Bilia AB

STO:BILI A

Earnings Call Transcript 2021-Q3

[Kristina Franzen, Chief Financial Officer]

Good afternoon, everybody, and welcome to the Bilia telephone conference about the third quarter results. We have muted your phone lines while we present the results, and then we will open up for you to put questions to ask. So my name is Kristina Franzen, and I'm the CFO of Bilia. And together with me, I have...

[Per Avander, CEO & MD]

Per Avander, Managing Director for Bilia AB. And we would like to start with some highlights, and then be a little bit deeper in the business areas. We have 3 different business areas, service business. We have a car business and fuel business, and be a little bit deeper in the service and car business. But from the beginning, more generally, we reported an operating profit of SEK 489 million compared to quarter 3 last year, SEK 402 million. We improved the margin to 5.9% compared to 5.3% last year. For used cars, we report the best result ever for the quarter, SEK 174 million. The last record, it was SEK 154 million. In Norway, we still have a strong result and a margin of 6.7% compared to 6.3% the last year. We have a big backlog, close to 20,000 new cars, and it's a growth of 23%. And if you go back to the last quarter 2, we have improved the backlog with a little bit over 5,000 units. In the beginning of quarter 3, we took over 2 companies: Mercedes in Stockholm and Mercedes in North Sweden. It's 9 sites, and now we have a new business area: Trucks, Mercedes Trucks. In the quarter 3, the turnover from acquisition we have made the last half year, it's turnover around SEK 900 million. As I said, we have seen the different business areas. And if I start with the service business, we improved the profitability with SEK 20 million or 8%. We had the same number of working days. It's really important because we are talking about production of mechanics. We had a growth of 16% if we compare to the last year, included the acquisition we have made the last half year. We have a clear business strategy. We try to tie up the customer closer with service subscriptions and tire hotels. So we measure how many service subscriptions we have. And today, we have 123,000. It's both new and used cars. We store a lot of tires in Bilia. Today, we have closed 400,000 units in our tire hotels, and we have a target of 600,000. The car business, as I said, the best quarter ever when we are talking used cars. We delivered less cars, but we have the average price much higher, and we have a really good margin and a good demand for used cars. We have a lack of used cars in Sweden and in West Europe. And what we can see in Norway, we have a more normal level of used car in our sites. The new car business, we improved the profitability with SEK 20 million. The underlying turnover of new cars decreased by 6%. And one reason for that is lack of components, especially semiconductors. Here, we delivered 21% less new cars in the quarter 3 compared to the last year. The order intake was really good. We improved 25%. So the customer still buy new cars, but the delivery time is really, really long for the moment. And what we can see in the future of quarter 4 and quarter 1 next year and quarter 2 next year, we see that we will have a lack of components still. But I got the question from a journalist in the morning this day that if the backlog we have close to 20,000 cars, if the customer is waiting for them. And what I can see for the moment, they wait because all our competitors, they have the same situation as we have in Bilia. Okay. Kristina, over to you.

[Kristina Franzen, Chief Financial Officer]

Some words about the financial position. And for the third quarter, we had a continued strong operational cash flow. It was close to SEK 600 million, which we are very happy about. It's below last year, but then you have to bear in mind that we had an exceptional cash focus for last year because of the COVID spreading. That also means that we have continued to have a receivable on the bank. It amounts to a little bit above SEK 800 million. And that is then despite that we have paid a little bit above SEK 1 billion for acquisitions during the year. It means then that we are not utilizing the available credit in net of SEK 1.5 billion towards the banks. Our net debt amounted to around SEK 300 million. It is an increase by around SEK 600 million since year-end. But then you have to bear in mind that we actually had a positive net debt last year, which, of course, is very unusual. Right now, our net debt in relation to EBITDA is close to 0. It's 0.1x, which is on a very low level. And that has also then caused the Board to take a decision about repurchasing SEK 1 million, a maximum of 1 million shares, and that has been decided and will start within shortly.

[Per Avander, CEO & MD]

