany in an excellent location in a good regional city in the shopping area next to Aldi, next to Rossmann on a roundabout and a crossroad. And we had a team who already been planning for that and have locals. So we had a good flying start over there that we opened in the first day of July. Finland, quite a major change on the way of operating. And as I said, consumer markets -- and I think maybe for the ones who do monitor the business in so detail, the consumer-to-consumer market is really focused on rather affordable 1,000, 2,000, 3,000 value cars, all in combustion engine and something we would maybe not sell in a normal case. At the same time, we've been also changing our game plan. Our offering is closer to the market demand. And I think then in the past, we used to put quite good cars in the auction platform. We have opened our own Kamux outlet which is only open for the professionals in the industry and that's the way how we can mitigate the auction channel and improve our profitability even on the lower end of the value chain in that respect. Competition, especially on the sourcing market has been really strong and some companies have been beefing up the inventory. And that's why import is extremely important. And we've been also increasing our ability to do trade-ins and we've been having good results on that one. Then on the 4 things we've been doing is the faster and more data-driven pricing that's paying off, doing a good job on that one. Then the -- what we call demand management and sales and operation planning. Our offering is now matching better the local demand and local needs. We are not perfect, but we are way better than we used to be in the past. And then on the inventory management, where we had a bit of a mixed bag, some stores doing a very good job, some not. Today, we have a system where we are clearly more actively, more centrally and faster addressing the inventory management. And on top of that, we've been increasing the activity level. And now when we know that we have a solid background and we've been eliminating most of the negative deals, we have a very small part of low-margin deals, we can step on the gas and improve the volume going forward. Then on the leadership, I think we had Joni Tuominen becoming the interim leader for Kamux Finland, 16th of April. He started in the company January 1, but took the new position on April. Joni and his team has been doing a good job, has been assisted also by Juha Kalliokoski, who assumed the role of COO and improving our daily standards and daily operation, doing wonders on a daily basis, making that on a weekly basis and then turning that into months and quarters going forward. Then I think some of you know that we had a competition authority addressing actually 2 of the best in the industry, Saka and us. We gave our response. But during the time when Kamux and Saka were headlines that was visible on our consumer traffic and also on the amount of reclamations and complaints. That has now been going to normal. But I think we had a 1 week or 10 days where we had a bit of a tough time on that respect. Now it's normal. And whatever is the outcome on that one, we will implement according to the needs of the competition authority. Then it's a bit funny. We've been challenged by the competition authority on our ability to do quality and our NPS is 59, which is one of the best in the industry. So I think continue doing a good job on that one and try to still improve from the 59. But all in all, lost on the top line, nice improvement on the car-related margins and the adjacent services and then improving the total profitability of Finland in that respect. Sweden, and I think the journey we have over there, it's a declining market. We still had a negative development on our own net sales. But having a look on the margin per car sold, having a look on the adjacent services delivered per every single car on that one and having a look on the inventory turnover and the inventory healthiness, we've been doing a big step forward. At the same token, I think Johan and the team has done a good job on bringing up the spirit. And if we were a bit not so upbeat, now people start to feel confident and we will see the numbers going forward. And then I think also our management team is now complete. We have a good colleague in Enel's team. We have a gentleman started as a CFO Sweden with a car background and experience in that respect. So we have a good way forward. Not seen in the numbers of yet, but direction is very good and very healthy in that respect. Germany, a bit of a different story. And I think the ones who have been following us before last -- end of last year, we were very systematically going to the right direction step by step, but then we failed on the last quarter, both on the number of cars sold and then the profitability of cars. Since then, we've been suffering a bit on the inventory, volume of the inventory, the quality of the inventory and we need to restart the engine. Do exactly the same eye, on the ball, back on the details, make the inventory right based on the local demand, do the pricing the Kamux way, do it fair and do it fast and then go forward with the way of Kamux operating and that's we are now restarting. We have Marcus Mezodi starting with us on the 1st of July. He's a car expert from the past that knows both new cars and used cars. And I think we can restart engine quite fast. The offering we have is clearly on a better shape, but then maybe we need to have more versatile offering. We have bit too many of the same brand, same color, same mileage. And when people looking at that on the mobile from the Kamux, instead of seeing 900 cars, they may be seeing 400 cars because we have too many of the similar quality and that's something we're going to change. Market is unchanged on the players of the game of the 4 big ones, I think Aures Holding is not public information. We know that they have their own challenge, but also good marketplaces in certain areas. Aramis Auto, who used to be a bit in a challenging position, they have got the game together and they are both promoting a very healthy growth on the top line as well as on the profitability and the systematic condition of the cars is paying off and they've been gaining share. Autohero, a bit of a mixed bag in that respect. And our own game, we are back to the profitability and then stepping on the gas. Still, I think our vision is unchanged, even though we are far away from that one. But as you saw on the previous slide, yes, we are far away, but not that far. And with our efforts, we can do organic steps forward. And then on top of that, we have opportunities on the and better arena if they are appearing on the marketplace. Then going forward, I think focus on the One Kamux do the same way of the data-driven pricing. And I think during the journey, we've been understanding data-driven is not solely data-driven. It's a combination of a human professional skill set together with the data we have on our own system as well as on the marketplace is providing a lot of information in that respect. And a combination of 60% to 70% professional skill set enhanced by the available data, doing it fast and do it right on the first go improves both the buying process as well as on the sales process, making the sale faster, improving the inventory rotation and helping the profitability to come faster. And that's what we are doing. Then on our management of the assortment, which is the S&OP process, we are not perfect as of yet. But I think we have the first signs that can be done, will be done and Finland has taken a good step forward on that one. Sweden started to enhance and do the same process earlier this year, getting there. And in Germany, we have just started the S&OP process. We'll have the benefits of that. Then most of you know that we work with our own KMS ERP system, which is also a hybrid CRM. And I think we had a lot of areas where we can do better and we can help with the system for people to manage better on the daily work. And that's what we have started. We still have some issues on the backlog and they will come into the play for the second half, but a good step forward on that one. And then on the inventory management for the stores we've been doing that and enhancing the business, no major change. But for the ones who are mediocre, not so good, we are helping centrally and we have a great system how to help people to perform, do tasks and execute the task. And then if that's not working, then central will come and help and we have the same system in all of the markets. And then on top of that, as the market is very hectic, very dynamic, the speed of activity and the clock speed is something we monitor on a daily basis going forward. The left hand on our strategy is customer promise. That's where we've been doing rather good and we are maybe even a step ahead of the game over there, but we're never going to be perfect on that one. So we still have room to improve. Then on the operational efficiency, yes, we were lagging a bit behind. Now we are catching up. And I think most of the things we have stated is now happening in real life and then doing that already in Finland to a high degree, Sweden is starting to pick up and then Germany has a bit of a restart in some of the areas. But all known, all what is favorable, but known to us and we will be doing going forward. Then on the M&A track, I think for the time being, we fixed the own game. And then when we are ready, then we have an eye for that traction as well. Management team, very happy to have Enel on board. Enel is having an excellent background on the financial world, learning the retail and the car industry. And as I said, you'll be learning on your holidays and time the off and you hit the ground running. In Sweden, we have the pleasure to have Johan on board with an experience in both used car and new car business already starting to make change. Germany, we have Marcus on board, now started and doing the things together with the central team over here. Joni has been a fast learner, taking the Finland big step forward with his team. And then as we are in the people business, we are happy to have Joanna on the HR role. And I think on the training, motivation and building up this spirit, Joanna's trip is more than fundamental taking us forward. Aino continues on our Chief Marketing Officer role. On top of that, she's been taking a major step on the sales and operation planning process and working that in the central team, bringing it to the marketplace in Finland, now in Sweden and later on in Germany as well. And Juha has been very helpful on the Chief Operating Officer, changing the way of daily routines in each individual market on the store, and I'm very happy to have Juha helping the country management team. Jarkko having eye on the ball on our digital development and now especially on the ERP and then having a bit of an enhanced capabilities from the AI. And Altti, both on the car flow where we are better, but we are not perfect as of yet and then the data. And as you may remember, we have a lot of data. But to make the data in an understandable factual way that people can make decisions based on that, we've taken a big step forward. And now we have visualized most of the data, so it's easy for the people to understand where we are, what is the pulse of today, what is the pulse of the week, what is the pulse of the month and what is the trajectory where we are going. Then I think it's time to give room for Enel and have a look on the financials in more detail. So welcome, Enel.

