Bilia AB (publ)

Thank you for the introduction and welcome to Bilja's fourth quarter results presentation with CEO Per Wander, CFO Kristina Franzén, Deputy CEO Stefan Nordström and I, Carl Fredrik Jevets. Despite the current tough economic situation, especially in the car industry, we're proud to present a solid result and a satisfactory cash flow. And moving to the agenda. Same procedure as last quarter. Per will start by going through the current situation in the car industry, followed by Q4 numbers. Then Kristina will go through the financial situation and I will conclude with an outlook. So let's start. I'll leave the word to Per Havande.

Okay, thank you Carl Fredrik. And we go to the slide, the current market situation in the car industry. There is a good and strong demand in the service business with good booking times. Our customers take care of their cars both for service and repairs regardless of the financial situation. The fleet business has still a stable demand for new cars in Sweden with a market share around 60%. The private consumers are still in a wait and see mode, but we can see some better activities when we measure, for example, floor traffic in showrooms and credit requests. Many brands have started strong campaigns, big discounts and attractive private leasing offers. In Norway, we see and feel signs of a better business climate. The demand for new cars are growing, good booking times in workshops, households' confidence is on a better level. Our brands have, for the moment, strong campaigns in the Norwegian market. The demand for used cars are on a good level in Sweden and Norway, and we see stable prices for all cars, except fully electrical vehicles. In the same time, we see lower prices of fully electric and new cars. The prices of used fully electric cars are declining. The stock of used cars is on a slightly high level in Sweden and Norway, and in Western Europe, it's on a normal level. There has been lots of discussion of different business models. Four or five years ago, it was really popular to test subscription car sharing agency model. One example is Lincoln Co. They only sold the cars through a subscription model in the past, and now they are going over to traditional wholesale model. Still, we see agency models from some manufacturers, but the feeling is more that we are going back to what we had in the past. Some manufacturers hesitating and pushed the introduction of agency model into the future. Next slide, please. Net turnover increased organically by 1%, explained by higher deliveries of used cars and growth in the service business. We report a result of 420 million with a margin of 4.1%. We had better earnings in the service business with a higher margin. We had lower profitability for new cars, especially in Sweden and Norway. Next, please. On this waterfall chart you can see the different business areas. All the earnings improvement is coming from the service business and less result for both new and used cars. On this slide, you can see the quarter four profitability from 2020 to 2024 in each country. And in the middle, we have Norway, and there you can see some improvements. On the right hand side, you can see Western Europe delivering at a stable and high level. Sweden deliver lower earnings due to the car business. Next, please. We are moving over to the important service business. As I mentioned, there is still a stable demand in the service business in all countries, our countries, especially for body and paint jobs. We have an organic growth for the group in the quarter of 7% and in Norway as much as 17%. For the full year, we have an organic growth of 7%. We report a profitability of 374 million. It's 81% of the group earnings. As you can see on the right hand side, it's 54 million better than the last year and one of the best quarter four result ever. There are several reasons why we report a higher result. One is good booking times in all countries. Another is much better efficiency and solid improvements in the Norwegian workshops. The third, we had a strong underlying growth and a better profitability in the Swedish body and paint shops. This higher result comes despite one working day less in Sweden and Norway for the quarter. go over to the car business. Deliveries on new and used cars adjusted for acquired operations were 1% lower for new and 9% higher for used cars compared to Q4 last year. For the car business, we report a result of 80 million compared to 144 million last year. and the profitability for new cars in sweden and norway were on the louvre level the main explanation for that is louvre gross profit bargain and fewer deliveries for used cars we report a profitability of 54 million compared to 71 million last year in a historically perspective it's a good level As I mentioned in the beginning, the stock of used cars is a little bit high in Sweden and Norway, but we have started some campaigns, which means we will quickly reduce the stock in quarter one. The order intake on new cars adjusted for acquired divested operations were 20% higher compared to last year. As I mentioned, we feel and see a little bit better activities in all our countries. The order backlog on new cars is a bit on the low side, especially Sweden and Norway. Having said this, our manufacturers currently have shorter production time, meaning we will see a lower backlog for the rest of the year. Kristina.

