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Bilia AB
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Welcome to the Bilia Q1 Report for 2024. [Operator Instructions]
Now I will hand the conference over to Head of Investor Relations, Carl Fredrik Ewetz. Please go ahead.
Thank you very much for that, and thank you for the introduction, and welcome to Bilia's first quarter results presentation with the CEO, Per Avander; CFO, Kristina Franzén; and I, Carl Fredrik Ewetz. We also have our Deputy CEO, Stefan Nordström in the room.
Good results with sales in line with the company-collected consensus and operational EBIT 3% above consensus. The agenda today, Per will start with the current industry -- current situation in the car industry and go through the numbers. Kristina will dive into our financial situation, and I will conclude with the outlook for the coming quarter.
So let's start, and I'll leave the word to Per Avander.
Okay. Thank you very much, Carl Fredrik. And we go to the current market situation in the car industry.
There is a very good and strong demand in the Service Business, especially for body and paint shops with quite long booking times. The fleet business has still a stable demand for new cars in Sweden. The private consumers are more wait-and-see and buy used -- instead used cars. The order intake on new cars in Belgium and Luxembourg had a good year 2023, but now we see a little bit lower demand for all brands.
In Norway, we see and feel a signs of better business climate. The demand for new cars are growing, good booking times in workshops, the consumer index is better from month to month, and there is a discussion about lower interest rate in the end of this quarter.
The demand for used cars are in a good level in Sweden and Norway, and we see higher prices for all cars, except fully electrical vehicles. I'm still aware, we will see a lack of used cars in stock this summer because we delivered too few new cars in the car industry.
We see a lower interest of fully electrical vehicles, not in Norway, where 90% of all new cars still are electrical. Many governments removed their climate bonus. They are still really expensive and luxury, and the development for range, charging [ go ] fast, but there is a need and demand for a cheap car, and maybe it will come in the end of this year.
Okay, we go to the next slide. Net turnover decreased organically by 6%, explained by low deliveries of new cars, especially in Sweden and Norway. We report a result of SEK 333 million with a margin of 3.6%. We had a better earnings in Western Europe and lower in Sweden and Norway compared to the last year. Remember that the Easter was, this year, in the end of March and cost many working days: in Norway, 3.5 days; and in Sweden, 3 days in March. I will come back to Norway on the slides for Service and Car Business.
On this slide, you can see the quarter 1 profitability from 2020 to 2024 in each country. And in the middle, we have Norway and the challenging situation. On the left-hand side, you can [ see ] Sweden, which has a stable situation. On the right-hand side, you can see Western Europe and the positive development year-over-year.
Take the next one. We go over to the important Service Business. As I mentioned, there is still a good demand in the Service Business in all countries. We have an organic growth of 8%, a really, really strong figure. We reported profitability of SEK 281 million compared to SEK 297 million last year.
There are a few reasons why we report a slightly lower result. As I mentioned, less working days due to Easter. We had less to do in our delivery workshops in Sweden, Norway due to fewer new cars to deliver compared to the last year. As I mentioned last quarter, we implemented a new workshop concept for Volvo in Sweden and start up a new dismantling and body and paint shop in Norway. The margin in Norway is below our target. Improvement activities are in place, and we start to see some results.
The Car Business. Deliveries of new and used cars, adjusted for divested and acquired operations, were 18% respectively, 2% lower compared to quarter 1 last year. For the Car Business, we reported a result of SEK 76 million compared to SEK 158 million last year. Low underlying deliveries of new cars is one reason to the low results, especially in Norway with a drop of 57%. In the used car business, we reported a result of SEK 69 million compared to SEK 82 million last year. Norway and Western Europe reported a better profitability.
The order intake of new cars adjusted for acquired operations were 13% higher compared to the last year. In Norway, we see and feel a little bit better business. The order intake in quarter 1 were 50% better. But bear in mind, last year was really weak. But in March, we sold a little bit over 900 new cars, which is a really strong figure in a historical perspective. And the order backlog of new cars on a normal level, an increase under the quarter with 300 units.
Go over to Kristina, yes.
Thank you, Per. So let's then turn into our financial position.
