Ladies and gentlemen, welcome to the Bilia quarter conference Q1 2022. Throughout the call, all participants will be in listen-only mode, and afterwards there will be a question and answer session. Today, I am pleased to present Per Avander, CEO, and Kristina Franzén, CFO, and Carl Fredrik Ewetz. Please go ahead with your meeting.
Thank you very much, and, good afternoon, everyone. Welcome to Bilia's first quarter presentation. We can go to the next slide, which should be the agenda. We are starting with market trends. We will briefly go through the Q1 results and then dig deeper into the service business and car business. That will be done by our CEO, Per Avander. We will move to the financial position and M&A with Kristina Franzén. Per will then continue, and finish off with the outlook, for Q2, and then obviously Q&A at the end. I give the words to Per Avander, our CEO.
Thank you very much. We start with slide number three, market trends. The first point, electric cars. Norway is in a class by themselves. The first quarter of all sold cars, it was 83% pure electric vehicles. The government, they have a target of zero diesel and petrol engine in 2025, and I guess they will achieve the target. Sweden, we see 60% of all sold cars in quarter one is pure electric vehicles, hybrids, and plug-in hybrids. With a market share of 60%, battery cars, Sweden is number three in Europe. It's a huge improvement the last year. Consolidation. All manufacturers in Europe work for larger clusters in Europe. One example is BMW in Sweden.
If you go back 10 years ago, we were around 20 different dealers, and today we are only eight. The big car dealers are getting bigger. When the manufacturers like to see clusters, bigger dealers, there is a lot of opportunities for acquisition, both in Sweden, Norway, and in Western Europe. Business models. For the moment, there are many tests in the car industry. One can be subscription. Another is car sharing. I remember in Sweden, both Mercedes-Benz and BMW with Car2Go and DriveNow, they tried in Sweden, but they left Sweden a couple years ago. Online, all manufacturers talk about online sales, private lease, and agent models. One of our brands today, Mercedes-Benz, they have a pilot for agent model in Sweden. We follow it close. Please go to the next slide.
Slide five.
Yeah. Bilia Group result. We report an operating profit of SEK 500 million compared to SEK 528 million last year. It is the second best quarter one ever. The margin was little bit better, 5.8% compared to 5.6%. Number three here on the slide, you can see divestment of four facilities in Sweden. It was the of February first in the middle of Sweden, Skaraborg, and you can say, you can call it headquarters Skövde. We sold our business to a family company, Volvo dealer. Please go to the next slide.
We're on slide number six, right?
On the right-hand side, you can see here the historical perspective result. If you go back from 2017 to 2020, you can see the quarter we have now is around double in profitability. It's a really strong profitability quarter one 2022. Sweden in line with the last year. Norway below last year, but I come back to that later on here because it's a strong quarter one result in Norway. Western Europe, little bit better. Please go to slide seven. Sweden continue high margin, 6.2%, the same as the last quarter one year ago. We have higher earnings in the service business, SEK 8 million better.
Despite the COVID restriction we had in the beginning of this year, I will come back to that later on. The demand for the used car in Sweden is still really good. We have a good margin. Okay, we go to the next slide, eight, Norway. If you look at the right-hand side here, see SEK 151 million in 2022, and compare to 2017 to 2020, you can see that profitability is really good. It's a fantastic result. We have a little bit lower earnings in the service business.
We drop in organic growth in the service business as well, because we had a peak in the end of 2020 and the first quarter, 2021 in Norway, when we started to help PostNord to pre-delivery service, and we delivered a lot of cars for them. It was a peak. Now it's much more normalized. I guess in quarter two, we will be in the same level as the last year. Yeah, we go to the next slide, please. Western Europe. We improved the earnings primarily due to divested operations in Germany. We had huge losses in Germany due to the bad conditions to sell new cars. It's a really tough competition with, you can call them, competitor or colleagues, other BMW and MINI dealers in Germany.
The third one here at the side, strong position for BMW in Luxembourg, Belgium, 2021. In Belgium, BMW, when we talk market shares and ranking list, we're number one. In Luxembourg, often top two, top three in the ranking for market share. BMW has a really, really good position in both Luxembourg and Belgium. Please go to the Slide 11. Service business. We have strong earnings in the same level as the last year, despite the COVID restrictions. In Sweden in January, 25% of all mechanics or technicians, they were sick. The production was 25% less in January. In Norway, the figure was 17%. With that in mind, bear in mind, you can see we have had a good profitability in quarter one.
