Welcome on board on Kamux 2023 full year review. My name is Tapio Pajuharju, I'm the CEO, and next to me, we have our new CFO, Jukka Havia.
Good morning, everybody.
First of all, I think I'm very happy for the performance. We passed the EUR 1 billion benchmark, not with a big margin, but passed. And then I think on the last quarter, we made a major improvement compared to prior year same period profitability, and I will dive a bit deeper on that one going forward. We'll have a look on the Q4 performance, both on the functional and on the financial performance, then we'll have a look on the market position, highlights on that one, and then how we've been executing the strategy. Jukka will have a deep dive on the financial numbers, and then we'll have a bit of a outlook on going forward and do a short summary before we are ready for the questions and comments from the audience. I think our vision is unchanged.
We dream to be number one in the pre-owned and pre-loved cars in the European marketplace. We are not on the podium. We are among top six, top seven on the marketplace, but I think that's very doable going forward, and I think on the 20th of March, when we have our Capital Markets Day, we'll share a bit about the update, the strategy, and the roadmaps going forward as a company and as well as on the market-by-market development in that respect. Then I think all in all, on the top line, slightly shy of 10% increase on the net sales, mainly driven by excellent work in the Finnish marketplace and then on the gross profit level, increasing actually on all of the markets. Very happy for that.
Then the adjusted operating earnings taking a big step forward. It's good to remember that our last quarter of last year was not the highlight. It was a very struggling period. In that respect, we had a major improvement. Then on the like-for-like showroom sales, had a also nice growth, almost 10% in that respect, and then on the integrated service, I think we are returning back to growth. Most of you may remember, while we've been struggling a bit with the financial services we've been selling, now when the margins are settling, we've been learning how to do the trade, and we've been gradually improving on that one, as well as on the Kamux Plazas, on the insurance sales in that respect.
Cash flow traditionally is rather strong in the last quarter, the same pattern for this year, and then on the number of sold cars, we even exceeded the 10%, and that also tells that the average price of a car slightly went down. Strong growth on the Finnish marketplace, steady growth in Germany. Unfortunately, not a good growth in Sweden. We've been taking a bit of a step backwards, and we'll share a bit more about Sweden going forward. Market in general, rather steady, and in all of the markets where we operate, the used car market took a bit of a tick upwards, which is favorable in that respect. But we are still much below the highlights of the 2022 and even 2021 on that respect.
Then I think on the market development, we maintained our market share in Finland, clearly number one, both on value as well as specifically on the PCs. Sweden, unfortunately, we took one step down, and we are no longer in position five. We are position six, and I think what is very, I would say, describing for the Swedish marketplace, it's been polarizing quite radically. The top players have been strengthening going forward, and then the bottom players have been having really struggle, even some of them bankrupted. The small players only been able to operate if they've been focused on a certain type of a vehicles, for example, utility vehicles, classic cars, sports cars, or something very narrow focus. Good, but if you are generalist in a small scale, not an easy market in Sweden.
In Germany, we've been maintaining our market share and then position, and we've been now growing a bit out of this last week, Horst and then Northern Hemisphere with two stores out of that spectrum. Then I think on this one, the volume development, especially on Finnish marketplace, very visible. The different shades of green are going now the right direction on the top line, and especially on the bottom line, I would say a rather nice improvement compared to the prior period of Q4 last year, which was not the highlight. But I think we are on a rather good trend.
When you look at the development for Q1, Q2, Q3, and Q4, I think we are on a rather steady trajectory, and it's good to remember that the seasonality of the car business is so that Q2 and Q3 tend to be stronger than Q1 and Q4 on the marketplace. Then I think when you have a look on the development as a totality, still Finland is a very dominant on the car volume. Nice increase on that marketplace. Germany also stepping in. Sweden took a step backwards, and I will have a look on the Swedish market in a short time.
