Earnings Release • Dec 8, 2015
Earnings Release
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Embargo: Tuesday 8 December 2015 – 8:00 am CET
Today, D'Ieteren is hosting its Investor Day in London. The speakers will include Axel Miller (CEO of D'Ieteren group), Arnaud Laviolette (CFO of D'Ieteren group), Denis Gorteman (CEO of D'Ieteren Auto) and Gary Lubner (CEO of Belron).
The main topics that management will address include the recent evolution of D'Ieteren group's two activities (D'Ieteren Auto and Belron), conditions on the markets they operate in as well as their medium-term strategy and an update on D'Ieteren's search for a new activity.
A live webcast of the presentations will be available from 10:00am (GMT) through the following link:
https://pgi.webcasts.com/starthere.jsp?ei=1086553
The presentations are available on www.dieteren.com.
At D'Ieteren Auto, year-to-date sales at the end of October were up 6.9% versus the same period last year, registering an improving trend since H1 2015. The impact of the "Emissiongate" (see below) was negligible because of the time lag between incoming orders and deliveries (sales recognition). Excluding registrations of less than 30 days1, the number of new car registrations in Belgium rose by 0.48% year-on-year to 406,666 units during the first ten months of 2015. Excluding registrations of less than 30 days1, the market share of the makes distributed by D'Ieteren Auto reached 22.34% (22.39% year-to-date in October 2014 and 22.67% for the FY 2014). Registrations of new light commercial vehicles in Belgium totalled 52,780 units, up 14.6% year-on-year. D'Ieteren Auto's market share in this segment reached 9.38%.
The total number of new vehicles, including light commercial vehicles, delivered by D'Ieteren Auto was up 1.8% to 97,100 units. Higher deliveries combined with a positive price/mix effect led to a 7.1% rise in new vehicle sales.
At Belron, year-to-date sales were up 11.7% at the end of October 2015 compared to the same period last year, comprising a 3.6% organic increase, 0.3% growth from acquisitions and an 8.0% positive currency translation impact partially offset by a 0.2% decline due to one less trading day. The total number of repair and replacement jobs increased by 0.5% to 9.6 million. The translation impact is primarily due to a stronger US dollar and GB pound. The acquired growth came from acquisitions in the US, Canada, Italy, Sweden, the Netherlands and Spain.
In Europe, sales decreased by 0.6% (up 0.1% year-on-year since 30 June), which comprised a decrease in organic sales of 2.6%, 0.4% growth from acquisitions and a 1.9% positive currency translation impact partially offset by a 0.3% decline due to one less trading day. Whilst the year-to-date figures reflect market declines in most countries, the rate of decline has slowed down since the half-year. The Autotaalglas business, which was acquired on 3 June in the Netherlands, is performing as planned. The Junited Autoglas acquisition, which was previously announced subject to approval by the German competition regulator, was completed on 24 September. A further acquisition in the Netherlands – GlasGarage – was completed on 9 November. This
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Embargo: Tuesday 8 December 2015 – 8:00 am CET
deal comprised the acquisition of the franchisor, of one owned branch and of a franchise network of 126 branches (30 standalone and 96 shop-in-shop branches). As with Autotaalglas, Glasgarage will be run separately from the Carglass business.
Outside Europe, sales increased by 24.3% (up 22.6% since 30 June 2015), comprising organic sales growth of 10.0% primarily in the US, a positive 0.1% impact due to acquisitions in the US and of former franchisees in Canada, and a positive currency impact of 14.3%, mainly due to stronger US and Canadian dollars offset by the weakening of the Brazilian real, partially offset by an adverse trading day impact of 0.1%. The US business continued to perform strongly on all fronts due to both market growth and market share gains.
On 18 September 2015, the United States Environmental Protection Agency (EPA) revealed irregularities concerning a software installed on certain vehicles with diesel engines sold by the Volkswagen group in the US. On 3 November, the Volkswagen group revealed that during the course of internal investigations other irregularities were found when determining the CO2 levels of certain vehicles (together, the "Emissiongate").