During the first quarter, we did generate a strong operational cash flow of SEK 400 million, which was some SEK 700 million higher compared to last year. Cash flow has been and will continue to be an important focus area for us.
We have, during the quarter, expanded our operations by acquisition of businesses. We have added 3 facilities, the Jaguar and Land Rover, 2 located in Sweden and 1 in Norway. We have also expanded our XPENG business by taking over 4 facilities from the importer, 2 located in Sweden and 2 located in Norway. Finally, we have bought out the last 10% minority shareholding in our operations in Belgium and Luxembourg. And going forward, this operation is fully owned by Bilia.
This, together with the payment of the last installment of last year's dividend, resulted in a utilization of our credit facilities of just below SEK 1.4 billion, out of our total credit limit of SEK 2.3 billion.
During the first quarter, we also renewed our credit facilities with the banks to -- at similar conditions that we had on the previous credit limit. The length of the renewed credit facility is 3 years with a possible extension by 1 plus 1 year. So in total 5 years and a maturity in March 2029.
Our net debt increased by some SEK 200 million, and the relation to EBITDA was 1.5x. It was an increase by 0.2x compared to the end of 2023 but remains on a solid level, well below our target of 2.0x.
The proposed ordinary dividend to today's Annual General Meeting is SEK 6.60 per share to be paid through 4 installments. The proposed dividend is lower in SEK per share compared to last year. However, it corresponds to around 64% of the earnings per share that we reported in 2023. This is the dividend proportion that is in line with the previous years. It is above the target to distribute at least 50% of the earnings per share and is also in line with the operational cash flow that was generated by us in our operations during last year.
So Carl Fredrik, with that, I think we move over to outlook.
Thank you for that. Outlook for the coming quarter, starting with the Service Business.
Even in a high interest rate environment, our customers continue to service and repair their cars, and we see that to continue in Q2. We [ have -- will continue ] to see good booking times ahead across the business. An early Easter meant fewer working days in Q1, and we will see them coming back in Q2. As Per mentioned earlier, some of the improvement activities in Norway we have implemented have started to show a small effect. I come back to Norway in a second. In Q1, the Service Business represented 76% of our operating profit.
In the used car business, we foresee activity remain on good levels in the coming quarter. To repeat what we have said last quarters, consumers choose to keep their old cars or buy a cheaper used cars. When it comes to prices for used cars, we see touch higher prices at a stable level during the coming quarter. Still, we could see some reduction in prices for certain models.
When it comes to new cars, like we said in the outlook for the first quarter, private customers have been restrained or in a wait-and-see mood. And until we see a rate cut, the majority of private customers will remain on the sidelines, but we believe we can sense a small glimpse of light in the private market compared to last quarter. Also bear in mind that when we see a rate cut, there's a big [ pent-up ] demand among especially private customers. In addition to that, we are likely to see an acceleration of more campaigns from different car manufacturers due to lower financing cost in, for example, private leases.
We see order intake from fleet customers to continue at a stable level. No trend shift here. And it's also fleet customers ordering the majority of EVs at the moment.
Moving over to Norway. Conditions are perceived to be slightly better, especially in relation to new cars. We consider us to be well positioned with historically low inventory levels associated with both new and used cars. At the same time, like I said earlier, cost reductions and improvement activities have been implemented, which are successfully materializing. We also expect a continued good market conditions -- or market situation for used cars in the quarter. However, new cars business is expected to have -- to be demanding in terms of results in the coming quarter as well as a result of still relatively low delivery volumes, which we hope can improve during the second half of the year.
Moving over swiftly to acquisitions. We foresee the activity level in the M&A market to continue, perhaps slightly slower in Q2 with clearly higher financing costs compared to 1 or 2 years ago. Like we said before, we want to be part of the ongoing consolidation but, at the same time, remain financially strong, would any unexpected happen.
That finalizes our fourth quarter presentation, and we can open up for questions.
[Operator Instructions] The next question comes from Simen Aas from DNB Markets.
