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Delticom AG

Quarterly Report May 15, 2015

95_10-q_2015-05-15_74659f32-f56b-4ffe-8aba-6f34817894b3.pdf

Quarterly Report

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3-Monthly Report 2015

Profile

Delticom is Europe's leading online tyre retailer. Founded in 1999, the Hanover-based company has more than 100 online shops in 42 countries, among others ReifenDirekt, www.mytyres.co.uk in UK and www.123pneus.fr in France, as well as the Tirendo shops which enjoy a high level of recognition, not least due to its brand ambassador, Sebastian Vettel. Delticom offers a wide range of products for its private and business customers: more than 25,000 models from over 100 tyre brands for cars, motorcycles, commercial vehicles and buses, but also complete wheels, motor oil, replacement parts and accessories.

Customers enjoy all the advantages of modern E-Commerce: convenience in order placing, quick, efficient delivery, clear cost information and, last but not least, low prices. The products are delivered in two business days to any address the customer chooses. Alternatively, Delticom delivers the tyres to one of more than 41,000 service partners (9,500 in Germany alone) for professional fitting directly on to the customer's vehicle at a reasonable price.

Key Figures 01.01.2015 01.01.2014 –/+
– 31.03.2015 – 31.03.2014 (%, %p)
Revenues € million 111.3 94.3 +18.1
Total income € million 115.6 97.3 +18.8
1
Gross margin
% 22.0 24.5 –2.5
2
Gross profit
€ million 24.5 23.1 +6.2
EBIT € million –1.4 0.3 –559.5
3
EBIT margin
% –1.2 0.3 –1.5
Net income € million –1.4 0.0 –6908.5
4
Earnings per share
–0.11 0.00 –6468.6
Total assets € million 187.3 221.5 –15.4
Inventories € million 73.6 94.7 –22.3
5
Investments
€ million 0.2 0.2 +11.7
6
Capital Employed
€ million 64.8 73.1 –11.4
7
Return on Capital Employed
% –2.1 0.4 –2.5
Equity € million 49.4 51.7 –4.4
Equity ratio % 26.4 23.3 +3.0
Return on equity % –2.8 0.0 –2.9
8
Liquidity position
€ million 20.1 21.1 –4.8
Operating cash flow € million –9.2 10.7
9
Free cash flow
€ million –9.4 10.5

(1) Gross profit ex other operating income in % of revenues

(2) Gross profit ex other operating income

(3) Consolidated earnings before interest and taxes (EBIT) to revenues

(4) Undiluted

(5) Investments in tangible and intangible assets

(6) Capital Employed = total assets – current liabilities

(7) ROCE = EBIT / Capital Employed

(8) Liquidity position = cash and cash equivalents + liquidity reserve

(9) Free cash flow = Operating cash flow – Cashflow from investing activities

Table of Contents

Interim Management Report of Delticom AG

Table of Contents

Economic Environment

Business performance and earnings situation

Financial and assets position

Organisation

Significant events after the reporting date

Risk Report

Outlook

Economic Environment

  • Economic developments In the first quarter, the European economy registered slight growth on the back of a weak euro and low oil prices, fuelled by exports. The economic uptrend and lower rate of unemployment in many countries also led to an improvement in consumer confidence in Europe in the first quarter of 2015, especially in Western and Southern European countries. However, the degree of recovery differs greatly from country to country. The situation in Eastern Europe continues to be dominated by developments in Ukraine and economic sanctions against Russia. In Germany, the labour market continued to benefit from the strong economy. Thanks to high wage levels and low energy prices, the purchasing power of private households remained robust.
  • Tyre markets According to initial estimates by industrial associations, the replacement tyre business in Germany in the first quarter of 2015 was unable to continue the strong trend seen at the start of 2014. While winter tyre sales were up by 4.4-%, summer tyre sales were down by almost 15-%. This was due to the changeable weather, which led consumers to delay changing their tyres. In the previous year's period, the summer tyre business got off to an early start thanks to spring-like temperatures in March.

Business performance and earnings situation

Tirendo

On 16.09.2013 Delticom acquired all shares in the Berlin-based online tyre retailer Tirendo Holding GmbH and its subsidiaries. Tirendo Holding GmbH and Tirendo Deutschland GmbH (both companies hereinafter collectively referred to as Tirendo) are fully consolidated in the Delticom Group from the date of acquisition (16.09.2013).

Revenues

Group Delticom, Europe's leading online tyre retailer, generates the bulk of its revenues through sales of replacement tyres for cars, motorcycles, trucks and industrial vehicles.

In Q1-15 the company recognised revenues of €-111.3-million, an increase of 18.1-% after €-94.3-million in the prior-year period.