Then on the integrated services, I think we have had a steady growth throughout the year, and now I think we are returning back to growth on that one, and the financial service also becoming a good stronghold in that respect for all of the markets. Then our network, I think we've been working on the virtual store quite nicely. Then on the brick-and-mortar stores, we've been upgrading some places in Swedish marketplace. They are now coming to play. Germany, we've been going out of the Northern Hemisphere. Düren store has been operating for the better part of the year. The Hameln we just opened week before Christmas, but it's up and running and operating. Heide has been relocated, and we are in the process of relocating our Ahrensburg store.
I think we are opening it on the first of April in a new location. Finland, I think with the capital region, we've been working quite a lot. Niittykumpu store has been upgraded. The ones who've been in the ring three arena, Koskela is also upgraded. Porvoo, we've been doubling the size, and then the new flagship store we're opening in Tampere, I think we are opening it on the first of April. And that's gonna be also a nice improvement on that respect. Then Finland, I think quite the nice spin on the marketplace.
We gained speed towards the end of the year in all of the areas in Finland, and all car types as well, and also gaining a nice grip on the capital market place in the nearby Helsinki region. Then also on the profitability, we took a major step upwards, and I think very happy for the performance of the team over there. Then Sweden, I think we had changes in the management team, and that's why we took a bit of a deeper look on the way we operate, and we changed some of the ways we operate, and that's a bit visible on the top line and also on the bottom line.
During the deep dive, we realized that some of the processes have not been done the way we would like them to be done, mainly in the areas of tires and rims. When we buy cars, they usually come in with a second set of tires. The way they've been handled in certain stores was not the way we would like them to be handled, and that's something we've been now addressing and gaining control again. Then some of the prices, both in buying and selling on the cheaper category, the salespeople have had a lot of authority to do that. We have changed the authority, and that's in the benefit of the company going forward.
So those two things we've been addressing, they used to be not the way they should be, and now they're being corrected going forward. Then I think one may ask is that the substantial improvement on the profitability, not substantial, but I think it all boils down to an improvement profitability going forward in Sweden, so it helps developing the profitability over there. Germany, I think a steady journey started at the summer, and now we've been executing that step by step. We changed the way we process the cars, how we get the industrial quality on the cars, and now I can say that most of the up of the mid-price point cars are like new, and that's where we've been improving a lot, and the game is rather strong on that one.
At the last quarter, profitability was not exactly what we wanted, but I think we're on the right traction and right trajectory in the German marketplace. Then I think we'll have a bit more to share, most likely not magic, but we will share a bit of the roadmap going forward as a company, what we're gonna be prioritizing, what we're gonna be doing, and then on top of the roadmaps on the marketplace, a bit about the adjacent services and adjacent marketplace where we're gonna be operating. So unfortunately, to be patient and wait until the twentieth of March, then we will share more news on this one. Then I think we'll pass the word for Jukka, and Jukka will have a bit of a deep dive on the numbers. Please go ahead.
Thank you. So what I'm gonna do, I'm gonna look this from the group perspective, so the total group consolidated. And like Tapio stated, we are now in a phase of gradual recovery, so clearly, especially the second half of 2023 already showed growth, both in terms of volumes, but also especially as far as the gross margins are concerned. And if you look at the full year gross margin, we ended up having about EUR 1,500 on average per car. Of course, there's quite a lot of cars we sold in Q4. It's, it's more than 60,000.
So there's variance, of course, the mix has an impact as well, but I think that's a strong statement of the fact that we have been able to start to improve the profitability side of the equation, and the market demand for the cars has stayed strong as well. So if you compare in a longer term perspective, now the recovery is going on. There is clearly on the marketplace, that everybody knows, there's inflationary pressures, so the cost management, cost control will be and has been a topic we have started to pay attention to, and I think that helped already in the last quarter of last year to offset some of the inflationary cost pressures, which we of course had. I think efficiency in general is a topic on which we will, of course, pay attention, and that's gonna be going forward.
