A Bit About Bilia AB:
In this segment of the stock analysis, I will delve a little into what Bilia is and what they do.
Bilia is a company that gives quarterly dividends, is listed on Nasdaq Stockholm, and operates within the automotive industry. Hence, Bilia is one of Europe's largest car dealers and sold approximately 90,000 cars (new and used) in 2023. The company operates in Sweden, Norway, Luxembourg, and Belgium, primarily offering services related to the car's lifecycle.
The sectors Bilia is involved with include car purchases, repair, car rental, maintenance, filling stations, and general service.
Personally, I am very positive about the service sector, which accounts for about 20% of the revenues, as this generates income regardless of the economic climate.
Strategy:
Bilia's strategy is focused on being the best service company in the industry, working hard to develop this in their key areas.
With the maintenance of continuous development of their service offerings to make it easier for consumers to maintain their cars. They also aim to achieve annual revenue growth of over 5% per year, an operating margin of about 5%, and a dividend payout of at least 50% of earnings per share.
Organic Growth in Service Business
They place a great emphasis on organic growth within the service sector, like improving and expanding services such as car repair, maintenance, and other car-related services. This is a significant part of Bilia's business model and contributes to creating long-term value for the company by ensuring steady income and high customer loyalty.
Enhanced Service and Product Offering through MobiliaCare
Bilia aims to expand its offerings through MobiliaCare, which includes new services and products targeted at car glass, stone chip repairs, and general glass treatment.
Growth through Acquisitions
Acquisitions are also a central part of Bilia's growth strategy. The company continuously looks for opportunities to acquire businesses that can enhance their existing portfolio and extend their geographical reach. In 2023, Bilia acquired Söderbergs Personbilar AB and Bilcentergruppen Sörmland AB, which have provided them with an expanded sales portfolio.
Focus on Used Cars
Bilia has a strong focus on the sale of used cars as a part of its strategy for sustainable growth.
Geographic Expansion
They aim to expand their geographical presence, both in their existing markets such as Sweden, Norway, Luxembourg, and Belgium, and potentially to other European countries.
Sustainable Business Model
A crucial part of Bilia's strategy is to maintain a sustainable business model. This involves focusing on a circular economy by utilizing resources efficiently and reducing waste. They participate in projects like "The Circular Car" and take initiatives to recycle car parts and utilize waste as a resource.
Economic Overview:
With a clear decline in both the top and bottom line in Q1 2024, Bilia stands significantly weaker. Norway is currently the clear loser, and the order backlog looks quite alarming for new car sales in all countries. The current backlog for new car sales has been almost halved and shows clear weaknesses.
Otherwise, there is over a 30% drop in the bottom line from Q1 2023 to Q1 2024, slightly higher debt, with better liquidity in the cash balance.
In general, the market is not at its peak for Bilia now, and you can see this by looking at the reports. They are still making good money, but if they can't recover, Bilia is no longer a cheap company to buy.
Statement
With a doubling of the top line and a good journey for the result, one can say that Bilia has delivered very good growth, with improved margins. They are currently experiencing poorer margins due to a weaker krone (SEK and NOK) and a tougher market.
Overall, I find the economy good, as they always make money. However, I don't like the low margins they have.
Net Income | Operation profit | Results | EBIT margin | Margin | |
2014 | 18446 | 562 | 385 | 3.05% | 2.09% |
2015 | 20443 | 929 | 647 | 4.54% | 3.16% |
2016 | 23906 | 841 | 636 | 3.52% | 2.66% |
2017 | 27492 | 923 | 691 | 3.36% | 2.51% |
2018 | 28382 | 943 | 734 | 3.32% | 2.59% |
2019 | 29508 | 1125 | 807 | 3.81% | 2.73% |
2020 | 30168 | 1364 | 984 | 4.52% | 3.26% |
2021 | 35509 | 1925 | 1457 | 5.42% | 4.10% |
2022 | 35345 | 2102 | 1622 | 5.95% | 4.59% |
2023 | 38514 | 1416 | 931 | 3.68% | 2.42% |
Balance
About half of their interest-bearing debt is related to leasing, which I think is starting to get quite expensive. They have significantly increased the debt to achieve the growth they have had, and I hope that this is something they will address going forward. Interest-bearing costs are currently a bit too high for me. Otherwise, the liquidity is fine, with 367 in cash at the end of Q1 2024.