As I said, in the past year, the PostNord cars affect us a lot in Norway. The underlying turnover was - 14%. Sweden and Western Europe had a positive underlying turnover of 1% and 5%. See, in the historical perspective, you have a really good quarter here. If you go to order intake, the demand for new cars were remained at a good level, and we increased 7%. The backlog is over 27,000 new cars, and it's around double if you compare to one year ago. Used cars in Norway, we had we had a little bit too many cars in the end of the last year. Our focus has been to have a high turnover rate with a little bit lower margin.
Now we are in a good shape for quarter two in Norway as well. Please go to the slide 16.
Then we are into the financial position for the quarter. The good results together with the continued control of working capital meant that we had a really good operating cash flow. SEK 348 million were generated compared to a negative cash flow of SEK 100 million last year. On top of that, we also got proceeds from divestments of operations in Sweden and Germany that Per talked about earlier on, which meant that we have had an additional SEK 420 million added. All in all, it meant that we had a decrease of our net debt by around SEK 400 million, and the net debt now amounts to SEK 166 million compared to SEK 582 million last year.
We should bear in mind that we have also made buybacks of shares amounting to SEK 238 million in the quarter. The buybacks are part of an ongoing program where we intend to buy back 1.1 million shares as a way to buy back shares. That means that the net debt/EBITDA is now at 0.1x and that is versus the target we have of 2.0x. All in all, we continue to have a very strong financial position. It also ends up with available funds at our banks of a little bit above SEK 800 million and available credit limits of SEK 1.5 billion that we are not using at all.
As you have seen at the AGM, it was decided that it will be a dividend of SEK 8 per share to be paid out. It will be paid out as SEK 2 per share per quarter, which means that we have made the first payment now during April. Continued good financial position, and that if we go to the next slide number 17, and then to slide number 18. It also means that we have available funds for continuing our M&A operations. During the first quarter, we have added two companies into the group, the first being LB:s Lastbilar in Sweden, which is then a sales and service workshop for Mercedes-Benz Trucks.
It is located in Norrköping, and we believe this is a very good complement to our newly acquired Mercedes business and also then adding service capabilities for us. We are very happy about that. The second company that we add to the group is a company that we announced yesterday. It is a company in Norway, Kokstad Autosenter, that is then selling used cars and also having an independent workshop. We are also very happy to welcome them into the Bilia family. During last year, we acquired six different operations, and we are now continuing the integration into the Bilia family of those. We had some different type of acquisition. I mean, it was adding expansion of our current Toyota brand in Norway.
We also added two new more brands into the Bilia family, Mercedes and Porsche. We also got together with the Mercedes business, the truck business, which was new to us. On top of that, we made two acquisitions regarding tire and rim repairs. Those are the two that you see on the slide as well then. Very happy to add new operations into Bilia. As Per said earlier on, there is also opportunities in the market, which we of course continue to have a close look at going forward. Per, with that, I think I hand over to you, and we move to the next slide.
Yeah.
And, um-
To slide 20, please. Forecast for quarter two. We see we will have a good demand for service in all our regions. If you go to the next slide, 21. We try to explain the slide. The blue line is 2021, and the red is 2016. What I will say here, zero to six years old cars today, the first and second owner of the car, the most loyal customer we have, and then it was 2016 and back six years. Here you can see how many cars we have in our areas. The first slide here is Sweden. We have 4% more Volvo cars. BMW, 11%. Toyota, 22%. In the right-hand side, you can see Mercedes, 48%.
We have had really good years when we talk total market on new cars. We can see we have a lot of cars in our markets. Please, if you go to 22, slide 22. The same in Norway. Volvo cars in the same level. BMW, they have increased the market shares many years now. We have 33% more newer BMW cars in the market in Norway. We are flat when we talk Toyota. We see we will have a good demand for quarter two and for the rest of the year. Please go to the slide 23. Yeah, we talk about new cars and the shortage of semiconductors and other components. We see we have a long delivery times for some different models, up to nine to 12 months.