Thank you, Per. So let's then move into our financial position. As we pointed out earlier during the year, cash flow is one of our focus areas and that is still the case. During the fourth quarter, we did generate a stable operational cash flow of 290 million kronor. And for the full year, we have generated an operational cash flow of some 1.6 billion kronor compared to some 600 million kronor last year. We will continue to work on inventory management. Our prime focus is turnover rate of use as well as of new cars. But we do also focus on other parts of working capital to be as efficient as possible in these times when financing cost is still on a high level compared to historical levels. During the fourth quarter, we have paid out our third installment of the dividend from last year, totaling 6.60 kr per share, which means that we have paid some 150 million kr to our shareholders. The fourth and last installment of this dividend has been paid out in January this year, 2025. During the quarter, we have also added a BMW dealer in Luxembourg to the Bilia family. It's Carlos Schmitz, where we are now then in Luxembourg running two facilities, which we expect to generate synergies in the future. The payment for this acquisition was partly made in cash, around 240 million kroner, and partly in own Belia share, which was valued at 60 million kronor as part of the purchase price. In total for the year, we have invested some 650 million kronor in acquisitions of new operation that includes Jaguar and Land Rover dealer in Sweden, a Volkswagen dealer in Sweden, and additional Xpeng operations in Sweden and Norway. We have also started up an importer business related to Jaguar and Land Rover for the Swedish and Norwegian operations. And these importer business are then operated as a joint venture and included in our financial statements based on the equity method. At the end of the quarter, we utilized around 1.6 billion SEK of our total credit limit of 2.3 billion SEK. This credit limit is what was renewed during the first quarter this year and matures in March 2029. Our net debt at the end of the fourth quarter amounted to 2.9 billion SEK, which was some 450 million kronor higher than last year and also some 400 million kronor higher than the third quarter. The increase compared to the third quarter was primarily caused by acquisitions in the quarter, as well as the dividend paid. Our target is to have a ratio for net debt with the excluding IFRS 16 below 2.0 times. And at the end of the fourth quarter, this ratio was 1.7 times, so well below our target of 2.0. And then at last, the Board of Directors of BILIA proposed a dividend of 5.60 kr per share for the annual general meeting to be held in April this year. The proposed dividend represents 78% of the earnings per share for the year. This is a higher level than the historical dividend that's been distributed. And as in previous years, the dividend will be paid out in four installments.

starting after the annual meeting so i think that's where we are from the financial position good let's move over to outlook then started with the service business like per said this is one of the best q4 results ever in our service business and like i said in the beginning delivered during a very tough economic period especially for the car industry This recurring good result we think proves the resilience in this business. We see the stable demand to continue in the coming quarter with good booking times across our business. And I think we mentioned before, but the service business represented 81% of our operating profit in the quarter. For used cars, the inventory level was at a slightly high level going into Q1. The activity level in our used business we think would remain on good levels and we see the overall prices stable during the coming quarter. When it comes to full electrical vehicles, prices are declining and we think they will continue down the coming quarters. We always work to strengthen our offering with induced cars and we will continue to do so also in the coming quarter and expect inventory levels normalizing. We are experiencing an improved order intake for new cars even though from historical low levels. Following campaigns from the car manufacturers and an increasingly more favorable consumer environment with lower interest rates, we do see signs of improvement activity among private customers. We expect campaigns to continue during 2025 to further fuel demand for private consumption. Adding to this, we believe that the EU's new emission requirements will force manufacturers to lower prices of electric cars as well. This in combination with a big pent-up demand, we remain cautiously optimistic about new car sales during the coming quarters. We see order intake from fleet customers continue at a good and stable level. So there's no trend shift compared to last quarter. Finally, last year we intensified the work to improve profitability and efficiency in our current operations. This means extra effort making sure newly acquired businesses as well as existing businesses perform according to BILIA standards. Our focus during the coming year is very much the same with the aim to create higher profitability, happier customers and higher shareholder value. This finalizes our fourth quarter presentation and we can now open up for questions.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Mats Liss from Kepler-Chevreau. Please go ahead.

Hi. Good morning, and congrats to a strong finish of the year. And I just had a couple of questions. First, I mean, the survey side is certainly performing well, I think. And you mentioned the efficiency measures you have implemented in the Well, I guess acquisitions and overall. But what more could be done there? Are you sort of at, well, as good as it gets? Do you have more improvement to be done there?