Yes. Thank you, Tapio. So let's dig into the numbers and the key developments of the quarter. As said, our revenue declined, and there were 3 key drivers impacting our volumes and revenue. First, we had a strong focus on pricing and margins and we were selective on deals. And as Tapio already said, we said no to 0 margin deals, we said no to negative margin deals and also to certain low-margin deals. Second, despite of the actions taken during Q1, our inventory was not optimal in the beginning of the quarter. We took proactive actions on purchasing, inventory management, and towards the end of the quarter, we have made a good improvement there. And third, we have, in total, 10 showrooms less than in quarter 2 2024 and this accounted about 1/5 of the volume decline. So these were the main reasons. So again, our focus on profitable business paid off. We had a clear gross margin improvement in Finland and in Sweden and a slight improvement in Germany. Gross profit per car was plus 25% higher than in the comparison period. In addition to margins, we also focused on cash flows and net working capital. And in the first half of the year, we generated EUR 28 million more cash compared to the previous year half 1. And once again, proactive purchasing, inventory management were the key drivers. So the key -- the financial performance of the quarter demonstrates that we are directing our focus and efforts in the right areas. Here are several numbers. Yes, revenue declined substantial, 18.7%. At the same time, when we look at the profitability measures and many of those have increased. So gross profit as a percentage of revenue 11.7% compared to 9.8%, a very nice improvement here. Operating result 0.8%, same as last year. Adjusted operating result 1.4% net to revenue compared to 1.1%. And revenue from integrated services as a percentage of revenue has increased 6.3% compared to 5.4%. So other, I would like to point out inventory turnover. We were slightly behind last year half 1. So it was 54.1% to 53.1%. However, when looking at the whole year last year, we are slightly in a better position. So a significant revenue decline, but major improvement in relative profitability. And here, we have graphs. So we can see here that our net working capital has improved 8.2% and the major part -- a major impact has been lower levels on inventory, which was 12%. Operating cash flow, as said, major improvement when looking at the H1. We had positive cash flows from operating activities, EUR 14.3 million, and it was plus EUR 28 million compared to previous year. Here were the financials. And back to you, Tapio.

