Kamux Oyj

Kaamuks Q1 review. My name is Tapio Pajuharju. I'm the CEO, and next to me we have Jukka Havia, our CFO. Good morning. Welcome. Today, I think we'll go through our journey on the Q1, have a look a bit about the market position, highlights of what's happening, and then also a bit of the strategy where we are on the current implementation of the plan. Jukka will have a deeper dive on the financial performance and development, then we'll have a bit of a look on the outlook, our financial targets, and then do a summary, and then we have time for questions at the end. So all in all, I think we did a very nice top-line growth. Also, gross profit improved well, and we improved our adjusted operating profitability substantially. Top line grew slightly shy of 8%, mainly driven our strong performance in Finland, topped with the German development on the number of the cars. And then Sweden, I think our corrective actions are underway, but it impacted on our performance, and we had a below target performance in Sweden, both on the top line as well as on the profitability. Cross-profit was increasing nicely and continued on a favourable development in all of the countries. Very happy for that. Then the adjusted operating profit increased nicely, and we actually almost three-double the amount in absolute terms at 2.7. Keeping that in mind, I think it's also fair to share that our Q1 of prior year was not the highlight. It was actually not very good. So then the benchmarking numbers are maybe not on an extremely high level. and we were expected to perform much better than the prior year. Corrective actions in Sweden, I think, are in full speed, and I think we have basically eliminated all of the non-according to our process, also shady and grey business we have eliminated and potentially criminal business eliminated. That has led into a rather large change in our personnel. We have slightly more than 20 persons left in the company. We've been able to recruit new people on board, but we've been basically limping, not with the full money, in some of these stores for some time, and that's visible on the top line and bottom line of Sweden. Going forward, I think we have actions in place, and towards the year end, we'll get the normal speed and normal grip on the marketplace also in Sweden in that respect. Our adjacent services are Kammux+, insurance and finance. We've been doing a very steady job, gradually improving all of the areas, with the exception of Sweden, where the new person had a bit of difficulties how to sell the Kammux+. And over there, we are slightly below benchmark on the Kammux+, but all the rest very, very good. Jukka will have a bit of a deeper dive on the cash flow and the situation on that one. Volume sales grew 5%. That's in a way, in Finland we've been able to increase our average price, Sweden roughly, and Germany we've been going the other way down. And it was in a way a deliberate decision to match the offering in Germany more towards the offering in Finland and Sweden. We used to be having clearly more expensive and bigger cars in Germany. Today they are roughly at par with the offering in Finland and Sweden. Then we have a homogeneous offering in three markets that gives us an opportunity also maybe to transfer the cars from market to market in a better manner. Good news is that markets grew in all of the operating countries and in Germany market volume is still better than in 2021. So it's good development in that respect. Then on the car market in general, it's normalizing, and I think in most of the countries, we've been maintaining or improving our position. In Finland, the picture is a bit mixed. On the personal cars, we've done a good job, but then on the utility vehicles, as the building market, the related markets are a bit down, that's where we have felt a bit of a softness, and that's visible on the total development of Finland. Finland in general had a very strong journey in all of the aspects. Sweden, unfortunately, in a growing market, we've been maintaining our position as the sixth, but we've been clearly below market performance in Sweden. That's now being corrected going forward. Germany, we've been doing a steady job, and the number of cars has been growing nicely, but then the value is not visible because we've been selling more cars with a lower price tag on that respect. Then having a visual look on our top line revenue, and it's very visible that we've been actually growing quite nicely in the quarter one compared to prior year and also the year before. Then on the operating profit on the adjusted level, we are not where we used to be, but we are clearly better off than we were on the last quarter. or first quarter of 2023. So in that respect. And then it's good to remember the type of our business. We have seasonal business where the Q2 and Q3 are the highest one. And then towards the year end, it's actually slowing down a bit in all of our markets where we operate. Then in the absolute number of cars sold, Finland did a good job and a steady job in that respect, Germany as well. But then the impact on the top line is different as we've been selling less value cars. And then Sweden, unfortunately, we got hit on the corrective actions in multiple locations. And that's now visible on the number of the cars, which is not growing compared to the corresponding period of prior year. Integrated services actually going very steady, very nice. And despite of the softness in Kamuxplus Sweden, in general, we've been doing good. Financial services is coming back to play and we've been able to obtain a bit of a better margin on that one as well. And then the insurance penetration is better. And in Finland, we have more to choose and we've been able to sell and our insurance penetration is improving quite nicely in Finland due to that fact. Then on our store network, I think we've been doing upgrades in the capital region in Finland. One in Koskelo on the Ring Road is now ready. Varisto is upgraded already. We've made a decision to move our store in Hyvinkää into a better place on the high traffic area. It's actually ongoing as we speak and we hope to open towards end of the month over there. And then the old premise we used to have in Hyvinkä, that's going to be a dedicated Kamuks utility vehicle, Kamuks work showroom over there. And then we