Yeah, we think we can do it better in Norway. We were over in margin for the service business in Norway, a little bit over 10%. And for the year, 7%, 7.6%, if I remember right now. So I think we have more to do. But we started up last year. We have a centralized team business excellence and help the Norwegian managers so we could be more efficient into the workshop. So we have more to do in Norway. And I think we said we had a little bit better business in the body and paint shops in Sweden. And there we can do a lot more as well.

But I think also, Mats, Stefan, in our new acquisitions, we see more potential to improve in the latest acquisitions we made. So I think we still have good potentials there as well.

And this trend, is it sort of, well, have consumers been somewhat cautious in servicing their cars? I mean, is it sort of a pent-up demand also, or is it...

If we take the new acquisition, I think it's more related to process. Nothing to do with the customer demand. It has been there and it's still there, but it's more how we work to do it in a more efficient way and how we work in the workshop and make it more profitable. So I think it's more process wise. The demand is there.

Yeah and some concept we can think in the BILIA way is a little bit wrong for some new company into BILIA. So we work with them so we have to do that this year.

One example that we showed on the capital market day was our Porsche operation. When we acquired the Porsche operation they lost money. And now they're among the most profitable workshop we have. And we have added more mechanics and we have worked with the processes. So it's the same with the new acquisitions. We see more potentials in these companies.

Sounds good. And just maybe also, could you give some indication of how the year started? Things are moving along.

I think in the beginning of January, yeah, in the beginning of January, often our customers, they are thinking of New Year and Christmas Eve still, the first two weeks. So that's normal for us. We think we have quite good booking times in our workshops. We see a lot of interest into our showrooms for the moment. We measure the credit requests so we can see what happened the next two weeks. So because our manufacturers now, they don't have full in the productions. So we see much better private leasing offers for the moment. One example is Volkswagen. ID4, three years ago, it cost 5,500 crowns. And when we had the peak, it was over 8,000 cars. So with that, the private consumers, they wait and see at that time. Now we are back to 5,500. So we hope we will have a sort of improvement from the private consumers 41, 42 this year.

You mentioned that the order intake was 20% up in the fourth quarter. I guess it's a pretty easy comparison. Then again, lead times are more limited, so should we expect those cars to be delivered in the first and second quarter?

Yeah, you're right. Bear in mind that is low figures the year before. But what we can see now, the lead time is not so long. Sometimes we can sell a car in January and we can deliver the car in February and March in the same quarter. Therefore, we don't think we can measure what we could in the past, the backlog. little bit different between the brands but many brands they have short product production time now so not more than two quarters yeah okay thank you very much thank you

The next question comes from Andreas Lundberg from SEB. Please go ahead.

Thank you and good morning. Can you hear me? Yes, we can. Really good. Great. Starting off with the last comments on lead times from OEMs. I saw the registrations for new cars in Sweden and Orem was kind of positive in January. Is that an effect of So the order intake during the fall given maybe shorter lead times or how should we see that?

Yeah, you see increasing registration, but if you look at the figures, it's not so high. It's a temp of 240,000 new cars in Sweden, 250,000. And the forecast for this year is 275,000 cars. So not so much. You compare with a really low figure the year before. But we have seen If you look at the Swedish market, the order intake, as we could see in Biblia, 20% more in quarter four. We have seen the same for other brands and other competitors as well. So the market is a little bit better.

But if you look at the long-term history for registrations in January, this year was kind of an average number, decent levels, I would say, or how should you call it?

I think in average, it's a low figure this year.

But have you compared January over January?

Yeah, compared to last year, yeah. But if you compare to the 20-year history or 10-year history, it was decent.

Yeah, it's a low figure in 2025, January.

Yeah. Well, shifting gears to used cars, I think you mentioned some But how do you view that in a situation where new cars are increasing again and also on the same topic when it comes to residual values going into 2025? Thank you.

Yeah, we often have a peak when we say stock of used cars in the end of the year. Often you have the lowest in August and then you build up the stock of used car in the autumn and in the beginning of the winter. And in January, February, March, we start to reduce the stock. It's normal. So what we can see when you talk residual value, Kristina, we don't have so much residual values anymore. In the past, we had the residual values for Renault. We don't have them anymore. And what we can see for Volvo, it's a stable level. The risk we can see is for fully electric cars because they change the price too fast. And it's the same when we purchase cars from companies or private consumers as well, because we have to follow what happens from the different manufacturers if they change the price for electric cars. for the fully electric cars, a new one, and you hit the used car directly. But what we can see now, for the moment now, that it's a stable prices for a little bit cheaper, fully electric vehicles. The problem is more luxury. Audi Q8 e-tron, for example, two years old, really exclusive cars. There can be a problem for us, but we are really careful. And Kristina, we evaluate the stock.

