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Bilia Interim / Quarterly Report 2015

Feb 5, 2016

2892_10-k_2016-02-05_b6930fe6-dd47-47b1-87cc-7daefed70fc8.pdf

Interim / Quarterly Report

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Everything to do with our finances. And then some.

Year-end report 2015

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Notable events during 2015

Fourth quarter

  • $\bullet$ Bilia concluded an agreement to acquire Arnold Kontz's BMW and MINI operation in Luxembourg. The operation accounts for about 50 per cent of the total BMW sales in Luxembourg. The planned date of possession is 31 March 2016. Turnover amounts to approximately SEK 1.1 bn, and operating profit for 2015 is predicted to be about SEK 45 M. The operation's capital employed, plus agreed-on surplus values, amounts to about SEK 360 M. Contingent upon the approval of the Annual General Meeting on 8 April 2016, a substantial portion of the purchase consideration will be paid with newly issued Bilia shares.
  • Bilia concluded an agreement to acquire Hedbergs Bilskrot AB (an auto salvage company) and Bastborren Fastighets AB (a property company) in Västerås. The combined operation has an annual turnover of about SEK 28 M, and the operating margin for financial year 2014/2015 was 11 per cent. The date of possession was 29 January 2016, with financial effect from the turn of the year. Bilia's net debt and capital employed are expected to increase by about SEK 26 M.
  • On 14 October 2015, Bilia decided to terminate the sales agreements for Ford cars in Sweden and Norway. Sales of new Ford cars amount to about SEK 750 M annually The period of notice of termination is 2 years, and new car sales are expected to decline gradually during this period, ceasing entirely by the end of 2017. This is not expected to affect Bilia's earnings per share.
  • In light of the fact that the operation in Denmark has been sold, Bilia's Board of Directors decided on 5 October 2015 to raise the financial goals, which are measured over a business cvcle.

Events earlier during the year

  • Bilia concluded an agreement to acquire Dörr & Hess, the dealer for BMW and MINI in Germany. The business is run from four facilities concentrated in an area north of Frankfurt. The date of possession was 30 October 2015, with financial effect from 1 October 2015.
  • During the month of June 2015, Bilia reached an agreement to acquire Kaiser Bil AB, a $\bullet$ Lexus dealer. The business is run from four facilities in Stockholm and Malmö and accounts for about 45 per cent of Lexus's total sales in Sweden. The date of possession was 1 October 2015.
  • On 29 May 2015, Bilia concluded agreements with several different buyers on the sale of $\bullet$ most of the operation in Denmark.
  • Bilia accepted an offer from Alecta to redeem the Swedish pension liability for ITP 2 as per 1 May 2015. As a result of the deal, the profit for the period was improved during the second quarter by SEK 154 M (operating profit SEK +197 M and tax SEK -43 M). The deal also had a net effect on other comprehensive income of SEK +21 M.
  • The 2015 Annual General Meeting passed a resolution to divide the company's outstanding shares so that each existing share was split into 2 new shares. The calculation of basic and diluted earnings per share has been adjusted retroactively for the reported periods.
  • In January, Bilia concluded an agreement to acquire all the shares in Toyota Hell Bil AS and Toyota Horten Tønsberg AS. The date of possession was 2 March 2015.

Events after the end of the period

Bilia concluded agreements to acquire the BMW dealerships in Uddevalla, Trollhättan and Strömstad, the MINI dealership in Trollhättan and the Toyota dealerships in Mälardalen and Kristianstad. For further information see page 14.

Further information on the above events and other press information is available at bilia.com.

The decision to sell or shut down Bilia's Danish operation is being handled in the accounts as from 2015 as a discontinued operation. The operation's operating profit and an estimated loss on disposal are recognised as an item in the Income Statement under "Discontinued operation". The Group's comparison figures have been adjusted, whereby Bilia's Danish operation has been adjusted from all line items and only net profit/loss from the operation has been recognised on the line "Profit/loss from discontinued operation, net after tax".

Fourth quarter 2015

Demand for cars and service was slightly better compared with the same quarter last year.

Net turnover amounted to SEK 5,750 M (5,037). For comparable operations and adjusted for exchange rate changes, net turnover increased by about SEK 395 M or 8 per cent. The increase is attributable to sales of both cars and service.

Operating profit amounted to SEK 234 M (198). If items affecting comparability are excluded. the profit was SEK 237 M (202). The improvement is mainly attributable to the Service Business, which boosted turnover by more than 6 per cent. The Car Business also developed positively and reported improved earnings. Underlying Group overheads increased by about 8 per cent compared with last year. Overheads amounted to 13.4 per cent in relation to net turnover, which was 0.8 percentage point higher compared with last year. In view of the earnings level during the quarter, provision was made for employee bonuses of SEK 7 M (7).

Net financial items amounted to SEK 0 M (6). The decrease is attributable to a higher net debt compared with last year plus the fact that the interest rate used to calculate the interest expense on the pension liability was reduced during the fourth quarter of last year.

Tax for the period amounted to SEK-55 M (-44), and the effective tax rate was 24 per cent (22).

Net profit for the period for continuing operations amounted to SEK 179 M (160) and earnings per share to SEK 3.55 (3.20). Exchange rate changes reduced the profit by SEK 2 M.

Profit from discontinued operation, net after tax, amounted to SEK 17 M (loss: 41). The profit stems partly from the Danish operation's result during the quarter and partly from adjustment of the provision made in the accounts for the third quarter of 2015.

Net profit for the period was SEK 196 M (119) and earnings per share SEK 3.90 (2.35). Exchange rate changes increased the profit by SEK 1 M.

Total assets increased by SEK 940 M during the quarter, amounting to SEK 7,429 M. The increase is mainly attributable to the acquisitions of Kaiser Bil and Dörr & Hess, as well as to higher stocks.