For used cars, we will see the demand will be very good, but we have a lack of some models, and we have too low inventories in some of our different showrooms in Bilia. Our priority now is to try to change some of the sales people we have to be purchasers, to purchase cars directly from Blocket or Finn.no in Norway. We try to find more used cars, so that can be a problem, but still a very good margin for quarter two. What I started with electric vehicles, we see it will increase every month in the future.
What I said in the beginning in Norway, I guess the government will achieve the target they have of zero of the petrol and diesel engines in 2025. With that, it was all from Kristina, Carl Fredrik, and I. Please, let's move to Q&A, operator.
Thank you, ladies and gentlemen. If you wish to ask a question, please press zero-one on your telephone keypad to enter the queue for the question and answer session.
We already have one question coming from Mats Liss from Kepler Cheuvreux. Please go ahead.
Yeah, hi. Thank you. Congrats on a good quarter, and had a couple of questions. First, I mean, you have seen quite the dramatic increase in fuel prices here, due to different reasons, and still seem to be confident about the service outlook for the second quarter and also the demand for used cars. Yeah, so it seems that this is nothing that sort of changed the overall picture. Could you have, well, shed some more color on that?
Yes. You mean if the customer will be careful they don't drive so much cars in the future. We can't see it. We had a drop in February in Norway when the diesel and petrol price increased a lot. It was only a couple of weeks, but after that, it was normalized again. We could see in the Norwegian market. Still the customer, they like to buy petrol and diesel engines. So what we can see today, it hasn't affect us so much with the diesel and petrol price.
Okay, great. Secondly, about the second quarter, I guess normally it's a strong service quarter ahead of the driving season, and it seems to be the same situation this year. You also indicated in Norway you see a strong quarter. I guess we have already had the Easter impact there, so we shouldn't be too worried about that. Is that right?
Yeah. Often the customer they change their tires in the beginning of April. As you said, Mats, quarter two is a strong quarter. If we go back some years, often we deliver a lot of new cars in quarter two. This year, we don't see it in our forecast for new cars to deliver a lot because some of our bigger outlets, there we have we call it internal delivery workshops, only internal workshop for new and used cars, and they have not so much to do. It's nice to have a really high backlog, but there is no money before we deliver the cars.
We hope we can start in quarter three and quarter four to deliver a lot of new cars. Therefore, little bit worse when we talk delivery workshops.
It sounds as if, well, you expect the orders, order backlog to increase during the second quarter. I mean, the lead times are still sort of a problem and production. Is that what
Bear in mind that you have a lot of inflation, and it's the same for us when we talk new cars. Maybe you have seen it in the newspapers, Volvo, they changed the price with SEK 20,000 -SEK 30 ,000 now, and all other manufacturers, they follow. We have a little bit higher new price for our cars. It's same for our competitors, but maybe order intake will be a little bit lower now if you compare to quarter one.
The deliveries.
Yeah, yeah.
Would expect to be lower, Mats. If that was part of your question as well.
The question was if we increase the backlog. Yeah.
Yeah.
Mats, coming back to your first question there with the high fuel prices, obviously that potentially would speed up the transition into electric cars or the demand for that, so.
Yeah. Good. About the mix there in the order backlog, is it sort of? Could you say something there? Is it large, small mix? Is there something to say about that? I mean, the pricing in the order backlog there. Maybe also, do you see any risk now when lead times be extended that you could see cancellations coming?
Yeah. No, we don't see it. Twice per month, I and our deputy managing director, we have meetings with the subsidiary companies managing directors in Sweden, and listen really careful if we have cancellation, but we can't see it yet. So the customers, they wait for their cars. Our salesmen, they try to call the customer earlier now.
If you have a private lease or a company lease in contract, in the past, we call the customer three months before the end of the contract. Today, we call them between six to 12 months before the end of the contract. The mix in Norway, all customers, they like to see brand-new models and brand-new cars. When we launch i4, for instance, in Norway, BMW car, pure electric, we sell a lot of that, the car. There you can see the mix there. We can see a lot of BMW cars, a lot of Toyota cars because now they have launched a pure electric vehicle in Norway. In Sweden, I can see the normal market share you can see.
