Thank you very much, Operator, and good morning, and welcome to Bilia's Q2 results presentation. As Operator said, my name is Carl Fredrik Ewetz, and I'm responsible for Investor Relations here at Bilia. Some of you might already have seen our report and noticed we report a stable set of figures, especially within Service. Remember, our Service Business represents between 60% and 70% of our profits, so very important. We can go to the next slide, please. That slide should be the agenda. It speaks for itself, but for you who are dialing in and are not able to see the slides, we will start with a current market environment update. We will go through the results on the Group level and also dig into Service and the Car Business .
Kristina will then focus on financial position, M&A, and mobility care, and Per will end this call with an outlook for Q3. Here to present the report is our CFO, Kristina Franzén, and our CEO, Per Avander. I'll leave the word to you, Per.
Okay, thank you very much, and hello, everybody. Yes, next slide, the current market situation. As you know, we have rising inflation and higher interest rates in the world. There is a continued consolidation in the car industry. Changes in the distribution models of cars. We have, for the moment, a lot of discussion about agency model, car sharing, and subscriptions, together with our manufacturers. We have stable demand in Bilia for the Service Business , and we have strong demand for used cars, despite we have lack of cars in stock. We had in the quarter a little bit weaker demand for new cars, after the first of May. As you have maybe read already, we have a record high order backlog, 29,000 new cars. Kristina?
Yes. Good morning, everybody. Before we move into the Group results then, I would just like to comment on the financial target that we announced on the Capital Markets Day in Stockholm in May. If we move into the next slide number four, you see the four financial targets we had. There were two of them that were updated, and I would like to comment a little bit specifically on one of them. It's number two on the sustainable business model, where we have a target for the operating margin that was changed from the previous 2.5%- 5%. The change was made to reflect our profit ambition going forward, but also then to reflect our historical performance over the last years in terms of profitability. The other targets remain, slightly revised, but not any major changes.
If we move to the slide five , we did also at our Capital Markets Day in Stockholm introduce sustainability targets for Bilia. We have set four targets, so actually four areas of sustainability targets, and I would like to comment a little bit on two of them. The first to comment on is the target we have around our circular business model. It's the target referred to increase the number of reused parts in our repair shops. Here, we do have in-house supply from our car dismantling and parts recycling facilities, which is an advantage for us to have these type of supply in an in-house operation. Further, I would just like to comment on one of the goals we have under Human care.
We do have set a target for ourselves to contribute to a more diversified workforce within our business area. We have therefore set a target to have 30% women in our sales operations. We have received some questions where we have limited our ambitions to the sales operations, and the reason for that is that we see that within this area, there are available competence to recruit for us, while we on the Service side unfortunately see that there are more limited resources of female competence. Here we will instead work on a more long-term basis and focus on where we can see we can short-term make a difference. That's the updated and new targets for the Bilia operation. With that, Per, I hand over to you.
Okay, thank you. We go to slide six. We report the operating profit of SEK 498 million and a margin of 5.6%. It's the second best quarter two ever. The net turnover decreased 5% due to 22% less delivered new cars. I think we can go to the next slide. Sweden. We still have in Sweden a high margin, 6.7%, and last year it was 6.8%. We have stable earnings in both Service Business and the Car Business despite less delivered new cars. We have this year sold six different Volvo and Renault facilities, five in the Skaraborg region and one in Stenungsund. Okay. We go to slide eight.
Norway, we have strong earnings with a solid margin of 4.8%. We have delivered 38% fewer new cars in the quarter. We have a really big backlog of new cars for the moment. We have lower earnings for the Service Business due to less delivered new cars and lower service for post-sale cars. To sort of an explanation, we have in the biggest facilities delivery workshops, and they are not utilized 100% because we have a lack of new cars for the moment. We go to slide nine, Belgium and Luxembourg. We have improved earnings due to the divested operations in Germany.
BMW is a really good brand in both Belgium and Luxembourg, and when we are talking market share in Belgium, BMW is number one and often top three in Luxembourg. We are looking for more acquisition in both Luxembourg and Belgium, especially in the Flanders area in Belgium for the moment. Number 10, Service Business . We have stable earnings despite less delivered new cars in all countries. As I told already, post sale cars, we don't have so many to have service with for the moment. In Sweden and Luxembourg, Belgium, we have an organic growth of 3% and 4%. Service agreements and tire hotels is on a stable level, and it creates loyalty. The Car Business , number 11. The net turnover decreased 9%. As I have told already, we have a record backlog, 29,000 new cars.
