Welcome to Bilia Q4 report 2022. For the first part of the conference call, the participants will be in listen-only mode. During the questions and answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now I will hand the conference over to Carl Fredrik Ewetz, Head of Investor Relations. Please go ahead.
To that, welcome to Bilia's Q4 results presentation with CEO Per Avander, CFO Kristina Franzén, and myself, Carl Fredrik Ewetz, responsible for investor relations M&A. We go to next slide, and as you can see the agenda is rather straightforward. I will start talking about the current market environment. I think we go straight to that, slide three. Per, I leave the word to you.
Oh, thank you very much, Carl Fredrik. The current situation in the car industry, the demand in the service business is still stable and at a good level. We have a high order backlog for new cars, both Bilia, but all our competitors as well in all our countries. One example in Sweden is the backlog for the total market in Sweden is approximately around 150,000 new cars in Sweden for the moment. We have seen a weak demand for new cars. Bear in mind registrations of cars 2023 will be one side, but order intake is another. Registrations and order take is maybe will be little bit different this year.
The stock of used cars has increased because of better availability of new cars due to changes in the tax system, especially in Sweden and Norway in the end of the last year. All in the car industry built up their used car stocks. There is an ongoing consolidation in the industry. One example is BMW in Sweden. If you go back 15, 20 years ago, it was around 15, 20 owners of BMW dealers in Sweden. Today it's only six seven owners. There is some consolidation still in the industry. The industry is changing. The interest of battery cars is huge in our countries. In Norway, the battery car is over 90% if we include pure electrical vehicles, plug-in hybrids and hybrids.
Pure electric, it was around 80%. Norwegian market is the best in Europe. In Sweden, we are number three in Europe. Around 65% is a battery car of all registered cars last year. It's a lot of launches of many new brands, especially from China. We see a lot of new brands. BYD is one. XPENG, we will take up that in March now in Sweden. ORA is another new brand for us. We will be importer and a dealer in Norway. Please go to the next slide. The net turnover increased due to availability of new cars and organic growth in the service business.
We report earnings over SEK 574 million with a margin of 5.5%. It's the second-best quarter ever, only SEK 3 million from the best, which you can see on the right-hand side. It was 2020. If we take off some divested operations in Norway and Sweden, we sold some of our Volvo business in Sweden and in Norway. If we add that, we will be SEK 80 million better. The best quarter ever, Q4 2022. Please go to the next slide. The service business, as I told, we had organic growth by 10% with a result of SEK 368 million.
It's a higher result year-over-year within the service business, considering divested operations. If we adjust for that, the profitability is SEK 50 million better. Still, we have good demand in the service business. In Q4 , we had a lot to do in our delivery workshops. In the biggest outlets we have, we have separate the service workshops and the delivery workshops. We deliver a lot of new cars. At the same time, we get back many used cars, and all of them need service. Next. As I told, we have a really high backlog on new cars, 26,000 new cars. If you go back a couple of years, a normal backlog for Bilia is around 12,000-14,000 cars. It's close to double we have in this year, 2023.
We had earnings of SEK 240 million, and most of it is coming from new cars. We de-delivered a lot of new cars, 29% higher, and used car, we declined a little bit, around 4% lower. In the quarter, we reduced the backlog with 3,000 cars. As I told, it's a really, really high backlog we have into January 2023. The order intake is weaker on new cars in all our countries, and it's the same for all our brands for the moment.
Mm-hmm. We then move into the financial position. We had during the quarter a negative operating cash flow of SEK 160 million. This was caused by a higher working capital, mainly inventory and net accounts receivable, caused by high deliveries of cars during the year-end, as Per mentioned before. During the quarter, we also used around SEK 650 million to acquire new businesses. It was one BMW MINI dealer and one Volkswagen Audi dealer, both located in Sweden. Together, it meant that we now, at the end of the quarter, utilized our credit limits by around SEK 640 million, compared to actually having a receivable on our banks of around SEK 150 million at the end of the Q3 .
Our available credit limits have been extended or increased by SEK 800 million during the quarter to enable us to repay the bond loan of SEK 800 million with maturity in October 2023. That would be in case we do not find the bond market to be attractive enough to refinancing the bond at that point in time. In total, it resulted in a net debt EBITDA ratio of 0.8 times. This is higher than the previous quarters, but it's still on a low level considering that we have a target of 2.0 times. The board proposed an ordinary dividend of 8.8 SEK per share. It means that we have increased the dividend by 10%, which is in level with the inflation rate.
The proposed dividend represents 50% of earnings per share, which is also in line with our financial target to distribute at least 50%. The proposal from the board is that the dividend should be paid in four installments during the year, starting in May, and might then actually flow over to the next year. Yeah.