So I have a few questions for you. I'll start with the first one. So encouraging to see that the order intake now actually went positive, at least driven by Norway recovering here following 7 quarters with negative growth there. Do you think this is a turning point? Or is this mainly reflecting our recovery in a very weak Norwegian market? I also see that you specified that Sweden and Western Europe is still negative, but do you expect this figure to be negative for the group again in Q2? Or should we expect positive order intake here and -- for the remainder of the year? So that's my first.
Yes. We see in Norway, it will be a little bit better and better. If you go back 1 year ago, it was really, really bad order intake in Norway. So as I said, be careful because what I said in [ March 9 ], a little bit over 900 cars is a really good figure for us. This 11,000 new cars in the Norwegian market is really good if you look in the past, but we see it slightly better and better.
So -- and as you can see, we delivered not so many cars, and it's the same for all in the car industry in Norway. So therefore, we can see we'll have lack of used cars. And when you have lack of used cars, the customers start to buy new cars. So if we can have a little bit lower interest rate so we have a little bit more better campaigns for private leasing in Norway, we see better and better month over month.
But I think also we can see [ campaigns ] for the manufacturer has improved. So the activities from all the manufacturers is also higher in Norway now compared to last year. So perhaps if we had that as well.
Because when they had lack of components and the demand was higher than the production, today is the total opposite. So for us, as a dealer, it's a really good [ phenomenon ] when they start to reduce the price with really good campaigns.
So it's a positive trend there. I think you can say that. It's nothing else [ happened that we can ] improve.
Okay. That's clear. And then just on the same topic there, could you just give us sort of an update on -- so you have introduced like new brands this year, some M&A. And how is sort of that developing? And a more detailed question maybe is that, how has the reception of the EX30 been for the Volvo brand in the Nordics?
I didn't really -- what was the first question?
Yes. So it was you have extended your partnership with XPENG, Jaguar and new brands in Nissan, if I'm not mistaken. How has that went so far?
Yes, yes. If we start with Nissan in Sweden, it's a little bit complicated because they changed 1st of January this year to be a pilot for agency model. So it's not easy to have in place the administration system for the salesman and everything. So I would like to say the order intake is not so high for the moment for Nissan and for the rest of dealers in Sweden.
If we go to XPENG, it's -- the order intake is much better in Norway compared to Sweden because the market is much bigger in Norway. And now we will launch the G6, the SUV now with right price, both in Sweden and Norway. So we see that the order intake will increase a lot this summer, I guess.
And then on the question...
EX30 reception.
Yes, yes, not the right level when we are talking order intake in Sweden but much better in Norway. In Norway, we have a really, really good price. If I compare to Sweden, it's 100,000 lower price in Norway compared to Sweden. But now as Stefan mentioned here, we have a campaign now with a really good private leasing in Sweden. So let us see what happen. Now with the pricing, we're SEK 5,000 per month for private leasing. It's a really good price.
Yes, okay. That's very clear. But -- okay. And then interesting to see that the Western Europe actually had the highest earnings in your Car Business in this quarter with a 4.2% margin. So is this -- is it some one-offs in this? Or is this sort of the trend that you expect to be on for the remainder of this year?
What we can see that BMW is a strong brand, both in Belgium and Luxembourg. They are #1 when you're talking market share in Belgium of all brands, bigger than Volkswagen, and they are #2 in Luxembourg, after Volkswagen. So -- and we can see BMW AG, in MINI, they put a lot of efforts into Belgium and Luxembourg market. So we have a really strong position there, and we have the right brands, we can say.
Yes. And we have -- in Luxembourg, we're also situated in our new big, fine, nice sites. So I think we have a really, really good position in Luxembourg market and when you combine it with the things Per mentioned that they are #2 in the total market and have a really strong position. So I think that is really helping this.
So very fair to assume that the trend there is -- there is no change? We should expect that to continue then going forward as well?
I think that we have a common goal together with BMW to continue to be #1 in Belgium. We will do our part in that, and they will do their part, and to be the #1 premium brand in Luxembourg is the same. The same, we will fight for that every day.
Yes. Okay. That's very clear. And then just one final housekeeping question then there. So the financial cost was actually pretty high in this quarter. Could you just give us some indication on a good run rate for the remaining quarters of this year just to get that figure somewhat correct?