started selling in our flagship store in Tampere, Lakalaiva, about two weeks ago and the official opening is coming on next week, Friday, and we had the luxury of being there as of yesterday. And we can tell that it's something very different, very unique. And when you see the place, you see the offering, you see the passion and the action of the people, it's a very nice thing. So we welcome everyone who is on the way to Tampere. Please stop by just before Tampere on the left-hand side. On the opposite side of IKEA, that's where we have Kamuks Laka live iron. It's worth stopping by over there. Sweden during the first quarter, no changes, but we made a decision to close one of the stores, Nordköping. Nordköping was maybe the store which was most impacted by the anomalies. We decided to close that, move the cars and move some of the personnel elsewhere. At the same token, we made a decision to upgrade our presence in Sundsvall up north and then also Helsingborg into a much better location. And during the summer, we are able to make the moves. In Germany, no major changes on the Q1, but in the month of April, we moved Ahrensburg into a new location. And as we speak, we are opening up the new showroom in Siirshan. So it's the third outside of this Lesvig-Holstein or Hamburg area. And we've been having good experience in Düren and in Hameln. And now we opened the Siirshan outside of the north in Germany. So it should be a good move in that respect. Finland, I think the market has been really good. Now we've been doing the personal cars, a bit hampered by the development of the utility vehicles, upgraded offering, and especially in the capital region, I think now we can have up-to-speed offering in the greater Helsinki area. We are still learning how to do the trade north of Ring Road 3, but gradually getting there, and then we are upgrading from there on. Showroom upgrades, if you have a chance to visit, they are really done nicely and do a good job. And then we've been doing clearly more focus on the profitability than the volume and the pieces of the cars. And that's also visible in the activity of the sales team. And they've done a good job in that respect. We've been piloting with the Bili and it started well and now we've been training our salespeople to sell the Bili and it's part of the offering and I think we have initial understanding that can be successful and it's a good additional product to Kamuks offering in Finland. Then in Sweden, I think we already entertained the corrective actions mainly. Recruitment, we've been increasing our capacity and capability in recruitment, and we've been very successful in hiring new salespeople in multiple stores. And I think we were a bit afraid how do we cope with the new people, how fast they will learn. I think we've been extremely good in hiring good people with high performance. And some of the new people during the first weeks and first months have shown that they can do things. And it's been also lifting up the spirit and the performance of the existing Kammox team. So it's a good move over there. Purchasing environment has changed. It's changed towards better for us. It's easy to source cars, easy to source Kammuk specification cars for Sweden. And at the same time, we've been also able, gradually been able to increase availability of Swedish cars for the Finnish marketplace and gradually also very early on for the German market. So it's been good in that respect. And the Swedish purchasing team has done a good job and been helping both Finland and Germany going forward. Then in Germany, I think there has been a good demand and I think we've been very happy for the new store performance. Systematic change on the portfolio and the offering towards the lower price, which is matching the offering in Finland and Sweden done well. And then as a consequence of the volume, I think we are very happy. We are booking black numbers, not big numbers, but they are black numbers. And it seems that we've been finding a way how to have a solid journey in Germany as well. So very happy for this demand. Having said that, on the volume, I think we can do more. And I think we have more potential in Germany on the growth. And I think now when we've been adjusting the portfolio, now it's time to put back the volume on the new portfolio, on the new stores as well. Then on our position where we are, and I think we have had a look. We used to have Constellation Group on the largest one. Then we did a bit of a benchmarking with everyone else in the used car industry. We were the only one who were posting them on the number one. Everyone else said, they are so much inclined to the new cars, they are not on their list. So we adjusted our list to match everyone else in the industry. We are now on the third position on the used cars. So Autohero is behind our back and they are the one who have mainly a very digital platform and the ones who've been longer in the industry have seen what has been happening with the fully digital. It's been changing quite a bit and we strongly believe in the omni-channel and that's the right way to go forward as well. Then our vision, I think this is unchanged and I think it's doable. And I think we are doing our organic journey on that one. And then I think the market is offering opportunities for either teaming up or doing some M&A going forward. So we keep this intact. Then a recap on our strategy. It's rather simple, customer in the focus. And I think we can really be the most friendly, proactive, convenient, but never aggressive and trustworthy use car partner for our customers, both on the consumer base and as well as for the B2B utility vehicles. And then I think our stronghold, how to make it profitable is our operational efficiency and increasing productivity in every step of the process. It's truly a teamwork, and I think where Camux has been one of the best, if not the best, is on the speed and cost efficiency. And that's deep in our DNA, and I think that's now surfacing back on the game as we speak. And then on top of the organic journey, I think we have opportunities on the MTA. We are working on that one, and when there's something on the agenda, we have ability to address and potentially even act going forward. And now I think I will pass it for Jukka. Jukka will have a deeper dive on the financial performance.