Thank you, Enel. So having a look on the long-term targets, I think we are still far off from the 100,000. And I think we took a bit of a step back, but go back on the stepping on the gas when we now have solid ground under our feet. Then I think the adjusted EBIT, we show that we can deliver the targets when we have all the components in the right place. NPS we can do. And I think we have occasionally been already above 60%. Then I think the change in the way of operating was not favorable for everyone in the team. And that's why I think our eNPS took a bit of a hit. And I think where we have tweaking the most the Kamux way, that's where we have the most of the negative development. Now when going forward, I think we're going to see favorable numbers on that one as well. And people do understand that what we have been doing does not only have an impact on the company performance, it has an impact on their ability to earn on a monthly basis, quarterly basis and yearly basis. So that will be more favorable going forward. Then on the outlook, I think we remain on our previous outlook. We know it's not the walk in the park and not easy, but it's very doable and our current analysis and forecasting bounds on that direction. And if and when something happen, definitely, we'll bring it up to the speed as soon as we know, but that looks now good. Then on our dividend, as decided at the AGM, the Board -- is subject to Board approval later in the fall to distribute a EUR 0.07 per share. And I think we are in a position to deliver that when the Board so decides. Then back on the repetition and wrapping it up. Yes, declining top line, major improvement in the margin per car sold, together with the integrated services improving quite nicely and having a good grip on the business and control and Finland making a turnaround, very happy for that. Sweden pointing to the right direction, still work in the process and Germany having a bit of a new store. But nothing unusual, nothing unknown, something we have done in the past and can do it again. So now it's time for questions and comments. And I think we first take the ones on the phone line.

Yes, we'll take first on the phone line.

[Operator Instructions] The next question comes from Maria from Wikstrom.

Yes. This is Maria Wikstrom from SEB. I had 3 questions. I'll take them one by one. I would like to start with the gross profit per car trend. And my question is that, I mean, you seem confident on your full year guidance despite you are quite a bit behind after the first half of the year. And my question is that, is your confidence based on a month-by-month improvement by gross profit per car or what is basically your confidence built for the full year guidance?

It's a combination of the totality. And I think we have simulated every single month, every single market and analyzed that in a totality. And it's a combination of the volume, gross profit per car sold and then the penetration level on the integrated services and then a management on the operational costs in that respect.

Okay. And then my second question is on the Swedish business. You currently have 17 showrooms. And if I recall right, I mean, you previously had, I mean, 3 bleeding showrooms. So how does it look currently, the profitability per showroom in the Swedish market? And what are your plans in Sweden, I mean, to bring it back to the black numbers?

The plan is progressing rather well. Some of the stores are ahead of the schedule, some behind. But I think during the fall, we will make the calls on certain areas, jury is still out. And I think now we have also proven that some of the ones we thought are in a way fatally wrong have been coming back with the right people, right actions. So -- but I think during the fall, we will come with the final outcome.

Okay. And then finally, I wanted to get a bit more details on the extraordinary item, EUR 1.2 million that you reported with the Q2. So what is this consisting of?