Okay. A little bit over to acquisition we have made the first half year 2021. And in January, we took over a company in Norway, Felgteknikk AS. It's a rim repair company. And for us, it's a really new, exciting business area. We will start up now in November 2 sites in Sweden, one in the West side of Stockholm, [ Telhel ], there were tire hotels today. Another one is our recycling plant we have in Jönköping. And this business area is rather new in Sweden and Norway, and we can't see so many competitors in the business for the moment. We acquired a tire company, City Däck Öresund AB, and took over the company in June this year with 2 sites. And now we have a plan together with City Däck's Managing Director how we can grow the business, both in the sites we have and if we can go the West side of Sweden to Gothenburg, to [ Estros ] and other bigger cities. And together with Felgteknikk rim repair, City Däck and we have EBITDA, we acquired the company, if I remember right, 2 years ago, tire hotels with a different content. And then we have rim repair restore tires, and we can sell new tires and rims directly from City Däck. In May, we acquired Porsche in South Sweden, Malmö and Helsingborg. And what we can see, they have done a really good job when we are talking new and used cars, and it has been a growing business many years for Porsche. And what we can see now, we can help them and support them to grow the service business both in Malmö are and in Helsingborg area. As I said, we took over in July 9, 2 Mercedes-Benz dealers, one in Stockholm and one North Sweden. And what I can see, I have been many times now in North Sweden, is a really good growth in Luleå, in Skellefteå, in Umeå and Örnsköldsvik. So I think it's a really exciting area to be in, in the future. And what I said, truck is a new business area. We have to go back 20 years in Bilia. We had truck business at that time with Volvo in different countries. And what we can see is a really stable business, the truck business, with loyal customers. A big service business because you can call it our customers, the truck is their tool. So they need to repair it. And we can see we can develop new service, a new concept and new processes in the service business. And what we can see we'll have some lack of some of processes as well. So for us, it's a really, really good business in the future. And we try to find out now where we can have sort of white spots in bigger cities and maybe we can open up for the service business for Mercedes trucks in the future. If we are looking forward, quarter 4 this year and the next year, I talked about the semiconductors, what I can hear from the different brands we represent. Some of them have bigger challenge than other. But the discussion for the moment now is, yes, we have a problem, quarter 4, we will have a problem the first half year 2022. So we try to change how we are working today. We have a lot of leasing contracts with fleet business companies, and we have as well the private leasing. So we say to our salesman instead to wait when a contract is going out 2, 3 months, we often call the customer. Now we call the customer earlier. So -- and they can buy the car, and then they have a little bit longer delivery time. We see we have still a good demand in the service business, especially workshops. But we have some delivery workshops, we call them like that. And if we don't get so many cars, new cars, we don't have so many used cars. So there can be a little bit problem in the workshops who we -- where we deliver cars. And then our salesmen, we try to purchase from private person, from companies to the used cars so we can fill up our outlets we have. So we see good demand with a good margin for used car in quarter 4 and quarter 1 next year because it will be a lack of used car in the market. And then we have the big question in both Sweden and Norway, how do the new tax rules affect the demand on new cars? In Sweden, we changed 1st of July the company car's taxation. And in Norway, what you call it, state budget from the government, they changed the regulations of tax for new cars every year. And now it's a discussion to increase the tax of plug-in hybrids. But often, this is sort of a negotiation. And the last we have is the Volvo agreement. We are satisfied with the agreement we have. We will still sell and repair Volvo in 34 outlets in Sweden, and we grew from 13 to 10 outlets in Norway. So we are looking forward to work close with Volvo again in the future. Kristina, I think it was all. Maybe you have something more?

[Kristina Franzen, Chief Financial Officer]

No. I think also that was all we had in mind as the starter. And then we will open up the phone lines to see if there is any question. Yes. Give us some minutes then to get that fixed for you.

[Kristina Franzen, Chief Financial Officer]

So then we have opened up all the phone lines, and that means if there are questions, you are welcome to put them now.

[Mika Karppinen, Research Analyst]

Hi. This is Mika Karppinen for Handelsbanken. Can you hear me?

[Kristina Franzen, Chief Financial Officer]

Yes. We hear you loud and clear, Mika.

[Mika Karppinen, Research Analyst]

Could you comment on the pricing of the used cars? What's the situation in the market? Have the prices continue to increase? Or how you -- how to describe the situation there?

[Per Avander, CEO & MD]

Yes. I think we are at the top level of the pricing of used cars because as you can read in the Swedish newspapers, the registration of new cars has been very low for, if I remember right, 3, 4 months now, and then we don't can take in so many used cars. So in our backlog of 20,000 new cars, I guess we have 10,000 used cars we are waiting for. So when you have a lack of used car in our facilities in showrooms, you can get a better price. And I see some of the customer, they don't like to wait for a new car. Instead, they can buy rather new -- used car instead. But I think we are on the top level. And Kristina, maybe you can comment, we have a private leasing and in residual values and company cars as to residual values in quarter 4. We talked about it in the telephone conference in the morning today. So maybe you can take it directly.

[Kristina Franzen, Chief Financial Officer]

We did get a question on how the cars are sort of coming back to us. And some of you might know that normally, there is a bigger inflow of the cars that are returned from residual value during the autumn, and that is the same situation for this autumn. And normally, the majority of the cars are actually returned in the fourth quarter. So that is what will happen now as well. And that, of course, means that we get some cars available for the used market in that sense. Here, of course, again, we might be a little bit limited from time to time if there is not a new car to be offered to the car that is being returned. But it's still a secured flow of cars coming into us. And that's on the same level approximately that we have had in previous years.

[Per Avander, CEO & MD]

Yes, yes.

[Mika Karppinen, Research Analyst]

Have you started sourcing used cars from new channels? Or are you still mainly leaning on the sort of these leasing sources generally, if I put it that way?

[Per Avander, CEO & MD]

Yes. Some of our salesmen, they are sitting and they call customer, private customer when they sent out, advertise at Blocket, maybe you know the Blocket. You can find a lot of used cars there. So we are more offensive today to buy used cars from private person and companies today. If you go back a couple of years, where we had a problem, we had too many, we store too many used cars. We never purchase so much. But now we are working with some of the salesmen calling the customer and try to buy directly from them.

[Kristina Franzen, Chief Financial Officer]

And also having some ads [indiscernible] private person to contact increase to have a car to be sold.

[Per Avander, CEO & MD]

Yes.

[Kristina Franzen, Chief Financial Officer]

Any other questions from anyone on the line? If not, then we thank you for participating. And of course, if you have any questions, please feel free to contact either myself or Per during the rest of the day. Otherwise, thank you for calling in.

[Per Avander, CEO & MD]

Thank you very much. Bye-bye.

[Kristina Franzen, Chief Financial Officer]

Have a nice day. Bye-bye.