Thank you. So what I'm going to do is mostly concentrate on the consolidated, that is group level total numbers. And like Tapia stated, of course, the revenue grew. That was driven by Finland. And in Finland, it was both volume growth as well as higher average price. And of course, we also have had good development of the integrated services, which then positively contributed to the gross margin that has been staying on a good level. So from that perspective, really good start of the year, even if the baseline of 23 is low, like Tapio stated. Of course, now going into the season, one of the key things we have been very much focusing on is to have the right offering for the marketplace for the coming peak season. Now, if you look at the end of March 24 balance sheet, our inventory in euros was about 10.6% higher than what it was at the end of March 23. And that is the inventory buildup is also one of the key factors why our cash flow, the operating cash flow was more negative than has typically been the case. But that is now as an anticipation and that applies to all the markets to really have the offering for the coming demand. Based on the improved profitability, of course, our returns, returns on equity, return on capital employed have improved. So we are now there as well on an improving trend. The balance sheet, if you look at it from the equity ratio perspective, has stayed more or less stable. We have a little bit higher up across debt level due to the fact that, of course, increased inventories find us that way. But nothing major, just a little bit more of a timing than anything else. EPS, earnings per share, three euro cents for the first quarter. The baseline last year was zero. So there's a clear improvement, even if Not in absolute terms, but if you look at it from the relative perspective. And then finally, if you look at the balance sheet now, most of the debt we have from external sources is classified as short-term. And that is due to the fact that the five-year financing we have, the package, the facilities, will mature end of Q1 2025. And as we have planned, we will then refinance and take that and execute on that on the second half of 24. So there's something to come. Now looking at the full group level numbers, the left hand side, you see the first quarter, then you have the first quarter last year, and then you have the full year 23 here. Couple of notes, of course, the further down you go, the P&L, the better the relative change. So we have improved more. So the revenue was up by 8%, but then the cross-profit was up by 17%. And I think that is really good, even if maybe then, if you look at the market base and then some of the other, we haven't really been able to catch up fully where the market demand has been. But I think from the quality perspective, From the profitability perspective, the development has been really good. And the integrated service is steadily growing. Of course, especially in Finland, the Kamux Plus development is strong and we are on the right path. Even if the inventory value is up quite significantly, if you compare Q1 to Q1, the inventory turnover has stayed good. So it's even lower. 52 days than what it was last year, like an 8% positive change, even if the number is negative, but it's to the positive direction. and then the other things we went through so that's where we are and I think that's a good thing. Now looking at the sort of seasonality of the business of course going into the season we typically have higher networking capital but now this year the tick up from end of last year to the end of Q1 was higher so the 10% increase in the inventory is higher but then of course going forward it might be stabilizing those it's still early days in the year but what we have tried to do is really to make sure that we have the right offering and like we discussed last time it's not only the the amount is also the the content of the inventories and there are also some like historically and currently where we have certain bottlenecks in some of the markets and getting the international sourcing ongoing it's one of the key focus areas Cash flow, like we stated, it's even more visual here. On the left-hand side, you see that on a quarterly basis, this minus 16 million euros is, of course, worse. It was about minus 8 million, Q123. The inventory change out of the networking capital is minus 10 million. So if you think about the rest of the networking capital, we actually were a little bit better. But the key driver here is the inventory. the inventory is the car which we have the car inventory which we have for the sales purposes. Then finally, before going into the forward-looking pieces, as the annual general meeting decided one month back, the dividend from fiscal year 23 is 17 euros per share. And out of that, already the first installment has been paid. So end of April in Q2, we paid the first bit. So that is something that went out. And the second tranche of the dividend will be paid end of October 24 and that will be 10 euro cents per share to come and then going into the outlook and the future and if I start with The long-term financial targets, like you know, we set those at the capital markets there when we updated the strategy. The long-term targets has been set for a couple of financial metrics and then few non-financials. And on the right-hand side of this slide, we have the LTM, the last 12 months. That's the run rate for the last 12 months. If you start with the sold cars, end of March, so from April 23 up until March 24, we sold 69,070 cars, a little bit up from where we were in the last year. And of course, long-term target is 100,000 cars altogether. Revenue, the target is 1.5 billion a year. The LTM end of Q1 was 1.02, so slight improvement there as well. And then the adjusted EBIT margin, the target is 4. The LTM end of Q1 was 2% and little uptick there. So at least the direction is there. Of course, it's early days, still a long distance to go. On the non-financial targets, which is really important, on the customer side, the NPS we follow on a monthly basis. Here we have the Q124 average, and that is the average also for all the countries. Of course, there's variation a little bit between the countries, but 51 positive was the number where we were. A little bit better than last year. Here as well on the positive curve, the target is set at 60, but it looks like that the actions we have been doing and something that has happened, including this sort of showroom and customer in the focus actions we are executing according to the strategy are working to the right direction. And then on the employee NPS we do that only twice a year so the frequency is less frequent and that's why we don't have any measurement yet but then when we update the numbers next time we will give you update where we are with the employees as well. So that's it and with these words Tapio if you can then comment on the outlook and then we can conclude.

