Kamux Oyj

Hello. Welcome to Kamuksi's Q2 results presentation. And I have here our CEO, Tapio Paiuharja, and CFO Jukka Havia presenting the results. And after the presentation, we have a session for questions. If you participate via the teleconference, you'll get the information and guidance before we start taking questions. Those participating via the webcast, please use the chat function and I will moderate the questions here. And then we have also questions here from the audience. Let's begin.

Very good. Welcome on board. And I think the headline tells it all. It was not the drive in a park, but I think we also have many good things happening. And I will share where we are on that. I will also have a bit of a look on going going forward. All in all, I think we'll dive deeper on the Q2. Then we'll have the market position, a bit about the strategy work. Then especially, I think, on the improving productivity and efficiency, we have some speedy matters happening on that one. Then Jukka will share the finance and development, and together we have the outlook and finance targets, and then we have time for questions and comments going forward. I think all in all, the sourcing market has been tightening in most of the places, but also in our operating marketplaces. And I think going forward in Finland, we could have had more cars. We were not able to get them on a solid margin. On the other hand, the cars we sold, we maintained a good margin over there. And that's a fundamental going forward, and we need to beef up our sourcing in that respect. Sweden, where we started the quarter rather okay, became very, very soft towards the end of the quarter. And later on, we'll have a bit of a deeper look on that one. On the other hand, Germany did deliver well, both on the top line growth, almost on the black numbers, and also a very nice profitability improvement when we have a deeper look on that one. Cross-profit decreased due to the tighter margin we get on the sourcing side, and at the same token, most of the car-related things, including maintenance, service, repair, and some of the people-related issues have been inflated, and that's something we need to tackle. And as an outcome, unfortunately, our operating profit took a dive, and I think altogether a 40% delta on that one. And for the first half, we are roughly at par on the prior year performance, so we still have a lot to do in order to make a major improvement on the bottom line. On the good side, I think on the integrated services, we are back on track with selling our final product in all of the three markets and improving quite nicely on that one. Same applies for the Camux Plus incremental guarantees for the customers. And then on top of that, the products we've been introducing in Sweden, we've been rather good in selling the tires and rims. And as we speak, we've been piloting the same in Finland. Then on the number of cars sold, as seen, we take a bit of a dip. On the value, we do better than on the pieces, but still Sweden was not the highlight of the year and had a very, very sad story for the month of June over there. And I think the consequences you've already seen, and we'll talk more about that. Market position, I think in Finland on the personal cars, we are still clearly on number one position in the PSEs. And I think Finland, it's good to remember that in our numbers, we have a fair share of the utility vehicles on board with the current economic climate and building and all of the activity on that front going down. The utility cars have been heard clearly more than the personal cars, and it's visible in our numbers in that respect. Sweden, I think we have a bit of a starting issue, and we'll dive deeper on that one over there. Germany, I think we have unchanged our position. The market has been good, but the sourcing market also in Germany has been very, very difficult, and I think that's going to continue for some time going forward. And I think building up our inventory ahead of this season, that's where we failed, and I think we could have had more cars in all of the three markets going forward. Then when having a revenue comparison, I think we are roughly at par with the issue, but slightly down due to the Sweden issue. But then on the profitability, that's where we did not deliver what we expected to deliver. And that's why we are taking incremental measures and speeding up some of the productivity and cost elimination issues going forward. Then on the number of cars sold, it's a pity that we missed the one car in Finland, but I think all in all, we could have sold a couple of hundred cars more if we would have the right models available in a timely manner. And then in Germany, rather nice development, and especially keeping in mind the challenges in the sourcing side, job well done. And then when having the value comparison on that one, it's good to remember that we have decided to take down our mid price point and the sweet spot. And now we are roughly at par with that one and going forward. Sweden is where we failed quite miserably in the month of June. The start of the quarter was still very, very solid. Then on the adjacent services, good job done. And I think we are really gaining speed on most of those. Having said that, I think on the Kambux Plus in Sweden, where we have a fairly fresh team selling it, we did not reach the average numbers over there. And actually we dropped halfway on that one. And now we've been training the team and clearly making onboarding and maybe also need to upgrade some of the product to make it really work. On the tire sales, I'm very happy what the team Sweden did. but unfortunately that was not fully offsetting what we lost on the Camux Plus over there. Then on the network development, I think if you have a look on our web store, we've been making some upgrades on the web store. The visuality of the cars, also the descriptions we've been beefing up. And then we've been making it rather easy for the consumers to pick up. If you want to have a hybrid and rechargeable car, then you just click one button and you get the availability. Same for the works, same for the exclusivity. And that's something we're going to be enhancing going forward. And then the visualization, especially now in Sweden, we are in the process of switching to car cutter. And I think it's clearly more evident that we can do standard good quality pictures in all of the stores going forward. In Finland, very happy for the development in the outside of Helsinki and the Hyvinkää. where we were below our market share in general. Now we are back on track and we've been gaining quite nicely on that area, both on the personal cars as well as on the utility vehicles in Hyvinkää. And then the Laka-Lava flagship, which we opened, have been always beating all-time highs, and I think we are reaching new levels, so they're very happy for that performance. Sweden, we