Equity increased by SEK 184 M during the quarter, amounting to SEK 2,056 M. The equity/assets ratio amounted to 28 per cent (27).

Acquisition of non-current assets amounted to SEK 27 M (42). Replacement investments represented SEK 1 M (14), expansion investments SEK 13 M (8), environmental investments SEK 0 M (0) and investments in new construction and additions to properties SEK 8 M (15), while finance leases amounted to SEK 5 M (5).

Operating cash flow amounted to SEK-230 M (9). After acquisitions and disposals of operations and change in interest-bearing receivables, cash flow amounted to SEK-316 M (7). Net debt increased by SEK 421 M during the quarter, and a net debt of SEK 323 M was reported at the end of the quarter. The poorer cash flow and the higher net debt are mainly attributable to acquisitions of operations and to higher capital tied up at year-end, mainly cars in stock.

Liquidity remains good, and at the end of December a debt to the banks of SEK 432 M was reported. The combined credit limit with Nordea and DNB amounts to SEK 1,500 M.

The number of employees increased by 136, amounting to $3,613$ persons. Acquisitions of operations increased the number of employees by 182 during the quarter.

Full year 2015

Demand for cars and service was slightly better compared with last year.

Net turnover amounted to SEK 20,443 M (18,446). For comparable operations and adjusted for exchange rate changes, net turnover increased by about SEK 1,290 M or 7 per cent. The increase is attributable to sales of both cars and service.

Operating profit amounted to SEK 929 M (562). If items affecting comparability are excluded, the profit was SEK 731 M (553). The improvement is mainly attributable to sales of used cars, which reported earnings that were SEK 81 M better compared with last year, and to the Service Business, where earnings improved by SEK 77 M. Underlying Group overheads increased by about 6 per cent compared with last year. Overheads amounted to 12.9 per cent in relation to net turnover, which was 0.1 percentage point higher compared with last year. In view of the earnings level during the quarter, provision was made for employee bonuses of SEK 25 M (21).

Net financial items amounted to SEK 4 M (-7). The improvement compared with last year is attributable in part to the redemption of the Swedish pension liability that took place in May 2015, and in part to a better result from interests in associated companies.

Tax for the year amounted to SEK-202 M (-103), and the effective tax rate was 22 per cent (19).

Net profit for continuing operations amounted to SEK 731 M (452) and earnings per share to SEK 14.50 (9.00). Exchange rate changes reduced the profit by SEK 3 M.

Loss from discontinued operation, net after tax, amounted to SEK 84 M (loss: 67). The loss stems from the cost of winding up the operation in Denmark. Most of the operation was disposed of at the end of the second quarter, while the rest was disposed of during the month of August 2015. At the end of 2015 there remained a site which is for sale and which has a carrying amount of SEK 7 M.

Net profit for the year was SEK 647 M (385) and earnings per share SEK 12.85 (7.65). Exchange rate changes reduced the profit by SEK 6 M.

Total assets increased by SEK 474 M during the year, amounting to SEK 7,429 M. The increase was mainly attributable to acquisitions of operations and to leased vehicles, owing to the fact that private leasing increased sharply in Sweden.

Equity increased by SEK 207 M, amounting to SEK 2,056 M. The equity/assets ratio amounted to 28 per cent (27).

Bilia's financial goals were fulfilled as follows: Operating margin 4.5 per cent (goal 2.5), return on capital employed 36.2 per cent (goal 17.0), return on equity 33.2 per cent (goal 18.0) and growth 10.8 per cent (goal 5-10).

Acquisition of non-current assets amounted to SEK 164 M (195). Replacement investments represented SEK 57 M (46), expansion investments SEK 37 M (41), environmental investments SEK 3 M (1) and investments in new construction and additions to properties SEK 58 M (94), while finance leases amounted to SEK 9 M (13).

Operating cash flow amounted to SEK 212 M (748). After acquisitions and disposals of operations and change in interest-bearing receivables, cash flow amounted to SEK-11 M (715). Net debt increased by SEK 393 M during the year, and a net debt of SEK 323 M was reported at the end of the year.

The number of employees increased by 92 during the year, amounting to 3,613 persons. Acquisitions and disposals of operations increased the number of employees by a net of 356.

Items affecting comparability

Fourth quarter Full year
Continuing operations, SEK M 2015 2014 2015 2014
Operating profit excl. items affecting
comparability 237 202 731 553
Items affecting comparability
- Gain from sale of operation, other 2 Ω 6 13
- Redemption of PRI liability Ω 197 $\Omega$
- Structural costs etc. -5 O -5
- Impairment O -4 0 -4
Operating profit 234 198 929 562
Profit before tax excl. items affecting
comparability 237 208 735 546
Items affecting comparability
- Gain from sale of operation, other 2 O 6 13
- Redemption of PRI liability 197 $\circ$
- Structural costs etc. -5 Ω -5
- Impairment O -4 o -4
Profit before tax 234 204 933 555

Gain from sale of operation during the quarter pertains to the sale of a property in Kongsvinger. Structural costs pertain to a provision for an insurance loss in Sweden.

The full year's redemption of PRI liability of SEK 197 M pertains to the earnings effect before tax of the transfer of the Swedish pension liability to Alecta. Gain from sale of operations of SEK 6 M pertains to gains from the sale of Bilia's operation in Stavanger and from the sale of properties.

Continuing operations (The Bilia Group, not including Denmark)

Deliveries Order backlog
No. of new Fourth quarter Full year 31 Dec.
cars 2015 2014 2015 2014 2015 2014
Sweden 1) 9,392 8,242 32,546 29,463 6,692 5,442
Norway 2) 2,487 2,612 8,311 8,281 2,488 1,099
Germany 245 245 124
Total 12,124 10,854 41,102 37,744 9,304 6,541

$1)$ Kaiser Bil is included in deliveries during the quarter with 160 (-) and during the year with 160 (-) and in order backlog with 137 (-). 2) Toyota is included in deliveries during the quarter with 347 (-) and during the year with 1,404 (-) and in order backlog with 367 (-).