Yeah, I think the outlook is unchanged and I think we will deliver better adjusted operating profit than prior year. And I think what we've seen today, that's really what we also foresee going forward. And then I think this is just an maybe summarizing where we are, nice top line increase, improving adjusted operating profitability, corrective actions in Sweden in place, integrated services doing good, and on the volume development, very good one in Finland and Germany, Sweden underway, and I think the markets are actually now underlying and favorably for us. And now I think we have time for questions and comments.

Yes, good morning to everyone, also from myself. This is Katariina Hietaranta from Investor Relations. We shall take first the questions from the telephone line. I'm understanding that there might be some, if you'll play the line.

If you wish to ask a question, please dial pound key 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key 6 on your telephone keypad. The next question comes from Kaye Loykanen from Danske Bank. Please go ahead.

Yes, good morning, Tapio, Jukka, and Katariina, from Danske Bank. Just a couple of quick questions. First of all, regarding the Germany and the kind of change in offering, should we expect now then going forward that the kind of average price per car approaches or closes into the levels of Finland, or how do you view How do you view that side?

I think closer to the Scandinavian offering in type of the cars, price levels, with the exception of EVs, which in Finland and Sweden play a big role. In our German offering, EVs play almost very minor, if not the zero role for the time being.

Okay. And how quick do you think that kind of transition will be?

I think we've already done most of the transition. Our stock rotates rather fast. And during the Q1, we did. And in certain stores, we are fully complete. Some stores, we have still something to do. But going forward, now we're on the right level, and we may need to adjust it just an inch to any direction. But I think we are roughly there.

Okay, that's very clear. And then secondly, on the inventory turnover, it did improve in the quarter, but still remains rather high if we look at the historical numbers. So my question really is that, first of all, where is the target or what level is the target that you have on the inventory turnover? And then secondly, are there big differences between the countries in the turnover?