closed the Nordköping showroom, removed the cars, and then later in the beginning of actually mid of the Q2, we decided to close Heronsity and Nortellie, and that now transferred cars to elsewhere. And I think we still have work to do on the Swedish showrooms. Sundsvall, Helsingborg, we have upgraded. We are clearly in better premises. Still the layout and some of the decoration visualization is ongoing, but already now we know that we can do clearly better. And then on the agenda, we have a store in Gothenburg, which is actually one of our largest where we are lacking cars. So we need to make the Gothenburg store fly with the cars and with the personnel. Then we have a good go for Sweden. Adelsburg in Germany is a new premises. Very happy for that. Still the same issue with the layout. We have not made it 100% ready as of yet. We are 80% ready. Then the new showroom in Sirshan is operating. Final decoration visualization has been done now when we speak. Then we decided to close store in Lübeck and Kaltenkirchen. I think we had too high density on the close to Hamburg area. And on top of that, the Lübeck was extremely expensive and didn't make profit. And all of the stores we've been closing are actually improving our profitability going forward. In Sweden, we still have a couple of stores we are considering. On the other hand, we know that we are underrepresented on the greater Stockholm area, and then the northern part of Sweden is still a black area for us. It will not be like that going forward. Then Germany, we have a good plan where to go, and it's mainly in the south and then in the eastern part of Germany. And also the Finnish network, we are conjuring more about that in a short while. Finland, still a rather steady job, and I think on the average metal margin, a job well done in a very difficult marketplace. But where we failed is actually on the adjacent costs related to the car. Maintenance, pre-cost, logistics have been creeping up, and with our pricing, we've not been able to basically offset that. And at the same time, some of the people-related costs is an area where we need to address, and that's going to happen rather fast. But I'm very happy for the performance on the upgraded stores. I think on the greater Helsinki area where we've been doing the upgrades and then gradually as we speak also we have something happening in the northern part of Finland. And I think we are gaining traction on the Finnish marketplace. Currently the availability of cars is also improving. Sweden, rather sad story. And I think part of that is due to issues which we focus so much on creating a sustainable atmosphere. And I think we can now say that all of the anomalies, all of the wrongdoings, semi-criminal, criminal issues have been eliminated. having said that we have almost more than one third of the sales people new and onboarding was not done with the proper manner and I think we did not see the outcome on the commercial areas of yet but I think gradually we are coming back on that and we already see stores where even the new people are performing clearly better and I think the salary models and incentive schemes are coming into place after they've gone through the so-called guarantee salary period and then we will see the performance kicking up. Our offering on the cars, I think we were a bit substandard on certain areas and now we've been addressing that and I think the buying team in Sweden has shown that hey we can get the things but the buying market in Sweden has also changed quite a bit. One of the leading companies most likely currently she's having a big inventory and that has impacted prices of some of the most popular models in Sweden. Then on Germany, I think even though we had a nice growth on the volume, a value didn't make it on the black numbers, but a major improvement on the bottom line. What I see happening in Germany is that we have the offering in place, we have the quality in place, we've been improving on the pricing issue, and I think availability and access to the big fleets and bigger sources are coming gradually in and going forward we can benefit of that not only in Germany but also rest of the marketplace so we are on a steady journey over there. Market has, in a way, not changed in a big way, but still, I think the bigger ones are getting bigger, and I think there is a lot of things happening. In the central Europe, especially, Adamis has been doing a very good job, and they've been improving their performance both on the marketplace as well as on the quality. They have adapted a fully hub model where they process all the cars in an industrial manner, and I think there are some learnings we can also take from there. Still, I think our vision is to become number one. We have a lot of issues to be done on our organic way. And on top of that, we have the opportunity to consider M&A activity when the potential partner would be available. And that's what we are doing as we are speaking. Then as a part of the strategy, I think this is something we now have decided to take a bit of a speedier manner. That's improving the productivity and efficiency. We are on a two way street. One is all of the car related issues we outsource from a third party. And on the last count, we had more than 5000 partners with whom do we work with. clearly a too high number to be managed on a professional manner. We have decided to cut the number of partners, focus more volume for the dedicated partners, and as a hindsight of that, we'll get better prices, better services, and more of a KAMUK standard procedure on that one. That's something we've been starting together with our sourcing team in Finland, in Sweden and in Germany. And some of the partners are going to be for all of the countries. And on top of that, I think we have some which are not car related, but they are third party sourcing issues where we can get benefits in a speedy manner. And that's roughly half of the story. The other half is coming from our way of operating our network and the way we operate on certain areas and that then having an impact on our network in all of the countries and also some of the processes which are outside of the commercial work we do. And that's something we're going to share later in what we do. We expect that roughly a bit less than one third will hit on this year's PNL. The rest is then building the basis for going forward in 2025. The strategy is unchanged. Customer promises is where we live, or we make it or break it, and that's where we've been doing a good job forward. Operational efficiency is an area where we still have a lot to improve, and I think on the best practices we are very good at, but to increase the average performance and efficiency of the whole operation is where we need to do an improved effort and in a speedier manner, and that's what we are doing with the project core. And now Jukka, the numbers.