Net turnover Operating profit/loss excl. items affecting comparability, operating margin
Fourth quarter
Fourth guarter Full year Full year
SEK M 2015 2014 2015 2014 2015 $\%$ 2014 $\%$ 2015 $\%$ 2014 $\%$
Sweden 4,065 3,528 14,513 13,110 210 5.1 162 4.6 629 4.3 458 3.5
Norway 1.511 1,496 5,738 5,324 45 3.0 62 4.1 159 2.8 147 2.8
Germany 173 173 0.4 0.4
Total Cars 5,749 5,024 20,424 18,434 256 4.4 224 4.4 789 3.9 605 3.3
Parent Company, other 13 1 19 12 -19 $-22$ $-58$ $-52$
Total 5,750 5,037 20,443 18,446 237 4.1 202 4.0 731 3.6 553 3.0

Strong earnings in Sweden

Higher closing order backlog

The market for new cars increased during the quarter by 19 per cent in Sweden and 5 per cent in Norway.

The Group reported an operating profit, excluding items affecting comparability, of SEK 237 M (202) and an operating margin of 4.1 per cent (4.0). The Service Business reported a profit that was SEK 27 M better, and the Car Business a profit that was SEK 3 M better, than last year. The order backlog increased by 114 cars during the quarter and was 2,763 cars higher at the end of the year compared with last year.

The operation in Sweden reported an operating profit of SEK 210 M (162), with an operating margin of 5.1 per cent (4.6). The Car Business reported a profit that was SEK 38 M better than last year. Deliveries of new cars increased by 14 per cent during the quarter, and the profit improved by SEK 27 M. Earnings from sales of used cars improved by SEK 11 M, and stocks of used cars were at a good level at year-end. The Service Business reported a profit that was SEK 8 M better than last year. The improvement is mainly attributable to higher turnover.

The operating profit in Bilia's Norwegian operation amounted to SEK 45 M (62) and the operating margin to 3.0 per cent (4.1). The Service Business reported a profit that was SEK 13 M better than last year. The improvement is mainly attributable to higher turnover and a slightly higher gross profit margin. Underlying deliveries of new cars decreased by 12 per cent, while orders received increased by 18 per cent, which resulted in a record-high order backlog. Earnings from sales of new cars declined by SEK 38 M compared with last year, amounting to a loss of SEK 10 M. Used car sales once again reported strong earnings that were SEK 8 M better than last year, due above all to increased turnover and a higher gross profit margin. Stocks of used cars increased during the quarter and were a bit too high at year-end.

The operation in Germany, which is new in the Group as from the 4th quarter, reported a profit before acquisition costs of SEK 2 M. The acquisition costs amounted during the quarter to SEK 1 M. The Service Business reported strong earnings, while new car sales reported weak earnings.

Continuing operations – divided into Service, Car and Fuel Businesses

Net turnover 1) Operating profit, operating margin
Fourth quarter Full year Fourth quarter Full year
SEKM 2015 2014 2015 2014 2015 2014 2015 2014
Service Business 1,354 1,123 4,491 3,981 182 155 479 402
- margin, % 13.4 13.8 10.7 10.1
Car Business 4,365 3.873 15.694 14.132 67 64 286 185
- margin, % 1.5 1.6 1.8 1.3
Fuel Business 253 250 1,021 1,051 5 24 18
- margin, % 2.8 1.8 2.4 1.7

Service includes workshop services, spare parts and accessories.

The Car Business includes sales of new and used cars and customer financing.

1) Net turnover does not include eliminations for internal sales.

Growth in the Service Business

Fourth quarter Full year
Per cent Sweden Norway Total Sweden Norway Total
Change from last year
Underlying turnover 8.4 7.0 8.1 7.0 6.1 6.8
Calendar effect $-1.6$ $-1.6$ $-1.6$ $-0.8$ $-0.4$ $-0.7$
Adjusted turnover 6.8 5.4 6.5 6.2 5.7

Better earnings in both Service and Car Businesses

Strong growth in the Service Business

The Service Business reported a profit that was SEK 27 M better than last year. The improvement is mainly attributable to higher sales and lower relative costs. The operation in Norway developed positively and reported an adjusted turnover increase of 5 per cent, while Sweden reported an increase of 7 per cent. There was one more working day in both Sweden and Norway compared with the same quarter last year.

The Car Business's deliveries of new cars increased during the quarter by 7 per cent and deliveries of used cars by 10 per cent for comparable operations. Orders received for new cars increased by 10 per cent compared with last year. Earnings from sales of new cars declined by SEK 15 M, mainly due to weak earnings in Norway. Earnings from sales of used cars improved by SEK 18 M, amounting to SEK 21 M. The improvement is mainly attributable to higher turnover.

Stocks of used cars increased during the quarter, but are at acceptable levels, except in Norway. The turnover rate for used cars decreased slightly, amounting to 10.8 times per year.

The Fuel Business is concentrated to Sweden, and earnings amounted to SEK 7 M (5). The improvement is attributable to a higher gross profit margin.

All values in the above graphs pertain to isolated quarters.

Discontinued operation

Cars Denmark

Bilia decided in March 2015 to discontinue its entire operation in Denmark. The comparison figures for the Consolidated Statement of Income and Other Comprehensive Income have been restated for 2014 to report the discontinued operation separately from the continuing operations. The criteria for presentation as a discontinued operation or for non-current assets held for sale were not fulfilled at 31 December 2014.

As per 31 December 2015, all five facilities have been disposed of.