I think the direction is clear, lower, but I think it's also a bit of a sourcing issue. And I think there are differences. There are differences also within the country on certain type of the cars. Starting with Finland, I think the utility vehicles, they tend to have a higher stock days than the personal cars. And then on the certain areas which are on high demand, take hybrids and certain EVs, very short. And then Sweden, it's more homogeneous. And in Germany, it's also more homogeneous. But a bit on the German is different. Then we buy the car, we put it on an industrial processing of the car, and that takes a bit of a time. So the stock days in Germany, by definition, are higher than in Sweden or in Finland.

Okay. And then just if you, I don't know how much data or insights you have into competitors' inventory turnover, but how do you compare to the main competitors in, let's say, Finland in terms of turnover?

This is now not an exact fact. It's more of a hearsay, but close to the fact. In Finland, we are better than some, but we are maybe not the best. In Sweden, we are rather good. And in Germany, we are very good compared to local companies.

Okay, that's very clear. That's all the questions I had for now. Thank you.

Thanks, Kalle.

The next question comes from Maria Wickstrom from SEB. Please go ahead.

Yes, thank you. This is Maria. I also had a few questions. I'll take them one by one. I would like to start on the metal margins, which according to my calculation was up some 40% year-over-year in Q1, ending at 680 million roughly. But we are still quite a lot behind the Q1 2019 level of 780. So can you kind of like in your view that is the 2019 levels in the metal margins still reachable as of course the market has changed quite a bit, I mean, since the 2019?

I have not done the math on the backward calculation, but based on what we are doing today, I think we are gradually improving our metal margin when we also upgrade our offering on the newer and more expensive end. Technically, it should be going up quite nicely, but I've not done the math compared to 2019, so I cannot exactly answer that question. But the trend is where we are heading and I'm gradually improving.

And I think, I mean, continuing on the metal margins, I think last year Q1, I think the metal margins were improving month by month. So if you now look at this year's Q1, was the trend more stable or did we see the similar type of a trend of an improvement month by month?

I think I have not compared the month by month in that respect, but as I said, we are gradually improving. So based on that theory, it should have been improving also from January to March.

Thank you. Then I wanted to touch on the integrated services, which definitely surprised on the positive side. And a little bit more on your contract structure as it looks right now. Should we now expect a nice contribution in the profits in Q4 or will it come more stable throughout the year in 2024?

May I answer this one? I think if you think about the countries, Germany is a market where the finance fees related service income will come more sort of, you know, quarter by quarter. Historically, all of that or most of that has been booked for the Q4 this year. And that is commented on also on the slides. is a little bit more stable, and that is linked to the terms and conditions of the finance agreements we have with the counterparties. But for all the other markets, I would guess the structure will be closely following the historical patterns. Exactly.

OK, perfect. And then the used car markets, I mean, have have grown quite nicely in April. So the growth is up from the Q1. And in Sweden, I think the registrations were up by 20% in April. So given that you have had these challenges in Sweden and the workforce is still rather new, is that the right conclusion that you haven't been able to join the growth that is currently happening in the Swedish market?

I think that's right assumption, but we are gradually gaining speed on that one as well, but it takes a bit of a time. And I think now we're entering the peak season. So during the peak season, we should be catching up.

Okay. And then finally, I think it's still early days, but what are your experiences with this BILI cooperation?

I think mainly favorable, and it's a nice addition to our current offering. We've been training our personnel to sell the product, and it's a nice cooperation with the BÄLY, as they want it to be pronounced. But it's still rather small compared to the big volume, but it's a nice addition, good addition to have.

And how you are going to report the profit from this? cooperation going forward?

I think it's not going to be disclosed separately, but I would underline it's a starting phase and a pilot and not substantial in that respect.

Okay, perfect.

At least for the time being.

I have no further questions at this point.

Thanks, Maria. And now I think we are ready for the questions.

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

Thank you.

We have the traditional ladies first.

Thank you. Thank you. This is Pia Rosqvist from Carnegie. Regarding the changes and challenges in Sweden, is it in any way possible to quantify the lost sales during Q1?

If you see the market trend, which is growing, we've usually been following the trend to a certain extent. Now we are clearly behind the pack. When you have the top 20 of the Swedish used car players, there were only a handful of ones with negative. We were one of them. So the delta is roughly that, I would say.

Thank you. Then, if I continue, in the report, you mentioned moving to a merchant model in Finland. Can you please give some background and more flavor to this?