Okay. We go further with the outlook for Q1 2023. In all our countries, the consumer confidence is really low. If I will be a little bit optimistic, I can say the last month it's little better, but really low. The private consumers, for the moment, they are a little bit confused. Private leasing has been a really good business for Bilia and for the customer, the last years. Now, it's more wait and see for the private consumers because the inflation and the interest is raising a lot. The monthly cost for the private consumers is higher. We don't sell so much private leasing for the moment. The fleet business is much more stable.
We see for this year, if you have a company car, you change it when it's time for that. Much more stable when we are talking fleet, compared to the private consumers. We have January. We are finished with the January, we have seen a good demand still in the service business. Our customer, they haven't closed their wallets. We have a lot to do in our workshops for the moment. Today, we have a little bit better level of used cars, more what you can say normalized level. I think it's good, if look back in some recessions we have had, one is 2008, private consumers, they stop to buy a new car, but they like to buy a secondhand car.
For us, it's really good to have a little bit higher level of used cars in stock. We see for Q1 and for Q2 , a lower order intake for new cars in our countries. It's the same in Luxembourg, Belgium as we see in Sweden and Norway for the moment. Carl Fredrik.
Yeah. Per touched upon it, earlier when it comes to electrical cars. Due to the reduction of climate bonuses and subsidies for chargeable vehicles in our markets, we do see less momentum in people switching to chargeable or electrical cars compared to what we saw in, for example, Q4. With continued pent-up demand combined with a wait and see mood among private and fleet clients.
We do expect demand and interest to remain when it comes to switching to a more sustainable alternative, i.e., chargeable cars or electrical cars. Moving over to opportunities in M&A. Per mentioned it earlier, we want to be part of this. Also here the deteriorating economic conditions have to a certain extent changed the dynamics when it comes to M&A in our industry. With higher financing costs and increased requirements for investment, we believe we can discern gradually lower price levels in the market, which makes us see potential opportunities ahead. We want to continue to be part of an ongoing consolidation, but obviously more prudent today. Looking at the cost-saving program, it's on track.
Like we said in Q3, we launched it in mid last year, and we did it for, we expecting tougher market conditions. This program is going according to plan, as I said, and is designed to reduce costs without sacrificing the quality of service. I think that means, the operator, we are ready for questions.
Thank you. If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Andreas Lundberg from SEB. Please go ahead.
Yeah. Good morning. Can you hear me?
Yes, we can.
Cool. Great. Starting off with working capital, could you give more color on the movements there?
Okay.
Yeah. Let's see what you said.
I mean, whether it's the used cars.
Working capital. Okay.
Is it used cars, new cars, or how should we see this?
Yeah. Yeah. I think it's a mix of both new car and used cars, right? We did get a lot of supply on new cars also for the high deliveries during or in connection with DRM. That is also then an increase of used cars. They go a little bit hand in hand, of course. When we deliver new cars, we also get the used cars in many cases in return.
we don't build up a stock on new cars. All of the cars is coming home they are sold.
Yeah. They are, you can say on a temporary-
Mm-hmm
... basis for preparation, before they're delivered to the customer. They stay in our books for some days for preparation.
Okay. It's a timing effect more or less.
It's a timing effect. Yeah.
Mm-hmm.
So-
Mm-hmm
That also goes hand in hand with the net receivable increase that I mentioned as well, right?
Mm-hmm.
Yeah.
Per, you touched upon the car registrations for 2023 versus order intake. I mean, how do you think about deliveries in 2023 given the order backlog and certain constraints still, you know, going forward?
Yeah. Our manufacturers, they sent a lot of cars to Sweden and Norway in the end of the year 2022 because as I said, the change in the tax system. Still we see it's a lack of components, especially semiconductors. We don't see what we call it, the catch-up effect in Q1 or Q2 . If you order a car today, it's a long delivery time still. Our manufacturers, they don't have so solved the problem with the lack of components.
How long do you think it will take to deliver on your order backlog?
Good question.
10,000 question. well, I read a couple of days ago that the manufacturer Volvo, they closed down Ghent factory and a couple of days in Torslanda now in January. We are following it close, but it change from day to day. I don't have a answer, but I guess it will take all 2023. We maybe have a lower backlog again.
Okay. Cool. On the, you talked about lower interest for leasing among private consumers. What implication do you see on that?
Okay. I mean, say it again, a little bit higher.
I mean, you're talking about lower interest for leasing, especially from private, you know, people, private consumers. What kind of implications do you see for that? Are those people more looking for used cars or not buy anything at all?
Yeah. Yeah. The monthly cost has increased with the interest rate. In the past, for pure electric vehicle, you have a climate bonus from the government. Now when you take off it, if you paid in the past SEK 5,000 per month for a new car, maybe you pay SEK 7,000-SEK 8,000 today. It's much more costly today. We don't know. Our feeling is, and we can see in January, the demand for used cars is a little bit better if I compare with Q4 last year and Q3 last year. The interest is higher for used cars for the moment. At least the private consumer, they change from private leasing to buy a used car instead.