Thank you. So I will take up and have a look from the consolidated total group perspective. And like Tapio stated, of course, the second quarter was dominated, and one of the predominant issues was challenges in Sweden. But we had relatively okay top-line growth, both in Finland as well as in Germany. But I think the real challenge was linked to the cross-margin. Now, after a couple of last quarters being going up, now it bent a little bit down. There are two main drivers behind that. One is the tight sourcing market. And the second one is, like Tapio stated, the costs that are car related, which were inflated, on which we are now having these actions that was referred by Tapio a short while ago. We did already, end of Q1, of course, try to build up the inventory for the season. And of course, with hindsight, now looking at what happened, we did not get probably all the cars we would have been able to sell. Still end of June 24, we had about, in value terms, about 5% higher inventory. Even if that was the case, still the net cash flow in the second quarter was on the positive zone and better than last year in the second quarter. But then if you look at the totality for the first six months, the cash flows are more or less at the same level. Our balance sheet has stayed very stable. Maybe the only main change has been that now the interest bearing debts after Q1 end has been now classified as short term. And that is linked to the fact that we are now starting the process to refinance ourselves. And then as a consequence of that, the return on equity, the equity ratio, all of these sort of relative metrics have been staying quite stable. Equity ratio is slightly down, but still at a good level. And then unfortunately for the second quarter, the EPS was flat at zero. And that is, of course, something which we have to improve going forward. That's sort of the nutshell. And then going into the table of numbers on the left hand side, you see the second quarter, April to June. Then in the middle, you have the first six months. And then on the right hand side, you have the last year, all of it, 12 months. And of course, now on the top line perspective, the second quarter was not that bad, quite flat. If you take the Swedish dip out of that, there's some growth. And same applies for the full six months, still some growth, 3% growth after the first half. However, then deeper down you go in the P&L, then you start to see the challenges we faced in the second quarter. And of course, the deviation delta in Sweden is one of the key drivers. The integrated services have been positively contributing to the profitability, but have not been able to fully offset the cost inflation that has eaten out the profits. If you look at one of the positive sides, even if the inventory value terms increase, the inventory turnover in days, days of inventory outstanding, is about five days less, about 8-9% better than it was last year at the same time, even if we have had some challenges in Sweden. But we think that there are more, coming back to these efficiency boosting measures, more we can do in order to turn it over, because that's one of the drivers, not only for balance sheet, but also profitability and cash flow. So that is how the group looked. Then on the working capital, so even if inventories went up, we have been able during this period to improve a little bit versus what was the case in end of June last year. And one of the drivers behind that is the fact that on the trade payables, accounts payables vis-a-vis the suppliers, we have been trading, getting some positive traction. And there are a lot of activities now ongoing managing our very diverse and complex supplier base. And one target is, of course, to have an impact on our networking capital and thereby the cash flow, because at the end of the day, the changes in the networking capital in this business are the key drivers of our operating cash flow. But all in all, the cash flow is stable and the financial capabilities and capacity, of course, do allow and would allow us to grow even faster than what we have done. And then, before jumping into how the future looks like, one note on the dividend. Like you know, in April we had the AGM, and based on the shareholders' decision, the first tranche of €7 per share was paid to the shareholders end of April, and then the second tranche of the dividend, which is a little bit higher, €10, will be paid at the end of October. And then we go to the outlook and future, and maybe Tapio can take over from here, or would you like me still to? Well, let me take that one. Fine. So if you look at our long term target setting that we announced end of March, the long term we haven't defined where it is, is long term. On the financial side, we have a volume target of 100,000 cars per year. On the right-hand side of this table, you see the last 12 months. That's the run rate last 12 months from July 23 until June 24. And we are a little bit up from where we were last year. Of course, the volume growth is not yet that high as we had planned, but still on the right direction. And that is driving the revenue as well. So the revenue 1.017 million, 1,000 million, 1.0 billion euros. But where we really have the challenge and what we now want to target is the adjusted EBIT margin, which is still flat, of course, not going down, but still at the flat level. We want to improve that. towards a target level of 4%. And in order to do that, we both, of course, have to be good at the commercially driving the sales, but also better in efficiency and productivity. On the non-finance side, which is driving the performance, the customer, of course, is super important. The customer service is at the epicenter and the trust at the epicenter of the strategy. The NPS on average for all of the group in the second quarter was 49. And that's the net promoter score number. The target is 60. If you think about where we were in Q1, we are slightly down. But there is variation between the countries, between the units. And now we spend a lot of time and energy internally looking at that at the store level and the reactions behind that. So I think that's going to drive the performance going forward. So OK level, but still room to improve. On the employee NPS, the E-NPS number, we are now doing end of Q3A employee survey. And thereafter, when we get the results, that will be then later also reported here. And then Tapio is going to take over from the outlook.