The chart Revenues trend summarises the development of the quarterly revenues.

Revenues trend

quarterly revenues in € million

E-Commerce Revenues in the E-Commerce division with its 188 online shops were up year
on-year by 18.5-%, from €-91.9-million to €-108.9-million. The share of divisional
revenues amounted to 97.8-%, compared to 97.4-% in the previous year.
Customer numbers In Q1-15 the company was able to acquire a total of 207-thousand new customers
(Q1-14: 197 thousand, Delticom and Tirendo accumulated, +5.2-%). In the course
of the financial year 2014, Delticom modified the way in which it calculates its
customer numbers. As a consequence, the previous year's figure differs from
the figures stated in the 3-Monthly Report 2014. Customers who purchased for
the first time at both Delticom and Tirendo in Q1-15 were offset. In Q1-15 a total
of 238-thousand existing customers (Q1-14: 200 thousand, +19.2-% - based on
new calculation methodology) made repeat purchases at Delticom group.

Regional split The group offers its product range in 42 countries. Revenues in EU countries totalled €-83.9-million (+13.2-%). Across all non-EU countries the revenue contribution for Q1-15 was €-27.5-million (+36.2-%).

Revenues by region

in € thousand

Q115 % +% Q114 % +% Q113 %
Revenues 111,339 100.0 18.1 94,283 100.0 16.0 81,275 100.0
Regions
EU 83,871 75.3 13.2 74,121 78.6 19.3 62,121 76.4
Rest 27,469 24.7 36.2 20,163 21.4 5.3 19,155 23.6

Key expense positions

Cost of goods sold The cost of goods sold (COGS) is the largest expense item; it considers the
         purchase price of sold tyres. Group COGS increased by 21.9-% from €-71.2-million
         in Q1-14 to €-86.8-million in Q1-15.
Personnel expenses On 31.03.2015, the company employed a total of 154 employees. 137 of them
(including trainees) worked for Delticom and the remaining 17 for Tirendo (Q1-14:
147). In the reporting period Delticom group employed an average of 140 staff
members (Q1-14: 278). Personnel expenses amounted to €-2.2-million (Q1-14:
€-3.6-million, –39.6-%). This decrease is mainly due to the significant workforce
reduction at Tirendo. The personnel expenses ratio in the first quarter came to
2.0-% (staff expenditures as percentage of revenues, Q1-14: 3.9-%).
Warehousing Rents and overheads remained with €-1.8-million nearly unchanged (Q1-14:
€-1.8-million, –0.1-%). Stocking costs amounted to €-1.1-million, after €-0.9-million
in Q1-14 (+17.8-%).
Transportation costs Among the other operating expenses, transportation costs is the largest line
item. The increase from €-7.2-million by 34.1-% to €-9.7-million is mainly due to
sales country-mix and the higher business volume. The share of transportation
costs against revenues increased in the reporting period from 7.7-% in Q1-14 to
8.7-% in Q1-15.
Marketing Group marketing expenses in Q1-15 were increased by 9.9-% from €-4.8-million
to €-5.3-million to push an early start into the summer tyre business. Q1-15

Depreciation Depreciation for Q1-15 remained with €-2.1-million nearly unchanged (Q1-14: €-2.1-million, +1.4-%).

marketing spent with 4.7-% of revenues was lower than last year's 5.1-%.

Earnings position

Gross margin The gross margin for the first quarter was set to 22.0-%, after 24.5-% in Q1-14.

  • Other operating income Other operating income for the first quarter was €-4.2-million (Q1-14: €-3.0-million), thereof gains from exchange rate differences to the order of €-2.1-million (Q1-14: €-0.6-million). FX losses are accounted for in the other operating expenses. In Q1-15 the FX losses amounted to €-2.3-million (Q1-14: €-0.4-million). In the reporting period, the balance from FX gains and losses was €-–0.1-million (Q1-14: €-0.2-million).
  • Gross profit Altogether, the gross profit increased in the reporting period by 10.2-% year-onyear, from €-26.1-million to €-28.7-million. Gross profit in relation to total income of €-115.6-million (Q1-14: €-97.3-million) totalled 24.9-% (Q1-14: 26.8-%).
  • EBITDA Earnings before interest, taxes, depreciation and amortization (EBITDA) for the reporting period came in at €-0.8-million (Q1-14: €-2.4-million). The 68.0-% drop is mainly attributable to the volume-related increase in costs. EBITDA margin for the period under review stood at 0.7-% (Q1-14: 2.5-%).