Not today, because today you can have high market share because you can deliver cars. If you go back before the shortage of semiconductors. I guess our backlog of new cars is the same, I can see. If we have 8% market share in Sweden for Toyota, it's the same if you compare to Volvo and BMW. But little bit more electric vehicles if you go back one year, so much more. The price for a pure electric vehicle is much higher. The transaction price is little bit higher, yes.
Great. You mentioned that Volvo, sort of, and others increase new car prices now. Should we expect that to support used car prices also? Is it sort of? I mean, some indications that they are sort of easing off some of the used car prices. But
If I remember right, I think I have said the last quarter and the quarter before that that I think we peak now with the price. We can't see increasing price of used cars, but we can be at the same level quarter two, quarter three, quarter four. I don't think higher price.
It could perhaps, possibly, that's what you have in mind, Mats, right? If there are higher prices for new cars, it might mean that the used become more attractive or keep the level up, possibly, right?
Mm-hmm.
If that is what you perhaps had in mind.
Yeah. I guess that because these new car price increases have come quite recently, I guess, or gradually.
Yes, they are.
Great. Okay. I mean, you mentioned the opportunities there in commercial vehicles and trucks, and I guess Mercedes-Benz is a brand you sort of work with there. Is it more to come during this year, or are you still in a sort of, not test phase, but you will sort of, well, get ready for more? How should we see that trend?
Yeah. The truck business is not a test for us, because we see we have an outlet in Luleå north, in Umeå and Örnsköldsvik, and we have different outlets in Stockholm, and now we acquire one in Norrköping. Our strategy now is to be really big in the truck business. Our competitors, Scania and Volvo Trucks, they have a better network when we talk service points in Sweden. We see what we can do there because it's far between Umeå and Luleå. Maybe if we can fix some points for service, that is key for a truck customer to have a network of service points.
We like the business, and we will grow with the Mercedes-Benz Trucks in the future.
Okay. Thank you very much.
Thank you, Mats.
Thank you. Ladies and gentlemen, as a reminder, if you wish to ask a question, please press zero-one on your telephone keypad. We have another question from Andreas Lundberg from SEB. Please go ahead.
Thank you, and good afternoon. If I start with the divested units, you have some remaining there to be sold or to be divested here later this year. Do you expect similar price tags for those remaining units? That's my first question.
Yeah. I think the operations that we are divesting are of different sizes, right? So I think the one that we now divested during the first quarter were sort of the largest one in that sense. So if I should give any guidance, I think perhaps a little bit of smaller price tag because there are smaller operations in that sense.
Got it. A question on your service business, which you said suffered a lot from this, you know, sick leave, COVID and so forth, and also the, you know, low deliveries on new cars. It still seems that the service business was kind of healthy. Could you maybe give some color on the underlying improvement? Yeah, that's the question.
Let's see if I followed your question then, Andreas. You meant what if we had some problems. How is the business in general conducting?
I think it was fine, and what's the reason behind that?
Okay.
As I said, that we have some delivery workshops. They are not full in Sweden and Norway because we have a lack of new cars. If we have a lack of new cars, we don't deliver so many new cars, we don't get back so many used cars. We miss a lot of job there. What I can see. If you go to body and paint shops, it's really good business still. What we see, the rest of our business, if you call it underlying business, take off the delivery workshops, the rest of the business is doing very well for the moment, what we can see. The forecast for the next quarter is the same.
We continue to work with the newly acquired ones, right?
Yeah.
To see how we can get them into the Bilia concept and the way of working.
Yeah.
with our Business Excellence team.
Yeah.
That's one way to work on further improvements.
Yeah. Yeah.
What's the status there on the integration work of your last year acquisitions?
Yeah. We don't have the same figures when we talk to service business. We call it the Business Excellence team, traveling around and help the workshops manager of each outlet we have in Sweden, for the moment. We started the integration, and if you remember, we took over the Mercedes-Benz business first of July last year, so it's only nine months now. It's a little bit too early, but we have a lot to do, we can see. What I have said before, that we like when we acquire a company when they have some trouble and problem with used cars and workshops because it's our own business. We help them a lot for the moment, and then we will increase the profitability.
We are still in the learning and understanding phase.
Yeah.
I would say, right?
Yeah.
Rather than the harvesting phase.