Yes. So we have presented line by line in our half year report and other items. There are -- we have closed -- closing the showrooms. So part of the costs are from closings and also part of the costs are making changes in the organization. So those are the main lines in other items.

The next question comes from Pia Rosqvist-Heinsalmi from DNB Carnegie.

Welcome, Enel. I got a few questions. And if I start with the gross profit per car, which seems now to be on an all-time high level, I'm trying to understand the sustainability and the drivers behind the current level. So why should we expect this level or should we expect this level to be sustainable going forward? And any more color on how much of this improvement is driven by the integrated services and how much from the car sales?

Once again, it's a combination of all of the parameters in the value chain, but the main focus has been on the metal margin to make a healthy metal margin. And then on top of that, not giving up on the integrated services. And I think that has proven to be repeatable, systematic and sustainable. And going forward, we're going to continue on the same manner. We've been exercising that now longest time and Finland have a proven track on that one, started to do the same practice in Sweden. And going forward, Germany is entertaining exactly the same systematics. But it also means that we will -- as said, we will say no to certain deals and we will not be equally hungry on low-margin deals than in the past. But now we have a solid ground and we have solid metrics how to follow it. And I think the compensation model we have in all of the countries is supporting the development.

All right. Then if I continue with your current network consisting of 67 showrooms, I think based on this showroom network, how or what kind of a volume uplift do you think you can achieve, I mean, with the current network without -- yes, without growing the network?

I think with the existing premises and when also counting, we have a KPI, which is capacity utilization. And then we calculate the places indoor, outdoor, we have room to grow, big time room to grow. And I think currently, we are in a capacity utilization of 60% or even slightly less. Then still, we have areas where we want to beef up. And like I said, in Sweden, when we hit the black numbers, most likely we need to expand in the Greater Stockholm region. And then in the north, we have nothing north of Sundsvall, which is still a very important part of the market. And then gradually, when we have black numbers in Germany, we are ready to take the next steps in that respect. At the same token, the car trading is becoming more and more digital and more centrally driven. So it doesn't not always mean that we need to open a new physical store. And then some of the current stores are maybe suboptimal in the size or the micro location. So we still have some development on the network.

All right. Then my final question is regarding Sweden and your comment earlier in the call that you're making some decisions later this year. So do I understand correctly that you make decisions regarding your expansion plans in the country?

I think, first of all, on our journey to the black numbers, we need to make a final call which stores will be part of the journey. I think we still have a handful of stores which we need to show that they can deliver and perform. Currently, it looks that most of those have been improving quite a bit and are in a good shape, but I think jury is still out. And then when we know that, then we are ready for the expansion. Currently, we for sure, look at the ideas how to expand. But first, we need to fix it and then we are ready for the expansion.

The next question comes from Joonas Hayha from OP.

It's Joonas Hayha from OP Financial Group. I only have one and it's regarding Germany. Your losses there deepened somewhat compared to the last year. Can you elaborate what kind of challenges have you been facing there recently? And has there been some kind of a change in market conditions or is the result more about improving your own game? How should we think about it?

I think we -- like I tried to entertain on the '24, we had a rather systematic journey towards the black numbers. And then on the last quarter something changed and that has continued. And our Kamux way of doing things has not been 100%. We need to adjust that and that's why we also have a change in the management. Now we are restarting that. I think on the store network, the way we work, just restarting the way we used to do. And then on the inventory management, we had a bit of a lack of cars. Now we have the cars, but maybe the offering is not versatile enough. The number of cars is roughly right, but the actual offering of a certain cars is not ideal for the market. And take an example of for example, Ford Kuga, we may have 9 or 11 of the same year, same mileage, different colors. And when someone is looking for cars, then you take 10 out. So our 800 cars on the Mobile.de is not 800 is maybe 400. So we need to improve the versatility on that one. And then when the sourcing market is complicated and difficult, the trade-ins play a big role, and those you get very fast in the inventory. So we need to improve the offering and the way we work.

Okay. And maybe a follow-up. Can you update us on how many of your stores in Germany are profitable at the moment?

That's something we don't disclose. We still have a mixed bag on that ones. On the other hand, we know exactly what to work and how to make it happen.

There are no more questions at this time. So I hand the conference back to the speakers.

Thank you. I think that we shall now take a couple of questions from the floor here and then there are a couple of ones waiting via the chat.

Rauli Juva from Inderes. A few questions from me. You mentioned some changes in the compensation model as well as the hit on your employee satisfaction. So can you elaborate a bit what you have been doing on that side?