From the outset, D'Ieteren Auto took all actions within its control to minimize the impact of the "Emissiongate" on its customers and to communicate fully and transparently as soon as information became available. A 'customer care' website was launched on 25 September in response to customer concerns. The following day, D'Ieteren Auto decided to stop the commercialisation of vehicles that were potentially fitted with the noncompliant software (NOx). Customers who had ordered a vehicle equipped with an EA189 (EU5) engine were offered the option to change their order for an equivalent vehicle equipped with an EU6 diesel engine. Between 5 and 20 November, D'Ieteren Auto also suspended the commercialisation of models that were potentially affected by the CO2 irregularities. Since the beginning of the "Emissiongate", D'Ieteren Auto has been in touch with the various relevant federal and regional authorities in order to discuss the necessary measures and to minimize any consequences for its customers.
About 320,000 vehicles with the EA189 diesel engine and the non-compliant software will have to be recalled in Belgium. The Volkswagen group has ensured that it will cover the costs arising from interventions required to fix the problems.
Since the irregularities related to CO2 emissions are not technical in nature, no technical intervention will be needed for the concerned vehicles. The Volkswagen group confirmed to take at their charge any possible tax consequences. D'Ieteren Auto is confident that the Volkswagen group will reach an agreement with the competent Belgian authorities to ensure that neither private customers nor fleet customers will be affected by any retroactive or future tax adjustment.
The impact of the "Emissiongate" is difficult to evaluate at this time. D'Ieteren Auto suspended the commercialisation of several models, first in September, then in November (see above), but this took place in a seasonally slow period as customers wait for the Brussels Motor Show in January 2016. The loss in orders stemming from these suspensions is estimated at 1,260 units (approximately 1% of yearly sales). The impact of the "Emissiongate" on D'Ieteren Auto's current operating result in H2 2015 will amount to about EUR 8 million (incentives, bonuses and stock management). Unusual costs related to the "Emissiongate" are currently estimated at approximately EUR 11 million in H2 2015, of which EUR 9 million at the operating result level and EUR 2 million under the share of result of entities accounted for using the equity method (VDFin). The EUR 9 million unusual costs at the operating result level include provisions for extra costs to be disbursed in 2016 (e.g. logistic and mailing costs related to the upcoming recalls).
Embargo: Tuesday 8 December 2015 – 8:00 am CET
D'Ieteren maintains its guidance for 2015. Its current result before tax, group's share, is expected to increase by 20-25%. Both D'Ieteren Auto including Corporate – in spite of the "Emissiongate" – and Belron are forecast to show a solid improvement.
At the beginning of 2016, given the time lag between order intake and delivery, D'Ieteren Auto's sales will be negatively impacted by the decision to suspend the commercialisation of vehicles potentially concerned by the "Emissiongate" at the end of 2015. The order intake should benefit however from the biennial Brussels Motor Show in January 2016 and new model launches. The Audi A4 was launched at the end of November 2015 and other models will be launched or revamped next year, including the Volkswagen Tiguan, the Audi A5 Coupé, Q1 and Q2 and the Seat SUV.
The "Emissiongate" has no impact on the implementation of D'Ieteren Auto's strategy, including the reorganisation of the dealer network (Market Area), the improvement of the performance of the D'Ieteren Car Centers in the Brussels region and the streamlining of the import structure. D'Ieteren Auto including Corporate still aims to realise an current operating margin of 2.5% and 2.0% sales growth in the medium term.
Belron is expected to record unusual costs of about EUR 15 million in H2 2015 including previously announced costs related to AutoRestore (see press release dated 31 August 2015) and efficiency improvement measures in France, Italy and at the corporate head office. The previously announced unusual costs related to the closure of the Chinese operations are expected to be more than offset by the recycling of cumulative exchange differences.