Loss from discontinued operation

Full year
SEKM 2015 2014
Revenues 468 1,027
Expenses -609 $-1,094$
Loss before tax -141 $-67$
Tax 57
Loss after tax from dicontinued operation -84 $-67$
Discontinued operation
Basic earnings/loss per share, SEK $-1.65$ $-1.35$
Diluted earnings/loss per share, SEK $-1.65$ $-1.30$

Net cash flows from discontinued operation

Full year
SEK M 2015
Cash flows from operating activities -137
Cash flows from investing activities 146
Cash flows from financing activities -4
Net cash flows from discontinued operation г.

Acquisition of operation 2015

Toyota Hell Bil AS and Toyota Horten-Tønsberg AS

On 2 March 2015, Bilia acquired all the shares in Toyota Hell Bil AS and Toyota Horten-Tønsberg AS. The business is run from seven facilities and is concentrated to Trondheim and Tønsberg outside Oslo. During 2015, the operation contributed SEK 888 M in turnover and SEK 22 M in operating profit. On a annual basis, this is equivalent to a turnover of about SEK 1,050 M and an operating profit of about SEK 26 M. The purchase consideration amounted to SEK 196 M. The entire purchase consideration was paid in cash. There is no contingent purchase consideration.

The acquisition enables Bilia to expand its offering with the Toyota and Lexus brands in Norway. Toyota, along with Volkswagen, is the market leader in Norway.

The business has about 225 employees and will continue to be operated from the present-day facilities.

Acquisition-related expenses amount to SEK 0.4 M and consist of fees to consultants for due diligence and have been recognized as "Other operating expenses".

Effects of the acquisition

Below is the final acquisition analysis, and the difference between the final acquisition analysis and the preliminary version that was presented during the first quarter of 2015 is shown in a separate column. The acquisition has the following effects on the Group's assets and liabilities.

The acquired operation's net assets at the acquisition date:

Carrying amounts in
Toyota Hell Bil AS Fair Fair value Difference versus
and Toyota Horten- value recognised in preliminary acquisi-
SEKM Tønsberg AS ladjustment Group tion analysis
Intangible assets 84 84
Property, plant and equipment 37 267 304
Long-term investments
Deferred tax asset
Inventories 80 80
Trade receivables and other receivables 33 33 $-5$
Cash and cash equivalents
Trade payables and other liabilities 102 301 403
Net identifiable assets and liabilities 51 50 101 -4
Consolidated goodwill 95 $-1$
Purchase consideration paid, cash 196 -5
Less: Cash and cash equivalents in aquired operation
Net effect on cash and cash equivalents 195 -6

Acquired customer relations totalling SEK 62 M are recognised as intangible assets. Customer relations will be amortised over 10 years.

Acquired distribution rights totalling SEK 22 M are recognised as intangible assets. Distribution rights will be amortised 10 years.

Acquisition of operation 2015

Lexus's dealership operation in Stockholm and Malmö

On 1 October 2015, Bilia acquired the Lexus dealer Kaiser Bil. The business is run from four facilities in Stockholm and Malmö and accounts for about 45 per cent of Lexus's total sales in Sweden. During 2015, the operation contributed SEK 97 M in turnover and SEK 5 M in operating profit. On an annual basis, this is equivalent to a turnover of about SEK 385 M and an operating profit of about SEK 20 M. The purchase consideration was SEK 85 M. The entire purchase consideration was paid in cash. There is no contingent purchase consideration.

The acquisition enables Bilia to expand its offering with the Lexus brand in Sweden.

The business has about 45 employees and will continue to be operated from the present-day facilities.

There are no external transaction costs or acquisition-related expenses attributable to the acquisition.

Effects of the acquisition

The acquisition has the following effects on the Group's assets and liabilities.

The acquired operation's net assets at the acquisition date:

Carrying amounts in Fair Fair value
Lexus' dealer- value recognised in
SEKM ship operation ladjustment Group
Intangible assets 42 42
Property, plant and equipment 16 18
Inventories 18 18
Trade receivables and other receivables 18 18
Cash and cash equivalents 21 21
Trade payables and other liabilities 63 12 75
Net identifiable assets and liabilities 10 32 42
Consolidated goodwill 43
Purchase consideration paid, cash 85
Less: Cash and cash equivalents in aquired operation 21
Net effect on cash and cash equivalents 64

Acquired customer relations totalling SEK 32 M are recognised as intangible assets. Customer relations will be amortised over 10 years.

Acquired distribution rights totalling SEK 10 M are recognised as intangible assets. Distribution rights will be amortised 10 years.

Acquisition of operation 2015

BMW and MINI dealership operation in Germany

On 1 October 2015, Bilia acquired the BMW and MINI dealer Dörr & Hess in Germany. The business is run from four facilities, which are concentrated in an area north of Frankfurt. During 2015, the operation contributed SEK 173 M in turnover and SEK 1 M in operating profit. On an annual basis, this is equivalent to a turnover of about SEK 690 M and an operating profit of about SEK 6 M. The purchase consideration was SEK 32 M. The entire purchase consideration was paid in cash. There is no contingent purchase consideration.

Through the acquisition, Bilia can continue to expand and grow on the European market.

The business has about 120 employees and will continue to be operated from the present-day facilities.

Acquisition-related expenses amount to SEK 0.8 M, and consist of fees to consultants for due diligence, and have been recognized as "Other operating expenses".

Effects of the acquisition

The acquisition has the following effects on the Group's assets and liabilities.

The acquired operation's net assets at the acquisition date:

Carrying amounts in Fair Fair value
BMW/MINI dealer- value recognised in
SEK M ship operation adjustment Group
Intangible assets 12 12
Property, plant and equipment 25 6 311
Inventories 71 71
Trade receivables and other receivables 25 25
Cash and cash equivalents 71
Trade payables and other liabilities 116 q 125
Net identifiable assets and liabilities 12 O 21
Consolidated goodwill 11
Purchase consideration paid, cash 32
Less: Cash and cash equivalents in aquired operation 71
Net effect on cash and cash equivalents 25

Acquired customer relations totalling SEK 9 M are recognised as intangible assets. Customer relations will be amortised over 10 years.