EBITDA

quarterly, in € million

EBIT Q1-15 earnings before interest and taxes (EBIT) contracted to €-–1.4-million
(Q1-14: €-0.3-million). This translates into an EBIT margin of –1.2-% (EBIT in
percent of revenues, Q1-14: 0.3-%).
Financial income Financial income for the first three months amounted to €-8-thousand (Q1-14:
€-8-thousand). Financial expenses were €-96-thousand (Q1-14: €-271-thousand).
The financial result totalled €-–88-thousand (Q1-14: €-–263-thousand).
Income taxes In the reporting period, deferred taxes led to tax income of €-50.2-thousand. In
Q1-14, the expenditure for income taxes was €-10.5-thousand.
Net income Consolidated net income shrank in the reporting period from €-20-thousand in
Q1-14 to €-–1,390-thousand.
The table Abridged P+L statement summarises key income and expense items

from multiple years' profit and loss statements.

Abridged P+L statement

in € thousand
Q115 % +% Q114 % +% Q113 %
Revenues 111,339 100.0 18.1 94,283 100.0 16.0 81,275 100.0
Other operating income 4,218 3.8 41.0 2,992 3.2 94.5 1,538 1.9
Total operating income 115,557 103.8 18.8 97,276 103.2 17.5 82,814 101.9
Cost of goods sold –86,814 –78.0 21.9 –71,199 –75.5 16.6 –61,055 –75.1
Gross profit 28,744 25.8 10.2 26,076 27.7 19.8 21,758 26.8
Personnel expenses –2,196 –2.0 –39.6 –3,636 –3.9 60.8 –2,262 –2.8
Other operating expenses –25,787 –23.2 28.5 –20,062 –21.3 23.2 –16,283 –20.0
EBITDA 761 0.7 –68.0 2,378 2.5 –26.0 3,213 4.0
Depreciation –2,112 –1.9 1.4 –2,083 –2.2 209.3 –674 –0.8
EBIT –1,352 –1.2 –559.5 294 0.3 –88.4 2,539 3.1
Net financial result –88 –0.1 –66.4 –263 –0.3 3830.3 –7 0.0
EBT –1,440 –1.3 –4765.1 31 0.0 –98.8 2,532 3.1
Income taxes 50 0.0 –580.1 –10 0.0 –98.8 –856 –1.1
Consolidated net income –1,390 –1.2 –6908.5 20 0.0 –98.8 1,676 2.1

Financial and assets position

Balance sheet

Inventories Among the current assets, inventories is the biggest line item. Since the beginning of the year stock grew by €-17.4-million or 31.0-% to €-73.6-million (31.12.2014: €-56.2-million). This corresponds to a share of 39.3-% of total assets (31.12.2014: 34.2-%, 31.03.2014: 42.7-%).

Receivables Trade receivables usually follow the seasons, but reporting date effects are often unavoidable. At the end of the quarter, the accounts receivable amounted to €-23.0-million (31.12.2014: €-14.5-million, 31.03.2014: €-20.2-million).

Payables In the wake of this inventory build-up, the accounts payable increased from an opening balance of €-75.9-million by 27.3-% to €-96.6-million.

As of 31.03.2015 the balance sheet total amounted to €-187.3-million (31.12.2014: €-164.0-million). Table Abridged balance sheet illustrates the low capital intensity of the business model.

Abridged balance sheet

in € thousand
31.03.15 % +% 31.12.14 % 31.12.13 %
Assets
Non-current assets 56,404 30.1 –3.0 58,135 35.4 66,698 37.7
Fixed assets 55,088 29.4 –3.3 56,952 34.7 64,368 36.4
Other non-current assets 1,316 0.7 11.2 1,183 0.7 2,330 1.3
Current assets 130,930 69.9 23.7 105,872 64.6 110,322 62.3
Inventories 73,570 39.3 31.0 56,151 34.2 72,841 41.1
Receivables 36,685 19.6 85.8 19,745 12.0 26,158 14.8
Liquidity 20,675 11.0 –31.0 29,975 18.3 11,323 6.4
Securities 0 0.0 0 0.0 0 0.0
Cash and cash equivalents 20,675 11.0 –31.0 29,975 18.3 11,323 6.4
Assets 187,334 100.0 14.2 164,007 100.0 177,020 100.0
Equity and Liabilities
Long-term funds 64,812 34.6 –3.2 66,943 40.8 64,635 36.5
Equity 49,416 26.4 –1.7 50,293 30.7 51,679 29.2
Long-term debt 15,396 8.2 –7.5 16,651 10.2 12,957 7.3
Provisions 401 0.2 14.2 351 0.2 252 0.1
Liabilities 14,995 8.0 –8.0 16,300 9.9 12,704 7.2
Short-term debt 122,522 65.4 26.2 97,064 59.2 112,385 63.5
Provisions 2,160 1.2 –8.7 2,367 1.4 2,028 1.1
Liabilities 120,362 64.2 27.1 94,698 57.7 110,357 62.3

Liquidity position Liquidity (cash and cash equivalents plus liquidity reserve) as of 31.03.2015 totalled €-20.1-million (31.12.2014: €-29.9-million, 31.03.2014: €-21.1-million). The company's net cash position amounted to €-14.8-million (liquidity less liabilities from current accounts, 31.03.2014: €-8.7-million).