Inventory management in this business is very crucial. If you look at where we landed end of last year, and maybe the '22 year, the last year isn't the best sort of comparison, it was a little bit different. But anyways, we were able to improve, so I think as also a testament to the fact that some of the operational actions taken by the company has bear some positive benefits. And I think what is good to note is that Kamux, and I'm coming from the outside, Kamux really has a strong balance sheet, and a strong balance sheet will be one of the preconditions and bases for the future growth. And if you look at the return on equity, little bit going down on the other, and the equity has been trending up as well.
But if you especially look at the equity ratio and, you know, the debt in relation to what the size and nature of the business is, I think this is in well and good shape as we speak. The EPS, which is of course the net profit at the end of the day, ended being at EUR 0.24 per share. Little bit lower than last year, but almost at the same level. So I think all in all, the normalizing market and the gradual recovery are the topics that we already discussed by Tapio. Now, looking this little bit more from the sort of table financial perspective, couple of highlights. Of course, on the left-hand side, you see the quarterly results, that is October, December, and like Tapio stated, the Q4 is not exactly the peak season. That happens in the summertime.
Then on the right-hand side, you see the full 12 months, both 2023 and 2022. So the revenue, we hit EUR 1 billion. We went past that milestone. I think it's important, even if … the Swedish krona was, you know, not that strong during the period and all of it, but still we made EUR 1 billion, which is an achievement. But I think more importantly, what I'm happy about is that the gross profit, both in absolute terms as well as, as a percentage of revenue, we have been able to improve, and that is, I think, something to look at going forward as well. The integrated services revenue, financial, insurance, some other services we sell, is typically higher as a share of the total revenue in the last quarter, and that happened 2023 as well.
That is linked to the way and structure and the terms and conditions of these agreements. But if you take it little bit longer term perspective, I think that's one additional profit driver which we have been able to drive forward, and that, that's gonna be a good... going forward, good thing to look at. And the organic growth, the like-for-like showroom growth in Q4 was 8%, which we think is a good achievement. Like Tapio stated, of course, the average price of the car was a little bit down versus what it was historically, and if you look at the European markets, that's been the trend as well. All in all, solid and good performance in all the fronts. Inventory management is, of course, really important, and there is fluctuation, and the typical cycle is that we start to buy cars.
Now we are approaching the springtime, towards the summer season, which sort of increases the inventory, and then after the peak season, that comes down. That has been the case for the last years, as you can see here. And inventories is a major part of the, of the net working capital, so that basically drives that. Nothing special, I think it was a good result, and I think what is also important is that what is the quality of the inventory? What do you have there? It's not only the total number, but what is the composition of it, which I think is another topic, which you cannot see directly here, but which is an important sort of driver. Then that drives the cash flow.
If you look at the cash flow of Kamux, it, for the last few years, it has been very much geared towards the last quarter, so that's when the cash flows in. In 2023, it's EUR 27.6 million, the cash flow from operating activities, almost at the same level than the previous year. And like you note on the right-hand side, it's very much due to the fact that the change in working capital, that is the change in inventories, was to the positive, and that drove the cash flow. But all in all, whether it's the cash flow, profitability, or the balance sheet, I think the performance has been very solid end of last year.
Then one other topic, which I think has been the tradition here going through some of the internal development, and of course, we have quite heavily invested over the last few years into the IT system, the key digital capabilities, our own ERP, which we have built in-house. I think one change structurally is, which you can see on the higher end, is that historically, up until the early parts of 2022, we actually relied quite heavily on the outside external service providers. Now, for the last year, 2023 included, we have really much taken that in-house. So we have insourced a lot of the activities and gone into a development mode, whereas the build was done already. And this is now, of course, for us, an asset which we will and have to utilize even better going forward.
We have a lot of information, we have a lot of data, and some of that we will, of course, now have the full utilization for the next few years. And then, of course, we also have spent some money on the showroom upgrades. Tapio mentioned that now the network in 2023 didn't change that dramatically, but we have been doing upgrades and uplifts, and that is a topic which will continue going forward as well. So I think the customer experience and all linked to that is important, both online and offline, because this is Omni-channel, like they say, isn't it? And then, based on all of this, the board of directors have decided to propose a dividend of EUR 0.17 per share. That would be distributed from the fiscal year, financial year 2023.