Acquired distribution rights totalling SEK 3 M are recognised as intangible assets. Distribution rights will be amortised 10 years.

Parent Company

Bilia AB is responsible for the Group's management, strategic planning, purchasing, public relations, business development, accounting and financing. Furthermore, Bilia AB conducts real estate and IT activities, mainly for companies in the Group.

The Parent Company's operating loss for the fourth quarter amounted to SEK 19 M (loss: 20).

Dividend

The Board of Directors proposes a regular dividend of SEK 7.50 (6.00). Actual dividend last year was SEK 12.00 per share. Then each existing share has been split into 2 new shares.

Risks and uncertainties

As a result of its operations, the Bilia Group is exposed to both operating risks and financial risks.

The operating risks include:

  • Development of the market for new cars.
  • Diminished demand for cars can also affect the value of stock in hand and guaranteed residual values.
  • Reduced demand for service and repairs.
  • Increased competition in the markets where Bilia is active.
  • The ability of suppliers to offer competitive products.
  • Automotive suppliers become insolvent or terminate retailer agreements with Bilia.
  • Regulatory decisions that lead to changes in taxes and charges on the products Bilia sells can influence both demand for and the valuation of cars in stock and cars sold with quaranteed residual values.

The financial risks include liquidity risks, interest rate risks, credit risks and currency risks.

Bilia works continuously with risk identification and risk assessment. For further information about the risks that affect the Group, please refer to the 2014 Annual Report.

Accounting principles

This interim report in summary for the Group has been prepared in accordance with IAS 34 "Interim Financial Reporting" and applicable provisions of the Annual Accounts Act. The interim report for the Parent Company has been prepared in accordance with Chapter 9 of the Annual Accounts Act, "Interim Reports". The same accounting policies and calculation methods have been applied for the Group and the Parent Company as in the most recent annual report. New IFRS's that became effective during the year have not had any significant effect on the Group's or the Parent Company's financial reports.

Non-current assets (or disposal groups) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than from continuing use. An asset (or disposal group) is classified as held for sale if it is available for immediate sale in its present condition subject only to terms that are usual and customary for sales of such assets (or disposal groups) and its sale must be highly probable. These assets (or disposal groups) are recognised on a separate line as current assets or current liabilities in the Statement of Financial Position. On initial classification as held for sale, non-current assets (and disposal groups) are recognised at the lower of carrying amount and fair value less costs to sell. A discontinued operation is a component of the Group's business that represents a separate business segment or major line of business within a geographical area of operations or a subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs upon disposal or, if earlier, when the operation meets the criteria to be classified as held for sale.

Profit or loss after tax from a discontinued operation is reported on a separate line in the Statement of Income and Other Comprehensive Income. When an operation is classified as discontinued, the presentation of the Consolidated Statement of Income and Other Comprehensive Income for the comparative year is changed so that the discontinued operation is recognised as if it had been discontinued at the start of the comparative year. The presentation of the Statement of Financial Position for the current and preceding year is not changed in a corresponding manner.

Events after the end of the period

On 28 January 2016, Bilia concluded an agreement to acquire three car dealers that conduct BMW, MINI and Toyota operations Sweden. The companies have a combined annual turnover of about SEK 750 M with an operating profit of about SEK 14 M. The companies' capital employed, plus agreed-on surplus values, amounts to about SEK 145 M. Synergies can be found in a higher inventory turnover rate, which is expected to reduce capital employed by about SEK 30 M in 2016. The estimated date of possession is 1 March, provided the Swedish Competition Authority approves the acquisitions. The dealerships are located in the following towns:

Toyota - Kristianstad, Västerås, Enköping, Borlänge, Falun and Ludvika

BMW - Trollhättan, Uddevalla and Strömstad

MINI - Trollhättan

Audit

This year-end report has not been subjected to special examination by the auditors.

Annual General Meeting 2016

The Annual General Meeting will be held on 8 April 2016 at Bilia's facility at Haga Norra, Frösundaleden 4, in Stockholm. Shareholders who wish to have a matter on the agenda at the AGM should contact Bilia no later than 19 February 2016 in order for the matter to be included in the notice of the meeting.

The annual report for 2015 will be published on Bilia's website on 16 March 2016.

Next report

The interim report for the first quarter of 2016 will be published on 27 April 2016.

Gothenburg, 5 February 2016 Bilia AB (publ) Board of Directors

For further information, please contact Per Avander, Managing Director and CEO, or Gunnar Blomkvist, CFO, telephone +46 31 709 55 00.

Bilia AB (publ) Box 9003, SE-400 91 Gothenburg, Sweden Visiting address: Norra Långebergsgatan 3, Västra Frölunda Telephone: +46 31 709 55 00 bilia.com Corporate ID No.: 556112-5690

This report is being published by Bilia AB in compliance with the Securities Market Act. The information was submitted for publication on 5 February 2016 at 13:00 p.m..