Based on the cash flow, the chart Liquidity Bridge illustrates how the liquidity position changed in the trailing 12 months.

Cash flow

Operating cash flow Due to the development in net working capital, the Q1-15 cash flow from ordinary
business activities (operating cashflow) of €-–9.2-million was significantly lower
than in the comparison period (Q1-14: €-10.7-million).
Investing activities In the first quarter, Delticom invested €-75-thousand into property, plant and
equipment and €-158-thousand in intangible assets. Q1-15 cash flow from in
vesting activities amounted to €-–0.2-million (Q1-14: €-–0.2-million).
Financing activities Due to repayment of loans of €-–1.1-million and the raising of financial liabilties
of €-0.7-million, the cash flow from financing activities amounted to €-–0.4-million
in the reporting period (Q1-14: €-–0.9-million).

Organisation

Legal structure The following section lists the subsidiaries that are fully consolidated in the consolidated financial statements as of 31.03.2015:

  • Delticom North America Inc., Benicia (California, USA)
  • Delticom OE S.R.L., Timisoara (Romania)
  • Delticom Tyres Ltd., Oxford (United Kingdom)
  • Deltiparts GmbH, Hanover (Germany)
  • Giga GmbH, Hamburg (Germany)
  • Pnebo Gesellschaft für Reifengroßhandel und Logistik mbH, Hanover (Germany)
  • Reife tausend1 GmbH, Hanover (Germany)
  • Tirendo Deutschland GmbH, Berlin (Germany)
  • Tirendo Holding GmbH, Berlin (Germany)
  • Toroleo Tyres GmbH, Schönefeld (Germany)
  • Toroleo Tyres TT GmbH & Co.KG, Schönefeld (Germany)
  • Tyrepac Pte. Ltd., Singapore
  • Wholesale Tire and Automotive Inc., Benicia (California, USA)

An overview of all not-consolidated subsidiaries can be found in the notes.

Significant events after the reporting date

Dividend

The Annual General Meeting on 05.05.2015 has decided on a dividend of €-0.25 per share, a decrease of 50.0-% compared to the previous year's dividend of €-0.50 per share.

Risk Report

As a company that operates internationally, Delticom is exposed to varying types of risk. In order to be able to identify, evaluate and respond to such risks in a timely fashion, Delticom put in place a risk management system early on. The system is based on corporate guidelines for the early risk detection and risk management.

An outline of the risk management process is presented in the Annual Report for fiscal year 2014 on pages 46ff, together with a list of key individual risks. Compared to the Annual Report 2014, the risk situation has not changed materially. Individual risks endangering the company do not exist, and considered together, the aggregate risk does not pose any danger to Delticom's going concern.

Outlook

Economic environment According to the International Monetary Fund, the global economy is only staging a gradual recovery. Not all countries have digested the impact of the global economic and financial crisis.

Experts forecast stronger economic growth in Europe compared to 2014. However, the degree of recovery differs greatly from country to country. Although reform countries such as Spain and Portugal have since registered slight growth, unemployment remains high despite subsiding unemployment figures.

Due to the currently weak euro, the economy in the eurozone is primarily benefiting from rising exports. In view of the declining unemployment rate, consumers are now also more optimistic. It is still unclear to what extent the eurozone has laid the foundation in the last months for sustainable recovery.

Tyre retail Unlike the previous year, the tyre retail business was not boosted by an early start to the summer business at the beginning of the reporting year. Only the coming months will show to what degree the forecasts of individual market experts regarding a slight recovery in the replacement tyre business will materialise in the current year. For Germany, the German association of tyre dealers (BRV, Bundesverband Reifenhandel und Vulkaniseurhandwerk e.V.) cautiously estimates that there will be no widespread improvement in the situation in 2015 compared to the previous year.