It's the double if you compare with the last year. Here we have a really good profitability of used cars, SEK 120 million. In historical perspective, it's a really, really good profitability we have for the moment. Okay, Kristina.
Yes. We are on slide number 12, the financial position. Looking at the financial position, we had a solid and robust balance sheet at the end of the quarter. Our net debt amounted to around SEK 420 million, which was SEK 170 million lower than at year-end. We should remember that we have also, during the year, made buybacks of shares amounting to around SEK 520 million, of which SEK 280 million was actually bought back during the second quarter. Operating cash flow for the quarter was around SEK 250 million.
It was lower than last year, but still then contributing to a very solid operating cash flow, on a 12-month rolling basis amounting to around SEK 1.5 billion, which is very good. All in all, it means that we, at the end of the quarter, had, also for this quarter, available funds at the bank of SEK 510 million. And we did hence then also have unused credit limits of SEK 1.5 billion with our banks. If we move into our growth strategy and turn the slide to slide 13, M&A. We have during the quarter announced four acquisitions, four different type of businesses. The first, Kokstad Autosenter, is an operation of used cars going across all brands, so it's brand independent.
The operations are running in two facilities in Bergen, in Norway. Another acquisition we did was M Bilar, which is operating sales and Service Business for BMW and MINI in Sweden. Here we contribute by another five facilities in very attractive locations that we are happy about. The third is Insignia, adding two more brands into the Bilia family, so we are very happy to welcome Jaguar and Land Rover to us. The operations are run through one location in Norway. The fourth is Bil & Din Holding AS, which is then an operation of car dismantling and parts recycling. With these acquisitions, we are moving into this as a first within our business, we are moving into this operations in Norway, which we are very proud of.
When it comes to timing, we do have Kokstad and we do have Insignia with us in the balance sheet at the end of the quarter, while M Bilar and Bil & Din will join us in the coming quarters. Kokstad and Bil & Din are part of a new operational area, focus area. If we move to slide number 14, I would just like to give a few words about mobility care and new operational area that was also introduced at the Capital Markets Day in Stockholm in May, 2022. The operations, the business activities run within these operations are independent from the car brands that we are currently handling within Bilia, but also actually independent from all different car brands, also outside our own facilities.
The activities that we have included are tires and tire hotels, rim repairs, vehicle recycling, Bilia Outlet actually being sale of used cars. Bilia Outlet is the brand we are using for that. Including car glass and Body & Paint. We have also then subsequently the second quarter made a smaller acquisition within the tire activities, which we are very happy about. The mobility care operational area will safeguard that we continue to develop sustainable, attractive and innovative solutions to make sure that our one-stop shop is having a complete offer to the customer.
Thank you, Kristina. We go to the next slide, the last one, the forecast for quarter three. We see stable demand in the Service Business in all our countries despite higher inflation, higher fuel prices and higher interest rates. To comment the higher fuel prices, we see our customers still drive their cars despite the higher fuel prices we have in our countries for the moment. We see a small light in the tunnel when we talk availability of new cars for some of our brands we have in the portfolio. For quarter three, we still see a good demand and a good margin when we are talking used cars. Electric cars taking off really in Sweden and in Norway.
To go back to Norway, 80% of all new cars in the sold in the market is pure electric vehicles. When we are talking hybrid and plug-in hybrid, it's 90%. In Sweden, we are the third best country in Europe when we are talking battery cars. We are a little bit above 60% today. From the first of July, we will sell our Volvo business in Oslo. Okay. Kristina and Carl Fredrik, it was all from us. Now we can have Q&A. Thank you.
Thank you. We will now begin the question- and- answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then two. Once again, if you would wish to ask a question, please press star then one. We will now pause momentarily to assemble our roster. Your first question comes from Andreas Lundberg from SEB. Please go ahead.
Yes, good morning. Can you hear me?
Yes.
We do, Andreas.
Great. Say if I start with the order stock, which is up to 29,000 cars at the moment, right?
Yes.
You see some positive indications there. When do you expect to have delivered this order backlog?
Yeah.
A y-
Yeah.
A few quarters or a year or for how long? What's your best guess?
Andreas.