Belron's US operations are well-positioned to continue gaining market share next year in a market that is expected to show modest underlying growth but that may revert to normal weather conditions after two exceptionally cold winters. Assuming a normal winter, the European markets are expected to see further volume declines that Belron will try to compensate with growth initiatives, commercial actions and efficiency gains. Increased competitive pressures in some countries and glass cost inflation due to the relative weakness of the euro could have a negative impact on profitability. Restructurings in UK and Brazil are expected to continue to pay off next year.
The vehicle glass repair and replacement markets in the developed economies have declined more than expected since Belron's targets for 2019 were announced, putting pressure on both sales growth and operating margins. In addition, plans to enter emerging markets have been postponed. The current market outlook is for further declines. While the sales growth target (of 4.0% on average between 2014 and 2019) is still considered to be achievable, the expectation of an 8% operating margin in 2019 has become challenging. Belron does nevertheless still aim at a continuously rising operating result. The US market offers further growth opportunities. The European markets are expected to decline further but Belron is set to gain market share in most countries while continuing to focus on efficiency gains. Brazil and the UK are facing challenges but appropriate actions are being taken to return to break-even. Belron is also looking into potential service extension areas that could generate additional revenues and profits.
REGULATED INFORMATION
Embargo: Tuesday 8 December 2015 – 8:00 am CET
1 In order to provide an accurate picture of the car market, Febiac publishes market figures excluding registrations that have been cancelled within 30 days. Most of them relate to vehicles that are unlikely to have been put into circulation in Belgium by the end customer.
This document contains forward-looking information that involves risks and uncertainties, including statements about D'Ieteren's plans, objectives, expectations and intentions. Readers are cautioned that forward-looking statements include known and unknown risks and are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of D'Ieteren. Should one or more of these risks, uncertainties or contingencies materialise, or should any underlying assumptions prove incorrect, actual results could vary materially from those anticipated, expected, estimated or projected. As a result, D'Ieteren does not assume any responsibility for the accuracy of these forward-looking statements.
End of press release
REGULATED INFORMATION
Embargo: Tuesday 8 December 2015 – 8:00 am CET
D'Ieteren is a group of services to the motorist founded in 1805, serving some 12 million corporate and end customers in 34 countries in two areas:
- D'Ieteren Auto distributes Volkswagen, Audi, Seat, Škoda, Bentley, Lamborghini, Bugatti, Porsche and Yamaha vehicles across Belgium. It is the country's number one car distributor, with a market share of more than 22% and 1.2 million vehicles of the distributed brands on the road at the end of 2014. Sales in 2014: EUR 2.7 billion.
- Belron (94.85% owned) is the worldwide leader in vehicle glass repair and replacement. In 2014, some 2,400 branches and 9,400 mobile vans, trading under more than 10 major brands including Carglass®, Safelite® AutoGlass and Autoglass® served customers in 34 countries. Sales in 2014: EUR 2.9 billion.
| Last five press releases (with the exception of press releases linked to the repurchase or sale of own shares) |
Next events | ||
|---|---|---|---|
| 20 November 2015 | All vehicles are again available for sale in Belgium |
8 December 2015 | Investor Day |
| 5 November 2015 | D'Ieteren Auto temporarily suspends sales of models that may be affected by irregularities with respect to CO2 emissions |
25 February 2016 | FY 2015 Results |
| 4 November 2015 | Reaction to the publication by the Volkswagen Group of irregularities concerning CO2 emissions |
25 February 2016 | Analyst meeting & press conference FY 2015 |
| 16 October 2015 | About 320,000 vehicles of the Volkswagen Group will be recalled in Belgium |
20 April 2016 | Annual Report 2015 |
| 29 September 2015 | 393,648 vehicles with non conforming software in Belgium |
26 May 2016 | General Meeting & Trading update |
Axel Miller, Chief Executive Officer Arnaud Laviolette, Chief Financial Officer Pascale Weber, Financial Communication - Tel: + 32 (0)2 536.54.39 E-mail: [email protected] – Website: www.dieteren.com
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