Group's operating segments

Service Car Fuel Less: discontinued Total Segment Continuing
operation Cars reconciliation operations
SEKM 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Net turnover
External sales 3,709 3,465 15,694 14,945 1,021 1.051 $-1,027$ 20,424 18,434 19 12 20,443 18,446
Internal sales 782 788 $-58$ 782 730 $-782$ $-730$
Total net turnover 4,491 4,253 15,694 14,945 1,021 1,051 $-1,085$ 21,206 19,164 $-763$ $-718$ 20,443 18,446
Depreciation/amortisation -69 $-51$ $-293$ $-262$ -4 $-5$ 9 $-366$ $-309$ $-26$ $-21$ $-392$ $-330$
Operating profit/loss 479 415 286 156 24 18 16 789 605 140 $-43$ 929 562
Interest income 6
Interest expenses $-30$ $-39$
Shares in profits of associated companies 30 26 30 26 30 26
Profit before tax 933 555
Tax expense for the year $-202$ $-103$
Profit for the year from continuing operations 731 452
Loss from discontinued operation,
net after tax $-84$ $-67$
Net profit for the year 647 385
Material items of income and expense of a non-re-
curring nature recognised in the Statement of
Income and Other Comprehensive Income:
Items affecting comparability
- Profit from sale of operation, other 3 7 $\overline{\mathbf{3}}$ 6 6 13 6 13
- Redemption of PRI liability 13 52 65 132 197
- Structural costs etc. $-26$ $-5$ $-21$ 47 $-5$ -5
- Impairment $-4$ -4 -4
Items of non-recurring nature 16 $-23$ 50 $-15$ 47 66 $\alpha$ 132 198 $\alpha$
Material items not affecting cash besides
depreciation/amortisation:
- Other -47 $-52$ -6 12 0 $-3$ $-25$ $-53$ $-68$ 7 78 -46 10
Total $-47$ $-52$ $\overline{6}$ $\overline{12}$ $\Omega$ $-3$ $-25$ $-53$ $-68$ 78 -46 10
Assets
Interests in associated companies 377 370 377 370 377 370
Deferred tax assets 128 118
Other assets 6,924 6,467
Total assets 377 370 377 370 7,429 6,955
Investments in non-current assets 64 101 1,205 1,161 3 $\left 4\right $ $-106$ 1,272 1,160 48 140 1,320 1,300
Liabilities
Equity 2,056 1,849
Liabilities 5,373 5,106
Total liabilities and equity 7,429 6,955
Revenue from Non-current
2014 2014
14,535 13,123 3,459 2,960
5,324 815 528
173 53
91
-3 -1 $-786$ $-672$
20,443 18.446 3.541 2,907
2015
5,738
external customers
assets
2015

Denmark is recognised as from 2015 as a discontinued operation.

Group's operating segments con'd.

Full Year

Service Car
Sweden Norway Germany Denmark Sweden Norway Germany Denmark
SEKM 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014 2015 2014
Net turnover
External sales 2,575 2,414 1,034 837 100 214 10,938 9,645 4,683 4.487 73 813
Internal sales 565 486 215 244 2 58
Total net turnover 3,140 2,900 1,249 1,081 272 10,938 9,645 4,683 4,487 73 813
Depreciation/amortisation -46 $-40$ $-22$ -8 -1 $-3$ $-271$ $-231$ $-22$ $-25$ -6
Operating profit/loss 351 319 122 83 13 253 121 38 64 -5 $-29$
Shares in profits of associated companies 30 26
Material items of income and expense of a non-re-
curring nature recognised in the Statement of
Income and Other Comprehensive Income:
Items affecting comparability
- Profit from sale of operation, other
- Redemption of PRI liability 13 52
- Structural costs etc. $-26$ -5 $-21$
- Impairment
Items of non-recurring nature 13 3 $-26$ 47 $-21$
Material items not affecting cash besides
depreciation/amortisation:
- Other $-45$ $-41$ -2 $-7$ $-11$ $-23$
Total -45 $-41$ -2 $\overline{A}$ -7 $-11$ $-23$ 3 $\frac{32}{32}$
Assets
Interests in associated companies 377 370
Investments in non-current assets 33 88 31 12 1.046 956 159 100 105

Consolidated Statement of Income and Other Comprehensive Income

Fourth quarter Full year
SEKM 2015 2014 2015 2014
Continuing operations
Net turnover
Costs of goods sold
5,750
-4,745
5,037
$-4,202$
20,443
$-17,076$
18,446
$-15,533$
Gross profit 1,005 835 3,367 2,913
Other operating income 11 3 217 20
Selling expenses $-622$ -517 -2,144 $-1,929$
Administrative expenses -146 -115 -493 $-433$
Other operating expenses -14 -8 -18 $\lrcorner$ 9
Operating profit 1) 234 198 929 562
Financial income
Financial expenses
2
-11
1
-3
4
-30
6
-39
Shares in profits of associated companies 9 8 30 26
Net financial items 0 6 4 $-7$
Profit before tax 234 204 933 555
Tax -55 -44 $-202$ -103
Profit for the year from continuing operations 179 160 731 452
Discontinued operation
Loss from discontinued operation,
net after tax 17 -41 -84 -67
Net profit for the year 196 119 647 385
Other comprehensive income/loss
Items that cannot be reclassified to profit or loss
Revaluation of defined-benefit pension plans 5 -67 -120 $-172$
Tax attributable to items that cannot be reclassified
to profit or loss -2
3
16
$-51$
26
-94
39
$-133$
Items that can be reclassified to profit or loss
Translation differences attributable to foreign
operations -16 $-25$ -45 -1
Tax attributable to items that have been or may be
reclassified to profit or loss 0 0 0 0
Other comprehensive income/loss after tax -16
-13
$-25$
-76
-45
-139
$-1$
$-134$
Comprehensive income for the year 183 43 508 251
Net profit for the year attributable to:
Parent Company's shareholders 196 119 647 385
Comprehensive income for the year
attributable to:
Parent Company's shareholders 183 43 508 251
Weighted average number of shares, '000:
- before dilution
- after dilution
50,431 50,334 50,406 50,310
Basic earnings/loss per share, SEK 50,919
3.90
50,919
2.35
50,919
12.85
50,919
7.65
Diluted earnings/loss per share, SEK 3.90 2.40 12.75 7.60
Continuing operations
Basic earnings/loss per share, SEK 3.55 3.20 14.50 9.00
Diluted earnings/loss per share, SEK 3.55 3.15 14.40 8.90
1 ) Straight-line amortisation/depreciation by asset class:
- Intellectual property
- Land and buildings
-13
-13
$-10$
$-11$
-48
-24
-40
$-22$
- Equipment, tools, fixtures and fittings -11 -9 -66 $-57$
- Leased vehicles -76 -56 -254 $-211$
Total -113 -86 -392 $-330$