The fourth quarter is an important quarter in tyre trade due to the winter business.
As a result of the mild winter in 2014, excess inventories for winter goods cannot
be ruled out in the supply chain. If the coming winter also turns out to be mild,
sales prices could come under pressure as well.
Guidance unchanged The first quarter only has a comparatively small importance relative to the whole
year and in particular with regard to profitability. Delticom will continue to tena
ciously strive for cost optimization in 2015 to reach the full-year guidance.
At the current time, there is still major uncertainty when it comes to market and
price development in the European replacement tyre business in 2015.
Revenues The management of Delticom is planning on increasing sales volume in 2015
to exceed that of the previous year. In the case of a deflationary price climate
Delticom considers it conceivable that this increase in sales will not necessarily
result in a corresponding increase in revenues. For fiscal year 2015, the man
agement continues to aim for revenues in absolute terms at least on par with
fiscal year 2014.
EBITDA An increase in unit sales results in a rise in volume-based costs. Should these
rise more sharply in 2015 than revenues, a positive volume effect could have a
negative impact on earnings. Irrespective of this, we are aiming to match at least
2014 EBITDA in 2015 in absolute terms.

Consolidated Interim Financial Statements of Delticom AG

Table of Contents

Consolidated Income Statement

01.01.2015 01.01.2014
in € thousand – 31.03.2015 – 31.03.2014
Revenues 111,339 94,283
Other operating income 4,218 2,992
Total operating income 115,557 97,276
Cost of goods sold –86,814 –71,199
Gross profit 28,744 26,076
Personnel expenses –2,196 –3,636
Depreciation of intangible assets and property, plant and equipment –2,112 –2,083
Other operating expenses –25,787 –20,062
Earnings before interest and taxes (EBIT) –1,352 294
Financial expenses –96 –271
Financial income 8 8
Net financial result –88 –263
Earnings before taxes (EBT) –1,440 31
Income taxes 50 –10
Consolidated net income –1,390 20
Thereof allocable to:
Non-controlling interests –85 0
Shareholders of Delticom AG –1,305 20
Earnings per share (basic) –0.11 0.00
Earnings per share (diluted) –0.11 0.00

Statement of Recognised Income and Expenses

01.01.2015 01.01.2014
in € thousand – 31.03.2015 – 31.03.2014
Consolidated Net Income 1,390 20
Changes in the financial year recorded directly in equity
Income and expense that will not be reclassified to the statement of income at a later date
Changes in currency translation 525 –1
Income and expense that will be reclassified to the statement of income at a later date
Net Investment Hedge Reserve
Changes in current value recorded directly in equity –16 –11
Deferred taxes relating to Net Investment Hedge Reserve 5 3
Other comprehensive income for the period 513 –8
Total comprehensive income for the period –876 12
Attributable to non-controlling interests –177 0
Attributable to shareholders of the parant –699 12

Consolidated Balance Sheet

Assets

in € thousand 31.03.2015 31.12.2014
Non-current assets 56,404 58,135
Intangible assets 46,564 47,949
Property, plant and equipment 8,497 8,978
Financial assets 27 25
Deferred taxes 779 705
Other receivables 538 478
Current assets 130,930 105,872
Inventories 73,570 56,151
Accounts receivable 23,018 14,489
Other current assets 12,283 4,707
Income tax receivables 1,384 549
Cash and cash equivalents 20,675 29,975
Assets 187,334 164,007

Shareholders' Equity and Liabilities

in € thousand 31.03.2015 31.12.2014
Equity 49,416 50,293
Equity attributable to Delticom AG shareholders 48,606 49,305
Subscribed capital 11,945 11,945
Share premium 25,372 25,372
Other components of equity 642 128
Retained earnings 200 200
Net retained profits 10,448 11,659
Non-controlling interests 810 988
Liabilities 137,917 113,715
Non-current liabilities 15,396 16,651
Long-term borrowings 14,292 15,367
Non-current provisions 401 351
Deferred tax liabilities 703 933
Current liabilities 122,522 97,064
Provisions for taxes 947 845
Other current provisions 1,213 1,521
Accounts payable 96,642 75,920
Short-term borrowings 5,082 4,424
Other current liabilities 18,638 14,354
Shareholders' equity and liabilities 187,334 164,007

Consolidated Cash Flow Statement

01.01.2015 01.01.2014
in € thousand – 31.03.2015 – 31.03.2014
Earnings before interest and taxes (EBIT) –1,352 294
Depreciation of intangible assets and property, plant and equipment 2,112 2,083
Changes in other provisions –258 –289
Net gain on the disposal of assets –92 0
Changes in inventories –17,419 –21,811
Changes in receivables and other assets not allocated to
investing or financing activity –16,079 –15,423
Changes in payables and other liabilities not allocated to
investing or financing activity 25,012 45,423
Interest received 8 8
Interest paid –113 –244
Income tax paid –987 692
Cash flow from operating activities –9,168 10,733
Proceeds from the disposal of property, plant and equipment 7 0
Payments for investments in property, plant and equipment –88 –208
Payments for investments in intangible assets –158 –4
Payments for investments in financial assets –2 0
Cash flow from investing activities –241 –212
Capital transactions with non-controlling interests 0 0
Cash inflow of financial liabilities 658 0
Cash outflow of financial liabilities –1,075 –896
Cash flow from financing activities –417 –896
Changes in cash and cash equivalents due to currency translation 525 –1
Cash and cash equivalents at the start of the period 29,975 11,323
Changes in cash and cash equivalents –9,826 9,624
Changes in consolidation scope 0 0
Cash and cash equivalents - end of period 20,675 20,947