In general, I would say the balance sheet is OK, although I would like to see improved control of interest-bearing costs.
interest-bearing debt | Debt | Equity | Assets | Cash | |
2014 | 280 | 5106 | 1849 | 6955 | 616 |
2015 | 791 | 5373 | 2056 | 7429 | 99 |
2016 | 1259 | 7621 | 2511 | 10132 | 104 |
2017 | 1898 | 8338 | 2620 | 10958 | 202 |
2018 | 2339 | 9156 | 2915 | 12071 | 314 |
2019 | 5152 | 12895 | 3186 | 16081 | 236 |
2020 | 4857 | 12448 | 3968 | 16416 | 2063 |
2021 | 5526 | 12783 | 4417 | 17200 | 754 |
2022 | 6939 | 15114 | 4887 | 20001 | 456 |
2023 | 7690 | 15081 | 4314 | 19395 | 264 |
Cash flow
There has been very little direct growth in this year's operating results, and if you compare 2014 with 2023, it is a big disappointment. Generally, the best part here is the growth they have had in dividends and the fact that they manage to maintain such high dividends during tough times. Otherwise, I feel that the operations are much weaker than desired and that they need to improve their operations.
For me, the operating result is disappointing, and I generally expect operating results over 2000 after a period of 10 years.
Operations | Investment | Finance flow | Dividend | |
2014 | 1299 | -584 | -254 | -226 |
2015 | 835 | -846 | -505 | -302 |
2016 | 1654 | -1337 | -315 | -380 |
2017 | 1293 | -1219 | 14 | -412 |
2018 | 1127 | -920 | -102 | -456 |
2019 | 1437 | -934 | -584 | -483 |
2020 | 3155 | -440 | -884 | |
2021 | 1987 | -1248 | -2048 | -587 |
2022 | 676 | -343 | -653 | -556 |
2023 | 1591 | -972 | -810 | -791 |
Key Ratios
Low ROA numbers indicate that the company has quite a few assets, which makes this figure low. This is acceptable in itself, but the high ROE percentage shows that the company also has high debt based on assets, which increases the risk for me in the stock.
They typically have a debt-to-EBITDA ratio between 2-2.5, but it is somewhat weaker now.
In general, these numbers should be compared with Bilia's competitors to see how things stand!
ROA | ROE | D/E | Debt-to-EBITDA Ratio | |
2014 | 5.54% | 20.82% | 2.76 | 2.35 |
2015 | 8.71% | 31.47% | 2.61 | 1.67 |
2016 | 6.28% | 25.33% | 3.04 | 2.45 |
2017 | 6.31% | 26.37% | 3.18 | 2.57 |
2018 | 6.08% | 25.18% | 3.14 | 2.62 |
2019 | 5.02% | 25.33% | 4.05 | 3.15 |
2020 | 5.99% | 24.80% | 3.14 | 2.80 |
2021 | 8.47% | 32.99% | 2.89 | 2.46 |
2022 | 8.11% | 33.19% | 3.09 | 2.70 |
2023 | 4.80% | 21.58% | 3.50 | 3.55 |
Strengths and Competitive Advantages
Large Market Share in Sweden: The home base makes good money and they have good control there.
Comprehensive Infrastructure: Bilia operates in all segments within the automotive sector. Once you are with Bilia, it is easy to continue with Bilia's products and services.
Maintained Dividends: Even during acquisitions and a tough market in 2023, they managed to maintain dividends.
Diversified Across Multiple Car Brands: This provides different customer bases.
Focus on Key Areas: This creates specialization and improvement in understanding the areas they already exist in, helping to create a comprehensive delivery to their product buyers.
Challenges and Risk Factors
Exit from Germany with Write-downs: This shows that it is not necessarily easy to grow beyond national borders.
Highly Cyclical: 2022 and 2023 have been difficult years for Bilia and the start of 2024 has not been easy either. The backlog looks quite daunting, and dependence on the consumer economy is quite clear.
Leasing Costs: Leasing costs account for about 1/3 of Q1 2024's operating assets, while in 2023 it accounted for nearly 50% of operations. This presents extreme weaknesses in the company.
Currency Issues: Currency fluctuations have created problems for Bilia and will continue to cause noise in the margins. When the krona is weak, it is difficult to pass the entire cost onto the consumer.
Stock Analysis Conclusion
Future Prospects:
Will More Cars Be Owned in the Future?: When will this happen and how will Bilia react? How close are we to political incentives that discourage car ownership?
Market Improvement: Will the market improve with a clear upturn in the consumer economy?
Weak Year in 2024?: Will 2024 be a weak year or will used car sales be strong enough? Interest rates have already dropped in Sweden, how long will it take to see this reflected in Bilia?
Strategic Control in Belgium and Norway: Will their strategy help them gain more control in Belgium and Norway?
Summary:
A company that has delivered good results over time, even though operations have faltered. They have had some failures abroad (see sale of the German base) but are working to improve and gain good control over existing markets. In Norway, based on Q1 2024, things do not look so good, but good dividends and a generally difficult economic climate have not made everyday life easier.
In general, I like Bilia. They provide good exposure to the automotive sector and good quarterly dividends, but there are some clear weaknesses in the company that one must be aware of when owning shares.
Below you can see the car brands Bilia sells:
I personally own a small stake in Bilia.
If you wish to delve deeper into the numbers, you can find the stock on my index page, where I have provided Google Sheets read access for those who are interested.
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