Consolidated Statement of Financial Position, Summary

SEK M 31/12 2015 31/12 2014
Assets
Non-current assets
Intangible assets
Intellectual property 271 177
Goodwill 368 259
639 436
Property, plant and equipment
Land and buildings 131 100
Construction in progress 8 7
Equipment, tools, fixtures and fittings 331 321
Leased vehicles 1) 2,048 1,637
2,518 2,065
Long-term investments
Financial investments 1) 384 381
Long-term receivables 2) 0 25
384 406
Deferred tax assets 128 118
Total non-current assets 3,669 3,025
Current assets
Inventories, merchandise 2,564 2,250
Current receivables
Other receivables 1) 1,097 1,064
Cash and cash equivalents 2) 99 616
Total current assets 3,760 3,930
Total assets 7,429 6,955
Equity and liabilities
Equity
Share capital 252 252
Other contributed capital 48 47
Reserves $-99$ $-54$
Retained earnings including net profit for the year 1,855 1,604
Total equity 2,056 1,849
Non-current liabilities
Debenture loan 3) 28
Interest-bearing liabilities 3) 75 64
Other liabilities and provisions 4) 1,438 1,864
1,513 1,956
Current liabilities
Debenture loan 3) 28
Interest-bearing liabilities 3) 688 188
Other liabilities and provisions 3,144 2,962
3,860 3,150
Total equity and liabilities 7,429 6,955
Assets
1) Of which interest-bearing 377 377
2) Interest-bearing 99
641
Liabilities
3) Interest-bearing 791 280
4) Of which interest-bearing 8 668

Statement of Changes in Group Equity, Summary

SEK M 31/12 2015 31/12 2014
Opening balance 1,849 1,823
Cash dividend to shareholders $-302$ $-226$
Exercised warrants
Comprehensive income for the year 508l 251I
Closing balance 2,056 1,849

Consolidated Statement of Cash Flows

Fourth quarter Full year
SEK M 2015 2014 2015 2014
Operating activities
Profit before tax from continuing operations 234 204 933 555
Loss before tax from discontinued operation 23 $-41$ $-141$ $-67$
Depreciation and impairment losses from continuing operations 125 96 404 340
$\Omega$ $\overline{2}$ $\mathcal{P}$ 9
Depreciation and impairment losses from discontinued operation
Other items not affecting cash -41 28 $-58$ 10
Tax paid 0 7 $-59$ $-106$
Change in inventories -536 $-338$ -496 70
Change in operating receivables $-160$ $-155$ -9 $-67$
Change in operating liabilities 321 379 259 555
Cash flow from operating activities $-34$ 182 835 1,299
Investing activities
Acquisition of non-current assets (intangible and tangible) -27 -42 -164 $-195$
Disposal of non-current assets (intangible and tangible) 10 $\overline{c}$ 44 78
Acquisition of leased vehicles -395 $-349$ $-1,156$ $-1,105$
Disposal of leased vehicles 216 216 653 671
Operating cash flow $-230$ 9 212 748
Investment in financial assets 0 $-2$ -26 $-7$
Disposal of financial assets 2 $\mathbf 0$ 27 8
Acquisition of subsidiary/operation, net -89 $\overline{O}$ $-284$ -42
Disposal of subsidiary/operation, net 0 $\overline{O}$ 55 8
Disposal of discontinued operation, net ı $\overline{O}$ 5 $\Omega$
Cash flow after net investments $-316$ 7 $-11$ 715
Financing activities
Borrowings 200 0 1,000 400
Repayment of loans $-100$ $\Omega$ $-900$ $-400$
Change in overdraft facility 206 $-26$ $-304$ $-29$
Exercised warrants ı 1 ı
Dividend paid to Parent Company's shareholders 0 $\overline{O}$ $-302$ $-226$
Cash flow from financing activities 307 $-25$ $-505$ $-254$
Change in cash and cash equivalents, excl. translation
differences -9 -18 $-516$ 461
Cash and cash equivalents recognised in assets held for sale 0 $\mathbf 0$ 0 $\Omega$
Exchange difference in cash and cash equivalents $-1$ $-3$ -1 0
Change in cash and cash equivalents $-10$ $-21$ $-517$ 461
Cash and cash equivalents at start of year 109 637 616 155
Cash and cash equivalents at year-end 99 616 99 616

Fair value of financial instruments

The carrving amount of financial instruments corresponds to the fair value, with the exception of debenture loans. The fair value of debenture loans amounts to SEK 28 M.

Fair value is determined on the basis of the following three levels:

  • Level 1: according to prices quoted on an active market for the same instrument.
  • Level 2: based on directly or indirectly observable market inputs other than those included in level 1.
  • Level 3: according to inputs not based on observable market data.

Currency derivatives that belong to financial assets and liabilities, valuation level 2, have per year-end been valuated to fair value. The value of the currency derivatives is not material and does not constitute an significant item. Fair value measurement has reduced earnings by SEK 1 M.

Calculation of fair value

The fair value of currency derivatives is determined on the basis of market rates. If such rates are not available, the fair value is calculated by discounting the difference between the contracted forward rate and the forward rate that can be obtained on the balance sheet date for the remaining contract period.