For information only: Net-Cash

01.01.2015 01.01.2014
in € thousand – 31.03.2015 – 31.03.2014
Liquidity – start of period 29,927 11,500
Changes in cash and cash equivalents –9,826 9,624
Liquidity – end of period 20,101 21,124
Net Cash – start of period 10,137 –21,197
Changes in cash and cash equivalents –9,826 9,624
Changes in financial liabilities 417 896
Net Cash – end of period 728 –10,677
Net cash refer to short term financial liabilities:
Net Cash – start of period 25,326 –10,337
Changes in cash and cash equivalents –9,826 9,624
Changes in short term financial liabilities –658 9,425
Net Cash – end of period 14,842 8,712
Net cash refer to long term financial liabilities:
Net Cash – start of period 14,383 285
Changes in cash and cash equivalents –9,826 9,624
Changes in long term financial liabilities 1,075 –8,529
Net Cash – end of period 5,632 1,380

Statement of Changes in Shareholders' Equity

Net Invest
Sub Reserve from ment Net Non-con
scribed Share currency Hedge Retained retained trolling in Total
in € thousand capital premium translation Reserve earnings profits Total terests equity
as of 1 January 2014 11,859 24,446 –181 31 200 15,324 51,679 0 51,679
Net income 20 20 20
Other comprehensive in –1 –7 –8 –8
come
Total
comprehensive
income
–1 –7 20 12 12
as of 31 March 2014 11,859 24,446 –182 24 200 15,344 51,691 0 51,691
as of 1 January 2015 11,945 25,372 115 13 200 11,659 49,305 988 50,292
Transactions between
controlling and non-con
trolling shareholders
Net income –1,305 –1,305 –85 –1,390
Other comprehensive in
come 525 –11 93 606 –93 513
Total
comprehensive
income 525 –11 –1,212 –699 –177 –876
as of 31 March 2015 11,945 25,372 640 2 200 10,447 48,606 810 49,416

Notes to the Consolidated Interim Financial Statements of Delticom AG

Reporting companies

Delticom, Europe's leading online tyre retailer, was founded in Hanover in 1999. With 188 online shops in 42 countries, the company offers its private and business customers a broad assortment of car tyres, motorcycle tyres, truck tyres, bus tyres, special tyres, bicycle tyres, rims, complete wheels (pre-mounted tyres on rims), selected replacement car parts and accessories, motor oil and batteries. Further information about the reporting company can be found in the chapter Business Operations and in the chapter Organisation of the annual report 2014.

Employees

From 01.01.2015 to 31.03.2015 Delticom had an average of 140 employees (thereof 6 apprentices and interns). The calculation is based on full-time equivalents, thus taking into account the actual work hours.

Seasonal effects

In many countries, business with car replacement tyres depends to a large extent on the seasons with their different weather and road conditions. For example, the business in the northern parts of Europe and in German-speaking countries is characterized by two peak periods - the purchase of summer tyres in spring and winter tyres in early winter. Volume is generally weaker in the first quarter, as most winter tyres are bought and fitted with the first snow, and thus before the end of the year.

The second quarter is characterized by strong sales: the weather in April and May is usually quite warm and car drivers buy their new summer tyres.

The third quarter is a transitional quarter between the summer and winter business, with unit sales again being somewhat weaker.

In most European countries, the last quarter generates the highest sales as car drivers face difficult road conditions and become aware of the fact that they need new tyres.

Principles of accounting and consolidation, balance sheet reporting and valuation methods

Delticom's consolidated interim financial statements as of 31.03.2015 were prepared according to the International Financial Reporting Standards (IFRS), as prescribed by the International Accounting Standards Board (IASB), that were mandatory according to the European Union (EU) Directive. All applicable and mandatory IFRS standards on the balance sheet date were applied, especially IAS 34 (Interim Financial Reporting).

To the extent that there were no changes to standards requiring first-time application, the accounting, valuation and calculation methods explained in the 2014 Consolidated Financial Statements have also been applied in this set of interim financial statements, and apply correspondingly.