Yeah. When you talk service business, we have a Capital Markets Day. We have a sort of survey for pure electric vehicles in the workshops. So I'd like to announce it here today. We have a sort of deep dive in Norway with 1,000 petrol engines compared to 1,000 pure electric vehicles and see what happens in the workshops. So it can be maybe interesting new thing.
On the future M&A side, I mean, in the past you have mainly been acquiring, you know, similar units that you already have. How do you think you will allocate M&A capital from here?
No, I guess we can't say exactly how it looks like, right? Of course, we would like to grow with our current brands in our current markets. As we have said before, we would also have an interest to perhaps add another brand, right?
Mm-hmm.
Also look at more closely related businesses to our day-to-day business, right?
If you remember, we acquired last year a tire company in south Sweden with two outlets. We will acquire more tire business. We acquired rim repair in Norway. We will acquire more or try to open up to more of rim repair. Recycling plants, we are really satisfied with our business in Sweden. We see outlets for recycling. There we will grow as well. It's only retail business. We can acquire more of other business as well. We call it the independent business.
Yeah. To look at the whole we have as One Stop Shop.
Mm-hmm.
To see how we can add attractive offers there, that would be to the customer. That we are working on adding more things there that would be good.
Lastly, on your financials, or your buybacks perhaps, did you say that remains 1.1 million shares to be repurchased?
No, not really, right? I said that the program that we are running now is SEK 1.1 billion, and then we have bought back part of that, right? So I think right now. I'm not at the quarter, but rather as of yesterday, we bought back around SEK 300 million, I think, out of those. We publish that every week, so you can see how the buybacks are progressing.
For a potential new program, you need a mandate from the shareholders, right?
Yeah. We do have a mandate from the AGM, and that then requires board approval to utilize that mandate. It's a board decision, of course, and not a management decision.
On top of this SEK 1.1 million, all right?
The 1.1 is decided by the board and is ongoing. Any buybacks on top of those would require a board approval.
Okay.
A board decision.
Yeah. Thank you so much.
Thank you, Andreas.
Thank you.
Thank you. Ladies and gentlemen, one last reminder, if you wish to ask a question, please press zero one on your telephone keypad. We have another question coming from Mats Liss again from Kepler Cheuvreux. Please go ahead.
Yeah. Hi, just a follow-up or whatever. On the Western European performance there in the first quarter, it was. Well, as you mentioned there, you have exited Germany. Besides that, this is the normal level for the remaining business. Is that right?
We can say in the last year we had operating margin around 4% in Luxembourg, Belgium together. Be a little bit careful when you look at the figures for the service business. Some quarter, we can have a sort of a bonus for spare parts from our manufacturers. It can go a little bit up, a little bit down sometimes. As I said, we have huge losses in Germany, and now we're taking them off. We will show a better figure if you look back to some years. Last year, if I give you a direction, 4%, we had in operating margin, if I remember right.
Yeah, it was. I think that was also what we commented on in the fourth quarter really. Right? Now we're a little bit ahead of that in the first quarter. That is a little bit on the high side, going forward, I think. 4% would be more of a ongoing business normalized level.
Per Avander, I mean, you talked a little bit about the recycling business, and it's performing well. Is there any sort of impact there of strained supply chains and the sort of component supply overall, this becomes a more important part of your business?
No. We have lack of components in our warehouse for spare parts, so that we can't see in the figures here. We think that the business is really stable and really good with our three recycling plants we have today. When you talk sustainability, we see we can put in more of use the spare parts in the future into our workshops, both where we talk body and service workshops. I think we are a little bit early into the business, and I guess it will increase in the future when we are talking the sustainability.
Yeah. I think as Per said, so far we have not had any disturbances in terms of supply of spare parts into the service workshop. Because, if there would be disturbances, I guess part of the used spare part could be replaced, right?
Not today.
No. We have not seen any sort of shortage yet.
Okay. That be great. Thank you.
Thank you.
Thank you.
Thank you.
Thank you very much. Ladies and gentlemen, another reminder, if you wish to ask a question again, please press zero one for the queue for the question and answer session. Well, it seems that there were no further questions.
All right. Thank you very much for listening to our Q1 presentation. Thank you very much.
Thank you very much.
Thank you.