And as you saw then, I mean, the reason for the higher finance cost or finance debt is the increased interest rate, right? So I would expect that, that would be sort of the run rate going forward.
The next question comes from Mats Liss from Kepler Cheuvreux.
Well, a couple of questions. First, on service there in Sweden, I mean, I saw the EBITDA improved year-over-year. And I guess that's in spite of lower new car deliveries, so it's quite -- and also, I mean, you mentioned the Easter impact in Sweden as well. Could you give some flavor there why you are sort of improving? Seems a good...
Yes. One reason is we have had really good booking times. We have in the biggest subsidiary company, Bilia -- so Bilia AB, the Volvo and Nissan business. We have [ 15 ] -- employed more mechanics because we -- you may remember that we talked many years ago about -- we have employees in our [indiscernible]. They are all mechanics [indiscernible] long booking times.
As I mentioned there, the process change [indiscernible] the process also, we see that coming in place now in some of our workflow when we made the change.
We changed the concept. Do you remember?
Yes, we talked about that when we go back to a couple of quarters. And now we see in some of the sites, they're getting -- it's working now.
Great. And the outlook going forward seems quite confident. I mean you mentioned the Easter impacted quite long lead times in the body shops and so on. Should we expect it to -- well, is the trend momentum improving? Or is it sort of a normal seasonal improvement in the second quarter? I guess you have service to be implemented after the winter season and ahead of the driving season and so on.
Yes. As you know, the winter, we have a winter long time this year. So many customers, they wait with the change tires to April. And what we see with body and paint shops, there is still, as I mentioned today, the strong booking times, and we try to employ more body mechanics and paint mechanics. So it's a really good situation in Sweden.
I would say the booking times in Sweden is good. The booking times in Norway is good. The booking times in Western Europe is also good. So I think now the after-sales, then you have, one part, the seasonality. I think we have managed the majority of the winter tire change, not all yet, but a majority of them, I think, is done. We still have a bit less, but then it's like good booking times in both service and body shop.
Yes. And then we have acquisition we have done often with a lower margin. But throughout the business excellence team, a centralized team, they help the new companies into Bilia with the right processes and concept, and it go better and better.
We have some news coming in...
Yes, yes, yes.
Good. Then moving to Norway there. I mean the Norwegian market is somewhat soft still. But what about the market shares you have? Do you see opportunity now? I mean you mentioned the new Volvo offering there. Will it sort of -- or do you expect to gain some share?
Yes, I think we can take some market shares with XPENG. And now we took over -- we changed the ensemble, and we took over, directly from XPENG, 2 outlets in Oslo area. So we built up our network in Norway now with XPENG, and XPENG is a really good business for us. If you take our other brands, stable market shares for Toyota, often over 10%. Stable market shares for Volvo, 6%, 7%. And we were a little bit slow with campaigns, you can say, for BMW. But now we have right pricing to the market. One example is the smallest SUV, we have BMW X1. It's over -- it's lower than 500,000, so we are under the limit for VAT now. So we have strong campaigns as well from BMW.
The next question comes from Andreas Lundberg from SEB.
But for the used car, used core margin were down -- gross margin was down despite decent pricing. What was the reason for that?
It was a really good quarter for Norway and stable quarter for Western Europe, and we had a drop in Sweden. And it was our biggest subsidiary company, Volvo [indiscernible], and because we could see all dealers, except Bilia, they built up the Stockholm used cars in the end of last year. It was 14,000 used cars in stock for Volvo dealers in Sweden, and the normal is 10,000. And so when we started in January, many started a lot of campaigns for Sweden [ and the block here ]. So -- and it's the [ transparent ] pricing today. So when one dealer starts with the campaign for XC60, for example, everybody have to follow that.
So the price declined a little bit in January and in February. Now much more stable market, and we can see, for instance, that the petrol and diesel engine is increasing the price now. So stable margin in March but not in the beginning of January and the half of February. It was one -- another, it was tough to sell Renault and the -- [ but we will sell instead ]. We sold out a lot of demonstrations cars. And many of them, it was fully electric in [ the Gulf ], in Bilia in Sweden and cost a lot of money to change them, to sell them and put in Nissan instead. And we had a lot of rental cars in Hertz. So we changed them there as well, and it cost a lot of money when we changed for Nissan. So there is [ some reasons ] in the beginning of this year in Sweden.