Yeah, we've been changing the Finnish organization, I think, on the April 1st. It was announced in the last leg of March. Instead of a large management team and a large regional organization, we've been separating the utility vehicles under Kamuks Works. There's one gentleman in charge of the business, both top line and bottom line. Then we have three regional managers who have the full responsibility, one for the north, one for the rest of Finland and one for the capital. And then under them, they have merchants. A merchant is really like the shop owner, and the shop owner can have one large store, which is in a way like a megastore, or can have up to three or four local small stores, and he's in charge of the full P&L and of the store operation. And then he or she is having a store manager under his wing on that respect. And they are all now measured on the top line and especially on the profitability, which is quite the change mainly on the pieces and volume development. Still, we are focusing on the volume. That's part of the DNA. We want to keep it on the podium. But we have more emphasis on the profitability.

Thank you. And this is not something you yet have transitioned to in Sweden?

No, we are piloting that now in Finland. And when we have the first proof of success in Finland, then most likely we will do something similar in Sweden and potentially in Germany as well.

Thank you. You mentioned in the report also that you have started systematic tire sales in Sweden. So how is this revenue booked? Is it under integrated services or just plain car, I mean under used car sales?

It's under the used car sales. But of course, internally, we now separately follow that on the balance sheet, inventory perspective, revenue as well as costs. And the start is good. And that is also linked to the fact that we have changed the controls and some other mechanism, which then shall lead to the fact that some of the old leakages are done and dusted. So we don't have those anymore going forward.

Thank you. And then another question regarding the gross margin development in Sweden. And you referred to measures implemented in 2023. Please remind us of those measures.

I think the most important thing was the measure from the PCs to Euros and in Sweden, in Swedish kronors on salary models and the way people are measured.

Good. I think that's all for me now. Thank you.

Thanks, Pia.

Handing over to Rauli.

Go ahead.

Yes, Raul Jova from Inderes. A few left from me. I think for Germany, the metal margin was kind of at a very high level if you compare to the historic quarters. So was there anything kind of unusual, if you will, in the quarter or how sustainable do you see that level going forward?

I think it's more of executing the same way as we used to execute. The salespeople have a certain mindset for a minimum metal margin. And when you've been selling a car of 25,000, you ask for a certain amount. And when you sell the car of 18,000, you ask the same amount. So by fact, it's improving.

Okay, good. And then on Sweden, do you see or expect any decrease in your OPEX levels or should the earnings improvement come more to the volumes turning back to growth?

I think the OPEX level we need to address and we have room to improve over there. We also need to consider our network. How do we keep the network up to speed? We're still not good in the northern part in certain areas and maybe we have some stores which are substandard and we need to consider closing them.

Okay, thank you.

Thank you. And we have a couple of questions via the chat. Firstly, can you give a bit more color on when you expect Sweden to contribute with a positive EBIT to the group level?

I think we had last year positive bottom line in Sweden. I think we definitely did that this year as well.

Good. Also, personal costs are at an all-time high, both a share of revenue and euros per sold car. Group cost level is also at an all-time high. Gross margins keep on improving, but the cost level pressure is the bottom line. How satisfied are you with the cost structure and how to improve going ahead?

I think I share the same concern with the author of the question. And I think somehow the inflation, both on the pre-cost, after-cost, maintenance cost and the people cost have been going up. And we have been and are addressing that.

Very good. I have no more questions via the chat. Maybe we'll give just a couple of seconds there. Anything more from the floor here? Audience? Pia, go ahead.

Thank you. Regarding Germany, you also in the report, I think, mentioned the processing costs and you mentioned it during the presentation that it's outsourced. Is there any way to or how do you plan to improve those processing costs?

Yeah, we have one partner in the southern region, and we have one in the northern part, and they have a menu, and we operate based on the menu. When we started, our volumes were small, and I think now the volumes are growing, and I think we have some leverage to negotiate. And then I think on the menu, we always take the full menu, and I think we can opt for something else than always the full menu, which would lower the cost in general. And then on top of that, two partners may be not the ideal amount of partners. So I think we are considering adding up at least one or two partners to make a better logistics for the stores going forward.

Very good. Thank you. Now it seems that we have no further questions, so we are ready to continue the sunny day.

Thank you. Enjoy the rest of Friday. Bye now.