Yeah. As I said, we see the sign in the tunnel. But I don't think we will start to deliver a lot after this summer in August and September. It will take a little bit more time. More in quarter four is our forecast for the moment and quarter one next year, not so much in quarter three. That is our answer for the moment.
It will probably take a little while the production is fully ramped up.
Yeah.
Before we get the deliveries.
One example, we read the report from Volvo, and they had a really good production in June now, but it takes a little bit longer time when we can deliver the car to our customer. We see a little different situation between our brands we have as well. Quarter four and quarter one is our answer today.
Still positive indication, which is very nice.
It's still difficult to get for you to find used cars to sell or how do you work with that given the?
Yeah.
Limitations?
Yes. It's the same situation what we have had the last year. We try to purchase used cars from the market in all our countries. In the backlog, there is a lot of cars. Today we have private leasing, and we are responsible for the residual values. For example, Volvo and Renault. 100% come back, so we can get back some cars from private leasing as well.
We would have preferred to have more cars.
Yeah
During the second quarter of course. I mean, as you saw, there were fewer deliveries than last year.
Yeah.
that is of course, the result of the lack of cars also on the used car side.
Speaking about leasing, what's your indication so far about demand there for you know contracts being expired?
If we look in the history, the fleet business really stable when we have had some recessions. Private leasing, we don't see. We can't see. We say wait and see what will happen because the interest rate is increasing for the customer. The amount the customer pay monthly will be little bit higher. I don't have. I can't see what happened for the moment. I guess it will be little bit better in the end of quarter three. Car Sweden, they changed name now to Mobility Sweden. Their forecast, they declined the forecast of 300,000 new cars in Sweden. It's a signal that the demand will be little bit lower in the future.
Might be a little bit too early.
Mm-hmm. Yeah.
Given the interest rate increases, right? To really understand how the reaction have been from the customers.
Okay. Thank you so much.
Thank you.
Thank you.
Thank you. Once again, if you wish to ask a question, please press star then one. We'll pause momentarily to allow for any final questions to come through. Thank you. Your next question comes from Mats Liss from Kepler. Please go ahead.
Yeah. Hi. Well, coming back to Norway, I guess it's slightly weaker quarter there compared to last year. Then again, you mentioned that the outlook for the third quarter seems to be pretty stable, but I guess that was more a comment given for the whole Group. Could you say something about the development in Norway for the third quarter? Should we see a similar sort? I mean, Sweden performed pretty well in the second quarter, and Norway was a bit softer. Is it the same trend going forward?
Yeah. You can say in historical perspective, we had a peak last year. I showed that in slide eight, in the presentation. Now it's little bit more normalized. SEK 140 million for quarter two is the second best quarter ever in the Norwegian market. The forecast for us. We think it will be little bit more normalized, because we don't think quarter three we'll deliver so many cars. We had a peak of Polestar cars in our delivery workshops last year, and it was a recall at the same time. We had huge job in our delivery workshops at that time. We don't see we will have it in the future.
Now it's little bit more a normal profitability. I would like to say.
Perhaps also, Mats, to bear in mind is that we would also divest the three facilities effective from July the first, or have done it already, right? That will also, of course, impact the Norwegian results going forward. The trend going forward is not different from the trend we have had during-
Mm-hmm
the beginning of the year or the end of last year.
Could you please remind me how much of the divestitures represent for the Norwegian operation?
Yeah. It is in the subsequent event you have that number. It's SEK 175 million on average for the two last years for those three facilities. It's noted in the separate event.
For a full year.
Yeah, for a full year.
Yeah. Great. Yes. That's interesting. The situation in Sweden seems to be more stable, and also in Western Europe you've performed well. I guess that trend also seems to continue on a good note, even if fuel prices are high and you sort of have a limited amount of new cars to deliver. That's good, I guess.
Yeah.
Finally, the used cars also, they seem to be in limited supply, and the prices are sort of at high levels, but you expect that to continue as well, is that right?
Yeah, I think we will be in the level we had in this quarter because we had lack of used cars in Sweden and Luxembourg and Belgium. Maybe when we talk volume of used cars, we will sell fewer cars because we can't, we don't have all the cars the customer have need for. The margin will still be good. That's our forecast for quarter three and quarter four.
Yeah. Finally, just about the acquisitions and the M&As. I mean, you have made quite a substantial amount of acquisitions.