Mm-hmm. You had a very high profitability in used cars, especially in 2020, 2021, some extent in 2022 as well. What's your outlook for the profitability on used cars into 2023?
We don't have a forecast for that. Still we can see the demand is quite good, and the margin is still quite good as well, but we don't have a forecast. As I said in our presentation here that we like to have a little bit more cars in stock, used cars in stock, because we think the private consumer will buy a lot of them. We don't have a figure for 2023.
Yeah. Well, lastly, my last question is used car inventories. I think you said you have decent levels, what about the market levels of used cars? Thank you.
Market level of used cars.
Yeah. The market level in Sweden, it has increased for all brands and our competitors as well. In Norway, we often build up our stock of used car from August to December. Every year, we have a little bit too many cars in the end of the year. Now we see we reduce it again. We follow the total market of used cars in stock. It's a higher level because one year ago, we talked about the lack of used cars in stock, much more normalized levels of used cars today.
Okay. Thank you so much.
As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. The next question comes from Mats Liss from Kepler Cheuvreux. Please go ahead.
Yeah. Hi. Thank you. Congrats on a very strong set of numbers there. Well, I have a couple of questions. First, looking at the EBIT earnings there, I mean, you perform quite well in all markets, including Western Europe also. Is it a new level there that we should expect to be continued?
In Western Europe.
Is it more sort of-
What's that question? Yeah, it was-
Yeah. Western Europe then.
Bear in mind that we often talk about in the end of the year, we have some volume bonus for new cars, and some years we reach them, some years we don't. In Western Europe, we have a really good profitability in new cars in the end of the year. That is a yearly bonus. You can't say we have the same profitability now in Q1 . If I give them some guidance here.
Yeah. Probably a little bit on the high side.
Yes. Yeah
honestly, if we talk a sustainable level.
Mm.
Yeah.
Good. On service, I guess you have a mixture of new car deliveries and used car service as always. 10% organic growth is strong, so to speak. Is it more related to the deliveries of new cars, or is it sort of a, an indication also that you gain market share in the used car part of the business? Could you, could you give some flavor there?
We don't have a mix of external customer and internal, what we call it, customer. As I have told in other quarters, we took a decision in Bilia. We don't have full activities in our delivery workshops, but still we have the mechanics. So they work with maybe in 65%-75% of, over the total capacity. In the end of the last year, we had full speeding in our delivery workshops at once. In other way, as I told in the presentation here, when we deliver out a lot of new cars, we get a lot of used cars, and they need service as well. So it's a double effect you can call it. We see external customer as well. They are coming. They don't close their wallets.
We have good booking times in our workshop for the moment now in January, February.
Great. Well, you touched upon the consumer confidence that weakens. On the company car side, I guess, well, do you see any changes there, or is it business as usual?
No. Often the fleet business is much more stable when you have a recession. We can see it when we had the IT crash 20 years ago. We can see it 2008, 2009. The activity is still there for the fleet business. The volatility is much more for the private consumers. What we can see, our customer, when you have a really good, what you call it, coming to.
Financial situation.
Yeah, yeah. Financial situation really good. The employees, they choose a lot of cars. The fleet business, when you have a recession, they often go to more to Volvo, BMW, Audi, old brands, stable brands. You understand the residual value. Often the, what I call them, old brands, they take market shares when you have a recession. It's really good, for example, for Volvo, when you have a recession. They often take market shares.
Interesting. I guess Tesla moved ahead and cut their prices some what, and Ford followed them. What do you expect to this will have a sort of impact on, well, both new car prices, of course, but on the new used car side?
Yeah. What we can see now in our manufacturers, they say we don't follow it. Only one brand is follow and reduce the price. It's Ford Mustang for the moment in Sweden. Remember that Tesla, they increased the price a lot. Half of the reducing of the price now is coming from they increased the price 2022. They first increased the price and then they re-reduce the price. The level of the price now, if you take off the climate bonus as well, so it's the same price. We looked into our stock of used cars directly, and we had only 10 Tesla in our stock. Their residual value will decline a little bit. Let us see what happens.
Our manufacturers, our brands, they wait and see for the moment. I read that Elon Musk, he said when they reported their result, they have a huge interest of their cars for the moment in U.S. Maybe we can see it, but it's too early to see if they take some market shares.
Okay, great. Thanks a lot.
There are no more questions at this time. I hand the conference back to the speakers for any closing comments.
Okay. Thank you very much for listening in to our Q4 results presentation. Thank you for that. Goodbye.
Thank you very much.