The EUR 0.15 was what was decided a year ago. Of course, it's end of the day, the shareholders' decision. The AGM will be held on April 18th. This corresponds, this EUR 0.17 corresponds to about 71% payout ratio, so as a percentage of, of the net profit, of the EPS. It's about 6.8 million in absolute terms, and the idea of the proposition is that it would follow the same pattern that was done a year back, that it would be paid in two installments. The first one, EUR 0.7 per share after, after the AGM, end of April, and then the second installment, which is EUR 0.10 , at the end of October. So that's the proposition from the board to act as far as the dividend is concerned.
And then we go to the future, and maybe, Tapio, you can take over from here.
Okay.
Maybe look at the first, what happened for the last three years.
I think this is already becoming-
Mm
... bit of an old news, and I think we've been focusing more on the profitability than the growth and fixing the underlying profitability. And I think we need to wait until 20th of March, when we're gonna be sharing what the way we're gonna be going forward. But I think all in, all in all, we expect our profitability to be improved, and I think that's something we've been working on, and we have a rather solid trend how to do that. And we have all the productivity improvement KPIs looking in the right direction, so feel very good about that.... Then maybe a summary on what has been achieved. I think very solid top line growth exceeding the EUR 1 billion benchmark and almost 10% growth on the last period.
Then on the gross profit throughout all the markets, Sweden included, good job in that respect, and at the end of the day, adjusted operating profit take a major step upwards, like for like, slightly shy of 10% growth, and then on the integrated services, returning back to growth, and then on the volume growth, we've been ahead of the market. So I'm very happy for the performance, and I would also like to pass thanks to everyone from the Kamux team for being on board, all of our customers and all of our partners, for a job well done for the year 2023. Now I think we are ready for questions and comments, so-
Yes, thank you.
We get Katariina joining the team.
Thank you, Tapio. My name is Katariina Hietaranta, heading Kamux's investor relations. We start with questions from the audience here, [Foreign language]. Maria, please go ahead.
Starting with the metal margins, obviously it has been a good performance, I mean, throughout 2023. I think starting from January, it has been an upward trend. Now lately we have seen used car prices to come down in Finland, if you look at these statistics of Finland data. What kind of risk you see, I mean, for the metal margins going forward and going into 2024?
I think we've been taking a rather solid and conservative position on the inventory, like Jukka said. There is still some volatility on the prices of certain EVs and certain hybrids, and I think when you're seeing what is in our inventory, we try to match rather well on what is the market demand on a country basis, as well, on the region basis. So in that respect, I don't foresee any major risk on that respect. And then when seeing what is happening with the new car prices, apart from the new players in the EVs, they are going up quite gradually and actually big steps. One day that's gonna be reflected in the used car prices as well. So in that respect, I think we are in a rather good position.
Then if we talk about the competition in Finland, how do you see the competition to develop? I think we heard some players who have skipped offering the new cars for certain brands and shifting more focus on the used cars. So how do you see you are going to develop or perform in increased competitive environment?
I think roughly the same pattern like everywhere else. The ones who are good, and I may say, on the top five, top six, they're gonna be growing and doing good job. It's not so easy to come into the business, even if you've been highly successful in the new car market. This is a different nature and different way of operating. Some of the players who have decided to stop new cars, our read is that maybe they were forced to do that, and they didn't come voluntarily to the used car market as well. So I think they will have a bit of an uphill battle in that respect.
Then final question on the integrated services, and more specifically, on the finance product. When the interest rates were coming up, I mean, you said that you couldn't fully reprice the higher interest rates in your own prices. Now we've seen a small downward shift in the interest rates, and do you think, I mean, you are able to keep your margins and even grow it from here if the interest rates will decline during 2024?
I think what we have seen already now is that our own activity seems to be sticking quite well. We try to be fair, not aggressive on that one, and on the other hand, the psychology of the consumers is working on the same direction, so we feel rather okay on the development.