Yeah
This year and recent years also. I guess synergies should be expected to be well supported gradually now or is it sort of a plug-and-play operation? It's well the synergies are limited. Could you say something there about?
Yeah. It takes time to implement new brands, for example, Mercedes-Benz and Porsche. There's a lot for sale at the moment in the market in Sweden and in Belgium, Luxembourg. We prefer more of BMW MINI, as I told in the presentation, in Belgium, in the Flanders area, and maybe in Luxembourg, one more. We have a team working with business excellence, we call them that, to improve the business in the Service. We can do it at the same time and acquire more. We say we will still have a high tempo when we are talking acquisitions.
I think the synergies will come.
Mm. Yeah
A little bit gradually, Mats, right?
Yeah.
I think it doesn't happen overnight automatically once we acquire them, right? But with the excellence team Per talked about.
Mm-hmm
It comes gradually, right?
Yeah.
We do have.
What I try to say is when we acquire a new brand, we don't have so much synergies.
Right
At the first acquisition we make. If we acquire more of Mercedes-Benz now, we can find more synergies. The easiest way is what we have sent out in the press release, M Bilar and BMW dealer in Sweden, there we can find a lot of synergies.
Yeah. It's a mix. It's a high focus area, of course, to integrate both the new brands and the new facilities in a good manner. We do receive those synergies going forward.
Yeah. Just finally, I mean, you have this huge order backlog of new cars to be delivered. I guess, I mean, private persons and consumers are maybe sort of dampened more by, well, potentially increasing interest rates and so on. Historically, you had quite a large part of company cars, and I guess there is a need for companies to be sort of showing a sustainable, yeah, change in the company car fleets. How much are sort of company cars in the order backlog, and what do you see going forward?
In Sweden, it's a little bit over half of the backlog we have in Sweden, maybe around 60%. In Norway, it's a little bit less, around 40%. In Belgium, Luxembourg, it's not so common with company cars there. Most of it is a private person. We don't see that the customer terminate their contracts. We don't see it still. They have need for a new car, and they wait for a long time. All the customer, if we have a problem and one customer terminate the contract, we have another customer directly. It's not a problem for the moment.
If that was your question, Mats.
Yeah
If there were sort of a risk for obsolescence or so in the
Yeah. I guess the company cars are maybe more sort of.
Stable. Yeah.
Trending. Yeah.
Yeah.
It's good news that private, well, consumers also.
I don't think we see it with the private-
No
Persons either yet, right? There's
And, and-
Haven't-
Most of the cars in the backlog is the new technology. We plug-in hybrids and pure electric vehicles. The customer love them and wait for the cars.
Yeah. Okay, great.
Mm.
Thanks a lot.
Thank you, Mats.
Thank you.
Thank you. We have a follow-up question from Andreas Lundberg from SEB. Please go ahead.
Yeah, thank you, it relates to the core delivery. The decline in core deliveries and the effect on the Service Business . Obviously, it's a negative effect, but can you perhaps give some more quantification of this effect on the Service Business ? Thank you.
We don't have it, but I try to explain that the biggest facilities we have, we have separate delivery workshops. As you can see, we have a capacity of 100. Maybe we are working at around 60%-70% of the full capacity we have with the mechanics. All the cars we have in the backlog, they have a need for a pre-delivery service. Many of our customer have booked winter wheels and maybe some other accessories. If it affect us a lot when we are talking workshop hours and spare parts, because accessories is included in what we call spare parts. We don't have a figure for it.
Okay. I thought lastly switch gears to the cash flow statement, maybe it's for you Kristina, but the working capital movements were obviously less positive or even negative in the quarter comparing to last year. Now it could be volatile, but anything you could highlight there could be worth thinking of.
No, I think it is as you say. No, I think it is a little bit, as you said, Andreas, that the working capital is of course dependent on primarily the availability of cars, right? It moves a little bit back and forth in terms of that. There was an enormously good cash flow last year, right? I think the comparison since is a little bit tough. I think it's good we generated a strong cash flow in the quarter, right? On the 12-month rolling basis, we're still on a very positive number of SEK 1.5 billion. I think it's good. It's solid.
Great. Thank you so much.
Thank you.
Thank you. There are no further questions at this time. I'll now hand back for closing remarks.
Thank you very much for attending Bilia's Q2 presentation. We wish you a happy and great summer. Thank you from us.
Thank you very much.
Thank you.