These interim financial statements contain all clarifications and information required for annual financial statements, and can therefore be read in conjunction with the annual financial statements as of 31.12.2014.

The Annual Report 2014 is made available on the Delticom website in the section Investor Relations or can be downloaded directly using the following link:

www.delti.com/Investor\_Relations/Delticom\_AnnualReport\_2014.pdf

During fiscal year 2014 management reporting was changed. There is no differentiation between the reporting of the previous E-Commerce and Wholesale segments any longer. Delticom is therefore a one-segment company; this change means that the segment information previously reported in the interim reports is no longer presented.

Group of consolidated companies

The group of consolidated companies comprises Delticom AG as controlling company, eight domestic and five foreign subsidiaries, all fully consolidated in the interim financial accounts.

Due to its negligible impact on Delticom's net assets, financial position and results of operations, the following companies are not consolidated, but instead recognized as a financial instrument pursuant to IAS 39.

  • OOO Delticom Shina, Moscow (Russia) of which Delticom owns 100 % of the shares
  • Tirendo France SAS, Paris (France) 100 % subsidiary of Tirendo Holding GmbH
  • Tirendo Netherlands B.V., Den Haag (Netherlands) -100 % subsidiary of Tirendo Holding GmbH
  • Tirendo AT GmbH, Vienna (Austria) 100 % subsidiary of Tirendo Holding GmbH
  • Tirendo Switzerland GmbH, Zug (Switzerland) 100 % subsidiary of Tirendo Holding GmbH
  • Tirendo Poland sp.z.o.o., Warsaw (Poland) 100 % subsidiary of Tirendo Holding GmbH

Compared with the Annual Report for fiscal year 2014 there were no changes in the group of consolidated companies.

Unusual items

No significant matters have arisen that affect the assets, liabilities, equity, result for the period, or cash flows, and which are unusual for Delticom AG's business due to their type, extent or frequency. Business trends are explained in the interim management report.

Profit and loss statement, balance sheet and statement of cash flow

Detailed information with regards to business trends and the profit and loss statement can be found in the chapter Business performance and earnings situation of the interim management report. The chapter Financial and assets position presents additional Information concerning the balance sheet and the cash flow statement.

Other operating expenses

The following table shows the development of the other operating expenses.

in € thousand Q115 Q114
Transportation costs 9,723 7,250
Warehousing costs 1,104 937
Credit card fees 986 867
Bad debt losses and one-off loan provisions 686 510
Marketing costs 5,258 4,785
Operations centre costs 1,751 1,491
Rents and overheads 1,762 1,763
Financial and legal costs 879 969
IT and telecommunications 533 433
Expenses from exchange rate differences 2,284 402
Other 819 655
Total 25,787 20,062

Earnings per share

Basic earnings per share totalled €-–0.11 (Q1-14: €-0.00). The diluted earnings per share totalled €-–0.11 (Q1-14: €-0.00).

Calculation of earnings per share

Pursuant to IAS-33, undiluted (basic) earnings per share are calculated by dividing the consolidated net income of €-–1,305,199.33 (previous year: €-20,411.41) by the 11,945,250 weighted average number of ordinary shares in circulation during the financial year (previous year: 11,855,440 shares).

Up to 30.04.2014 were given 15,810 potential shares (financial instruments and other agreements which entitle their holders to subscribe to ordinary shares) from the tranche dated 22.11.2007, 37,500 potential shares from the tranche dated 08.05.2008, 17,500 potential shares from the tranche dated 25.11.2008 and 15,000 potential shares from the tranche dated 30.03.2009.

The exercise prices for the tranches 22.11.2007, 08.05.2008, 25.11.2008 and 30.03.2009 were below the average share prices since the options were issued. As a result all tranches are included in the diluted earnings per share.

The calculation of the diluted earnings per share was based (in accordance with IAS-33) on net income after taxes totalling €-–1,389,719.76 (previous year: €-20,411.41) and the weighted average number of shares outstanding during the fiscal year and the number of potential shares from options totalling 11,945,250 shares (previous year: 11,945,250 shares).

Dividends

At Delticom's Annual General Meeting on 05.05.2015, the Management Board and the Supervisory Board will propose a dividend of €-0.25 per share (previous year: of €-0.50).

Related parties disclosure

Related companies and persons in the meaning of IAS 24 include the Managing and Supervisory boards of Delticom AG (category persons in key positions), the majority shareholders Binder GmbH and Prüfer GmbH (category companies with a significant influence on the Group), as well as not consolidated subsidiaries (category not cosolidated subsidiaries).