Thank you.
Okay, next we have, Rauli.
Pia, Pia was first.
Oh, Pia was first. Sorry, my apologies.
I was physically in a better place here. Yeah, Rauli, Rauli from Inderes, hello. A question from, related to Sweden. You, like you mentioned, the volumes were quite a bit down in Q4, which you attributed at least partly to some kind of a process changes. So how should we view this going forward? Was this isolated to Q4, or should we expect the volumes and sales to be notably down also now during the coming quarters?
I would not foresee them to be notably down, but to make a big uplift, we take it step by step, and I think we need... We put the processes in place. We would need to feel secure that they are sticking, and then we can step on the gas again. But I think now we've been correcting a couple of things which should have been corrected a long time ago. They were not nationwide, but they were limited in certain stores, but it had an impact on the, I would say, spirit and mentality of the Swedish market for some time.
Okay, clear. Then the second question related to the market outlook. I think some, at least one player has noted that, due to the low volume in new cars there might be a shortage going into the summer season in the used cars. So how do you expect any kind of this sort of development?
I think it's not gonna get easier, but when you have multiple sources and then you are operating in multiple markets on the European platform, will not be a major battle in that respect. Should be business as usual. Maybe not as easy as certain time, but, very doable.
Very clear. Thank you.
Now, Pia, go ahead.
Thank you. I'm coming back to the misconduct in Sweden you discussed. So, was this something you would describe as opportunistic or systematic, and what kind of financial impact would you estimate to have seen in 2023?
Yeah, we have-
... and before?
... We have not made a full analysis of the total impact. When it's now corrected, it's all favorable, and it will improve the profitability. It was not spread out through the chain. It was individual stores who were not fully complying with our code of conduct regarding the second set of tires and rims, and then certain both on buying and selling the lower value cars. The salespeople have a certain authority where they can operate. The limits were higher than we were used to having in Finland, for example.
Okay, thank you. Then regarding your guidance for this year, so looking back at 2023, we saw a EUR 1 million improvement. Should we see this as the improvement for 2024, or can you describe the logic, assumptions behind your guidance?
I think we are working on a gradual and a continuous improvement on the profitability, and I think our aim is higher than that. And I think we aim to be closer to the standard of the industry. Then the question is the time frame, how fast we can reach it, but we are on a good trajectory on that one.
Thank you. Then, in the financials, in the net financials in Q4, were there any special items? It seemed a bit higher than normal.
Well, of course, if you think of below the EBIT, you mean? Yeah. What shows there is that the FX related items, including the hedging activities we have done, is then, of course, the results will be realized, both unrealized and realized effects. So that is, I think, the part that changes from quarter to quarter, and that is one of the drivers behind it.
Okay, thank you.
We have next, Jussi Koskinen, please.
Yes, Jussi Koskinen. Any changes with competitive advantage in the market, in industry or with Kamux?
I think we are addressing the consumer better than ever, and as long as you can deliver what the consumers are willing to have, you're gonna be good. And then on the service, I think we will maintain our grip on the friendly, active, but not aggressive way of operating with the consumer in the omni-channel world, and we tend to be rather good on that.
Thank you. Any further questions here from the audience? Maybe we give a bit time to check if there are any questions on the teleconference line.
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 Calle Loikkanen from Danske Bank. Please go ahead.
Good morning. It's Calle Loikkanen from Danske Bank.
Morning, Calle.
I just wanted to ask. Morning, morning. Regarding the average car prices in 2024, obviously, as you mentioned in your presentation, there's been a bit pressure on a European level on pressure down on the car prices. But obviously, you can probably influence the average prices by the sales mix or which cars you choose to have in the inventory. So what are your expectations regarding your average car prices in 2024?