And what's about the [ actual ] write-downs or residual values? And any things you've taken there? Any effects on these cuts on EV pricing on your residual values?
You have to be careful with the residual values when you're talking fully electrical cars today because nobody knows what price will be in the future. And you have seen the Tesla, they're changing the price up and down a lot. And we can see for our brands as well, Mercedes-Benz today, it's much lower priced today if we compare 1 year ago for fully electrical cars. So you have to be careful to have residual values for fully electrical vehicles.
But when we see the question, we have nothing now because when we take a look at the value for Mercedes, it was the Mercedes taking the residual values. BMW is taking the residual values, and Toyota is taking the residual values. So out of that perspective, it's only when we talk about the Volvo. And that's, so far, quite small when we come to electrical vehicles so far, but you need to be careful, but nothing now.
It's limited volumes from Volvo.
And [indiscernible] in any way during the [indiscernible], that is what you had a little bit in mind perhaps.
But maybe you have read in the newspaper that finance company like Santander and all the other, they are really frustrated because they have a lot of residual values for Tesla, and it's really costly for them.
[ As a -- the advantage ], we have much less of those type of risks in our balance sheet compared to what we had like 10 years ago -- or [ 8 to 10 years ago ].
But of your commitments of them on, [ say, the balance ], how much is related to EV cars?
I mean that's very good for them and...
If I guess, it's only [ 0 -- maybe 1% -- 0.1% ] or...
I can check that.
Yes, but it's still not so much, so...
No, got you. And also a last question on the Volkswagen deal you recently made here in Sweden or Stockholm, can you give more flavor on your -- what you have done so far? And what are your intentions with Volkswagen in Sweden?
Yes, is the east side of Stockholm, it's Haninge, and it's Skoda in Nacka. So we cover the east side of Stockholm. So we will be a bigger part with Volkswagen, Audi, Cupra and Skoda in the future. So we doubled our volumes now. We had [ new shipping ] since 1 year ago. So we hope we can acquire more in the future, so we can be bigger for Volkswagen, Audi. And it's a really strong brand. And as you can see in the newspaper, they put a lot of effort for fully electrical vehicles, but in the same time now, they launched Tiguan, Passat with plug-in hybrids with diesel engines. So they are overall sort of engines, you can say now.
So it's a really strong brand for us. And we hope we can put in our centralized business excellence team in the workshops and help them with little bit better processes and concept in the future. And for us, it's really good to have 2 different companies now. So we can start to find some synergies now as well.
And they are very strong light commercial vehicles as well. The market share, Volkswagen have around 30% over time. So that is really also interesting.
And then we originally said we had an expected takeover date on the 2nd of April. That would actually be the 2nd of May due to a little bit later decisions from the competition authorities. So we are not yet there. We'll be within shortly.
Next week.
Yes.
Would you say Volkswagen, is it easier, more difficult or the same compared to other brands to integrate in your business?
No, it's not more difficult. But what we say now it's better for us to build up a sort of a cluster for -- because it's a big brand. So together, the 4 brands and fifth -- 5 brands with the light commercial vehicles, so they are 25% together. So maybe it's better to build up a sort of a cluster for Volkswagen, Audi, Seat, Skoda and light commercial vehicles. So that's what we are thinking about in the future, instead to integrate 100% into Bilia, so we built up a cluster for these brands.
And on the Volkswagen network in Sweden, how much is run by themselves? And do you know their intention on the retail side?
[indiscernible], owner is Porsche Holding, and Porsche Holding took over the importer side as well now, we said it earlier. The deal, they are -- of the total retail, they are around 40% -- 40%, 45%. But it's many smaller family companies, and they are a little bit late into the consolidation, we can see. You have another big family companies to [ make ], but many, they have business in 2, 3 different cities, and they have a turnover of a little bit over EUR 100 million up to EUR 200 million.
There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
Thank you for that, and thank you for listening. And please revert to us would you have any further questions. And have a good day. Thank you very much.
Bye-bye. Thank you.