Yeah, we do, of course.

We look at the valuation of the products, the use of them, and what we have as least vehicles in the balance sheet on a monthly basis, and of course assess it towards the current market evaluation and do sort of make adjustments if necessary on a monthly basis. So we are close to that, both from a business and from a sort of reporting and accounting point of view.

And did you say that you expect stable pricing for used cars in the near term overall?

Yeah. Okay, cool.

And also lastly on the financials, the financial costs which are kind of increased quite a bit. How do you view that now going forward given what's going on with interest rates?

Thank you. It is of course with the lower interest rate coming forward we do expect also that the cost will go down. I agree.

Like gradually coming down or?

I think gradually it will come down, right? We have our interest cost is tied into the variable interest rate. So we will sort of gradually go with the deficit that goes in the market.

So we are not going to.

Cool. Thank you so much. Thank you, Andreas. Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Stefan Sternholm from Nordea. Please go ahead.

Hi, Stefan here. I have a question on margins. You are running the car business now at around 1% margin. How should we view this going forward? You're talking about price campaigns, etc. Is the margin potential rather on the service side or do you see potential to increase the margin also within the car business?

I think we will see for quarter one, quarter two, the same, because some of campaigns we take a little bit of our margin as well when we are talking new cars and used cars. I guess we will see the same level what we have seen now in quarter four. But sometimes we have a yearly bonus from the different manufacturers. So in Q4, sometimes we can achieve the bonus target from the different manufacturers and some we miss them. So in quarter four, it can be a little bit volatile, but the best forecast we can give is the same margin for quarter one and quarter two now.

Yeah, and as Stefan and Per pointed out earlier, I mean, the long term improvement in margin lies with the service business, right?

Yeah.

Okay, thank you. And a question on SX. This has been quite weak for some time. Maybe it's even a bit worse going into 2025. Is that an impact on your spare parts? Do you see a negative impact or is it like unchanged every year?

No, there is no significant impact of changes in exchange rates. I mean, the very vast majority of our purchases are made in local currency and not in foreign currencies.

Okay, thank you. Thank you.

Thank you, Stefan.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Andreas Lundberg from SEB. Please go ahead.

Thank you. Follow up on the service side. I think you mentioned several factors reducing the margin over the last two, three years, including recent M&A, but also that you were forced to do some extra job in Swedish Volvo shops at the cost for you. Can you update us on the status there? What to expect.

Yeah, you're talking about the Volvo concept to work two mechanics on one lift. I think we have rebuilt the biggest workshops, some smaller one. So it hit us much more when it was Haga Norra season in Gothenburg. We had huge problem with the turnover when we rebuilt them, but we are finished with the biggest one. We have some smaller workshops still. So we see much better turnover in KT4 now.

I think at the CMD you mentioned this body and paint high demand and you may want to have more of those businesses. How is that progressing?

Yeah, but we have a we have a good still a good potential in the body shop. It's not like how do you say customer driven? It's how do you say accident driven? And we can see that the demand and how do you say the accidents is on a stable level and the average damage, the cost to repair that is increasing. So for us, it's a big potential in that business. I had a meeting yesterday with all our body shop manager in the group. and we see still good potentials to grow that business continue to grow the body and paint business in actually all our countries so this this is a good potential for the future yeah well how is the utilization I sense that you you may want to increase space for this kind of business or can you handle it through your current shops you can say like this we can handle it in the facilities we have perhaps we need to adjust in the facilities to grow the body and power paint and reduce something else but we can absolutely grow the business in the facilities we have in the majority of the locations we have perhaps not all but then we are open to see if we can acquire a body shop and paint shop if it's necessary but for the moment we can see a good potential in the sites we have

And we talked about the service workshops for Volvo, the two mechanics on one lift. And there we can build out the body shop instead because we have empty areas, because we have two mechanics on one lift instead to have so many lifts in the past.

OK, thank you so much.

Thank you, Andreas.

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 very much for listening. And if you have any questions, please revert to us. Thank you very much.

Thank you. Bye.