I think all in all should be rather steady and maybe taking a slight upward trend. The electrification, both in terms of the EVs and hybrids, that's gonna take the average price up. In Germany, we have elected to take a notch lower price cars. We were actually much higher price cars in Germany than we were selling in Finland and Sweden. We take a notch down over there. But also in Germany, the new car prices will be reflecting. It will normalize quite rapidly. And then I think I'm foreseeing a slightly upward trend, provided there is no major hiccup in the economy, because that may then have an impact on the psychology of the consumer, which will then take a step back to the lower price consumer. But currently, we don't see any of that. Slightly going up.
Okay, that's very clear. And then my second question was on Sweden. It's basically twofold. So firstly, we've seen you mentioned bankruptcies and similar in Sweden and some players or some competitors being a bit challenged. Are you seeing the kind of competitive landscape easing at all due to these bankruptcies and turbulence in the market? Or does it remain as tough or even getting tougher?
I think it's in a way cleaning a bit about the industry and taking the, I would say, odd balls out. The big players in Sweden, they've been strengthening quite rapidly and doing a good job over there, and we are rather close on them. So I think in that respect, the market dynamics tend to be roughly similar. I don't see any major getting it easier or getting it more complicated. Roughly the same.
Okay, okay. And then, still continuing on Sweden, then on the sourcing side, in the past quarters, there's obviously been, because of the weak FX. There's been a lot of foreign buyers in the market. Have you seen any changes on that side? Is the sourcing market becoming easier in any way in Sweden?
Yeah, I think during last year, we did have months and quarters where the local sourcing was rather complicated. Towards the year end, I think the availability on even Blocket and on the equal platforms, they were going up. That's in a way easing the sourcing market for the local Swedish market, and maybe normalizing some of the export out of Sweden as well. But I think longer term, Sweden has lost a major block of cars during the past two years, and going forward, they need to figure out either to increase the new car sales big time or then start importing cars from somewhere else, because I think they lost in one year more than 140,000 cars going somewhere else than in Sweden. So it will need to be replaced going forward.
Okay, and is... Do you see you positioned well to kind of gain something here in that trend, or-
Uh-
... is someone else who is better?
At least we are well-equipped for sourcing from multiple markets, so in that respect, we should be having a good, if not stronghold, on the position.
All right. Thank you. That's all the questions I had. Thank you very much.
Thanks, Calle.
Thank you, Calle. I don't think that we have any... Do we have any further questions from the-
First from
No, yeah
... the audience has.
Yeah .
Please.
No, but from the, teleconference. Pia, go ahead.
Yeah, thank you again. Regarding integrated services, are there any changes in the terms and conditions for you from your partners, which we should be aware of in 2024?
I think we do annual negotiations for all of the services.
There are some changes, none of them material. But as we try to elaborate with our muscles, so they tend to be rather beneficial, if we so have.
Thank you. Then, finally, have you identified any specific market trend, which is, you know, bubbling under, but which hasn't impacted you yet, but which you are looking at, you know, keeping your eyes on?
Maybe not a trend, and not a new, new issue in any case, but I think we've been rather transaction-driven in our way of operating. So we've been also considering how to operate on something else than just buying and selling, and I think that's becoming visible. We were just in Germany, and we realized that car sharing, which has been in trouble for many years, now is coming back on the certain big cities in Germany. So we keep eyes open for many, many other options as well.
Thank you.
Thank you, Pia. We have a couple of questions over the chat. A few were about the Swedish misconduct, but I believe that we have addressed those. But then, I'm not sure how much you want to comment. This is actually to the board: Why do you pay out so much in percentage of profits, while you could invest the money into growing your network?
That's beyond my capability and pay grade. That's for the owners.
That's what I thought. A very different question in terms of, what do you think about the targets on return on invested capital to return on capital employed in the medium to long term?
I think net working capital is something where we do a decent job, but I do foresee opportunities on improving that. Having said it, they're not gonna be big steps, they're gonna be gradual improvements, and they will come into play during the time.
Of course, we have just today told that on March 20, we will discuss our long-term targets.
Yeah. Good.
If we have no further-
If nothing else on the-
Mm. No further questions.
Thanks for the attention. We'll conclude the day.
Thank you.
All the best. Take care. Bye now.
Thank you.
Thanks, yeah.