All transactions with related parties are agreed contractually, and conducted on terms as would also be usual with third parties. Transactions which occured during the interim reporting period did not have any significant effects on the earnings, financial and asset positions.

Related companies and persons (Category persons in key positions): In the reporting period, goods and services worth €-15-thousand (Q1-14: €-64-thousand) were purchased from related companies and persons, and goods and services worth €-1-thousand (Q1-14: €-0-thousand) were sold to related companies and persons. Accounts receivable from business with related companies and persons amounted to €-0-thousand (Q1-14: €-0-thousand) and accounts payable totalled €-1-thousand (Q1-14: €-25-thousand).

Related companies and persons (category not cosolidated subsidiaries): In the reporting period, goods and services worth €-0-thousand (Q1-14: €-0-thousand) were purchased from related companies and persons, and goods and services worth €-0-thousand (Q1-14: €-278-thousand) were sold to related companies and persons. Accounts receivable from business with related companies and persons amounted to €-187-thousand (Q1-14: €-665-thousand) and accounts payable totalled €-0-thousand (Q1-14: €-0-thousand).

Contingent liabilities and other financial commitments

As compared to 31.12.2014, the situation with regards to other financial commitments has not changed significantly. As of the reporting date, there were no contingent liabilities or claims.

Key events after the reporting date

There were no key events that occurred after the reporting date.

Declaration according to section 37w Abs. 5 WpHG (Securities Act)

The interim financial statements and the interim management report has not been reviewed by our auditors.

German Corporate Governance Codex

The website www.delti.com/Investor\_Relations/Entsprechungserklaerung.html shows the current statements made by the Managing and Supervisory boards of Delticom AG pursuant to Section 161 of the German Public Limited Companies Act (AktG).

Responsibility Statement

To the best of our knowledge, we declare that, according to the principles of proper interim consolidated reporting applied, the interim consolidated financial statements provide a true and fair view of the company's net assets, financial position and results of operations, that the interim consolidated management report presents the company's business including the results and the company's position such as to provide a true and fair view and that the major opportunities and risks of the company's anticipated growth for the remaining financial year are described.

Hanover, 13.05.2015

(The Management Board)

The Delticom Share

WKN 514680 ISIN DE0005146807 Reuters / Bloomberg DEXGn.DE / DEX GR Index membership SDAX, CXPR, GEX, NISAX Type of shares No-par value, registered Transparency level Prime Standard

23 November 2015

13 August 2015 6-monthly report 2015 12 November 2015 9-monthly report 2015 German Equity Forum Frankfurt

01.01.2015
– 31.03.2015
01.01.2014
– 31.12.2014
Number of shares shares 11,945,250 11,945,250
1
Share price on first trading day
18.61 30.98
1
Share price on last trading day of the period
19.19 18.92
1
Share performance
% +3.1 –38.9
1
Share price high/low
19.19 / 16.46 38,41 / 14,55
2
Market capitalisation
€ million 229.2 226.0
Average trading volume per day (XETRA) shares 10,543 19,435
EPS (undiluted) –0.11 0.24
EPS (diluted) –0.11 0.24
Equity per share 4.14 4.21

(1) based on closing prices

(2) based on official closing price at end of quarter

Estimates for 2015 Estimates for 2016
Broker Analyst Recommen
dation
Target
price
Sales
(€m)
EBITDA
(€m)
EBIT
(€m)
EBIT
(%)
EPS
(€)
Sales
(€m)
EBITDA
(€m)
EBIT
(€m)
EBIT
(%)
EPS
(€)
NordLB Frank Schwope Buy 23.00 532.0 18.1 12.6 2.4 0.70 561.0 20.9 14.8 2.4 0.70
Commerzbank Andreas Riemann Hold 19.00 527.0 21.9 14.5 2.8 0.81 564.0 27.7 19.8 2.8 0.81
Hauck Sascha Berresch Sell 12.00 506.7 15.7 10.9 2.2 0.57 527.0 20.6 16.0 2.2 0.57
Montega Tim Kruse Hold 20.00 510.0 15.2 7.9 1.5 0.42 540.6 24.1 19.4 1.5 0.42
Warburg Marc-René Tonn Hold 18.00 516.1 16.3 8.9 1.7 0.49 562.7 23.6 18.9 1.7 0.49
Average 18.40 518.4 17.4 11.0 2.1 0.60 551.1 23.4 17.8 3.2 0.60

as of 12 May 2015

Imprint

Publisher Delticom AG
Brühlstraße 11
30169 Hanover
Germany
Contact Investor Relations Melanie Gereke
Brühlstraße 11
30169 Hanover
Phone: +49-511-93634-8903
E-Mail: [email protected]

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