Quarterly review

1/14 2/14 3/14 4/14 1/15 2/15 3/15 4/15
Continuing operations
Net turnover, SEK M 4,291 4,819 4,299 5,037 4,715 5,381 4,597 5,750
Operating profit excl. items affecting
comparability, SEK M 101 126 124 202 153 187 154 237
Operating margin excl. items affecting
comparability, % 2.3 2.6 2.9 4.0 3.2 3.5 3.4 4.1
Operating profit, SEK M 101 126 137 198 157 384 154 234
Operating margin, % 2.3 2.6 3.2 3.9 3.3 7.1 3.4 4.1
Profit before tax, SEK M 96 122 133 204 154 383 162 234
Interest coverage ratio, times 1) 6.9 7.4 8.3 15.0 17.8 30.9 41.3 32.9
The Bilia Group
Profit/loss for the period, SEK M 74 87 105 119 23 297 131 196
Rate of capital turnover, times 1) 3.12 3.12 3.10 3.06 2.99 2.99 2.98 2.96
Return on capital employed, $%$ 1) 18.7 19.4 21.0 19.8 21.8 31.7 33.8 36.2
Return on equity, $% ^{1}$ 18.9 20.0 22.2 21.0 18.5 30.5 31.6 33.2
Net debt/equity, times 0.13 0.23 $-0.09$ $-0.04$ 0.05 0.04 $-0.05$ 0.16
Equity/assets ratio, % 31 28 28 27 24 25 29 28
Data per share (SEK)
Earnings/loss for the period 2)
1.50
$1.70$ 4) 6)
2.10
8)
2.35
$0.45$ 10) $5.90^{12}$ $2.60^{14}$ $3.90^{16}$
Equity 3)
38
$35^{5}$ 7)
36
9)
37
$35^{11}$ $35^{13}$ $37^{15}$ $41^{17}$
Operating cash flow 2)
0.45
4)
2.35
6)
11.90
8)
0.15
$2.40^{10}$ $3.90^{12}$ $2.45^{14}$ $-4.55$ 16)

For continuing operations, Bilia's Danish operation has been excluded for year 2014.

  • $_{\rm 1)}$ Rolling 12 months.
  • $2)$ Based on weighted average number of shares outstanding during first quarter, 50,282,769.
  • $3)$ Based on number of shares outstanding at 31 March 2014, 50,290,102.
  • $4)$ Based on weighted average number of shares outstanding during second quarter, 50,301,686.
  • $\sqrt{5}$ ) Based on number of shares outstanding at 30 June 2014, 50, 312, 326.
  • $_{\rm 6)}$ Based on weighted average number of shares outstanding during third quarter, 50,318,925.
  • $7)$ Based on number of shares outstanding at 30 September 2014, 50, 330, 722.
  • $8)$ Based on weighted average number of shares outstanding during fourth quarter, 50,334,058.
  • $9)$ Based on number of shares outstanding at 31 December 2014, 50,348,066.
  • $10)$ Based on weighted average number of shares outstanding during first quarter, 50,366,845.
  • $\scriptstyle 11)$ Based on number of shares outstanding at 31 March 2015, 50, 393, 016.
  • $_{\rm 12)}$ Based on weighted average number of shares outstanding during second quarter, 50,405,884.
  • $13)$ Based on number of shares outstanding at 30 June 2015, 50,418,122.
  • $14)$ Based on weighted average number of shares outstanding during third quarter, 50,419,599.
  • $15)$ Based on number of shares outstanding at 30 September 2015, 50,424,016.
  • 16) Based on weighted average number of shares outstanding during fourth quarter, 50,430,765.
  • Based on number of shares outstanding at 31 December 2015, 50,436,052.
Income Statement for Parent Company
-- -------------------------------------------- -- -- --
Fourth quarter Full year
SEKM 2015 2014 2015 2014
Net turnover 101 116 439 444
Administrative expenses $-120$ $-136$ -508 $-494$
Operating loss 1) $-19$ $-20$ $-69$ $-50$
Result from financial items
Income from interests in Group companies $-23$ $-115$ $-23$ $-45$
Interest income from Group companies 6 22 22
Other interest income and similar line items 0 2 3
Interest expenses to Group companies 0 0 0 $\Omega$
Interest expenses and similar line items -5 -1 $-13$ $-10$
Loss after financial items $-40$ $-133$ $-81$ $-80$
Appropriations 345 341 345 341
Profit before tax 305 208 264 261
Tax -8 $-67$ Ω -61
Net profit for the year 297 141 264 200
1) Straight-line amortisation/depreciation by asset class:
- Intellectual property -4 $-4$ $-16$ $-15$
- Buildings $-2$ $\Omega$ -4 $-1$
- Equipment, tools, fixtures and fittings $\Omega$ -1 $-3$ $-3$
Total -6 $-5$ $-23$ $-19$

Balance Sheet for Parent Company, Summary

SEKM 31/12 2015 31/12 2014
Assets
Non-current assets
Intangible assets
Intellectual property 54 47
54 47
Property, plant and equipment
Buildings 33 23
Construction in progress 8 6
Equipment, tools, fixtures and fittings 14 11
55 40
Long-term investments
Interests in Group companies 793 679
Other securities held as non-current assets 0 0
Other non-current receivables
Deferred tax asset
99 20
892 33
732
Total non-current assets 1,001 819
Current assets
Current receivables
Receivables from Group companies 1,179 493
Other receivables 117 298
Cash on hand and accrued deposits 351
Total current assets $\frac{1}{2}$ .297 1,142
Total assets 2,298 1,961
Equity and liabilities
Equity
Restricted equity
Share capital 252 252
Statutory reserve 47 47
299 299
Non-restricted equity
Share premium reserve 48 47
Retained earnings including net profit for the year 765 803
813 850
Total equity 1,112 1,149
Untaxed reserves 468 386
Provisions
Provisions for pensions and similar obligations 3 22
Deferred tax liability $\overline{\mathbf{3}}$ 2
24
Non-current liabilities
Debenture Ioan 28
Other liabilities 5 5
5 33
Current liabilities
Debenture loan 28
Liabilities to Group companies 52 204
Other liabilities 630 165
710 369
Total equity and liabilities 2,298 1,961
Pledged assets and contingent liabilities for Parent Company
Pledged assets 601 567
Contingent liabilities 986 1,597