30169 Hannover, de
+49 (511) 93634-8903
Delticom publishes Semi-Annual Report 2017
Business in the first six months
Market environment. Hopes for a turnaround in the European market for replacement tyres were unfulfilled in the first six months of the current year. According to the manufacturers' association ETRMA, sales of replacement car tyres to distributors in Europe were 1 % lower than in same period of the previous year. Here in Germany, the spring-like weather persuaded many drivers to make an early switch to summer tyres in March, resulting in a noticeably decline in summer tyre business in the second quarter. According to current figures published by the industry associations, in the first six months of the current year, consumer sales of replacement car tyres booked by German tyre dealers were down by 2.8 %. It is anticipated that the value of the summer tyre business saw a decline of 4.9 % in the first half of 2017.
Revenues. In H1 17, the Group recognized revenues of EUR 297.1 million, an increase of 8.0 % after EUR 275.1 million in the prior-year period. During the first three months of the current fiscal year, Delticom generated revenues of EUR 126.8 million (Q1 16: EUR 105.8 million, +19.9 %). Other than in the previous year, some springlike days in March favored an early start to the summer tyre season. However, with the weather pulling sales forward, the increase in the second quarter was accordingly weaker. In the second quarter, the company generated revenues of EUR 170.3 million (Q2 16: EUR 169.3 million, +0.6 %).
New customers. In H1 17 the company was able to acquire a total of 599 thousand new customers (H1 16: 545 thousand, +9.9 %). In addition, a total of 538 thousand existing customers (H1 16: 505 thousand, +6.5 %) made repeat purchases at Delticom Group in the reporting period. Since the company was founded more than 11.4 million customers have made purchases in one of our online shops.
Gross margin. The cost of goods sold (COGS) is the largest expense item; it considers the purchase price of sold products (mainly tyres). Group COGS increased by 11.8 % from EUR 210.1 million in H1 16 to EUR 234.8 million in H1 17. The gross margin decreased in the reporting period from 23.6 % in H1 16 to 21.0 %. In the first six months the company structured the prices in its online shops in line with its sales targets for H1 17.
Personnel expenses. In the reporting period, Delticom employed an average of 156 staff members (H1 16: 144). Personnel expenses amounted to EUR 5.2 million (H1 16: EUR 5.0 million, +5.4 %). Broadening our business activities has resulted in further new hirings over the past 12 months in order to drive forward the pace of development in individual areas.
Other operating expenses. Other operating expenses amounted to EUR 64.2 Million (H1 16: EUR 62.9 million, +2.1 %). Among the other operating expenses, transportation costs is the largest line item. The moderate increase in transportation costs from EUR 27.3 million by 3.1 % to EUR 28.1 million is mainly due to the sales country-mix.
Marketing. Marketing expenses in H1 17 amounted to EUR 12.0 million, after EUR 12.4 million the previous year. On the one hand, the 3.2 % decrease goes hand in hand with a change in the marketing mix. On the other hand, no TV advertising costs have been incurred for the Tirendo shops since mid of 2016. H1 17 marketing spent with 4.0 % of revenues was lower than last year's 4.5 %.
EBITDA. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the repor-ting period came in at EUR 5.0 million (H1 16: EUR 6.1 million, -18.8 %). This equates to an EBITDA margin of 1.7 % (H1 16: 2.2 %).
Depreciation. Depreciation decreased from EUR 4.5 million by 19.0 % to EUR 3.6 million. This decline was essentially due to lower scheduled write-downs on intangible assets.
EBIT. Earnings before interest and taxes (EBIT) decreased in the reporting period by 18.1 % to EUR 1.3 million (H1 16: EUR 1.6 million). This translates into an EBIT margin of 0.5 % (EBIT in percent of revenues, H1 16: 0.6 %). Thanks to a reduction in depreciation, the decline in EBIT compared to EBITDA was less pronounced. On the expenses side, the company has invested the reduced amount of depreciation in H1 17 almost entirely in new projects.
Income taxes. In the first six months the expenditure for income taxes totalled EUR 0.4 Million (H1 16: EUR 0.5 million). This equates to a tax rate of 31.7 % (H1 16: 34.3 %).
Net income. Consolidated net income in the first half of the year totalled EUR 0.8 million after EUR 0.9 million in H1 16. This corresponds to earnings per share (EPS) of EUR 0.06 (H1 16: EUR 0.07).
Inventories. Among the current assets, inventories is the biggest line item. Since the beginning of the year their value grew by EUR 27.9 million or 44.4 % to EUR 90.6 million (31.12.2016: EUR 62.7 million, 30.06.2016: EUR 91.9 million).
Receivables. Trade receivables usually follow the seasons, but reporting date effects are often unavoidable. At the end of the second quarter, receivables amounted to EUR 45.2 million (31.12.2016: EUR 35.5 million, 30.06.2016: EUR 38.0 million).
Payables. In the wake of the inventory build-up, the accounts payable increased from an ope-ning balance of EUR 89.0 million by 20.6 % to EUR 107.3 million. This corresponds to a share of 49.6 % of the balance sheet total (31.12.2016: 48.6 %, 30.06.2016: 39.5 %).
Liquidity. Liquidity as of 30.06.2017 totalled EUR 3.0 million (31.12.2016: EUR 6.7 million, 30.06.2016: EUR 8.3 million).
In the reporting period, Delticom used existing credit lines for the intra-year financing of the inventory accumulation. On 30.06.2017, the company's net cash position (liquidity less liabilities from current accounts) amounted to EUR -29.2 million (31.12.2016: EUR -6.2 million, 30.06.2016: EUR -29.9 million).
Cash flow. Due to the development in net working capital, the H1 17 cash flow from ordinary business activities (operating cash flow) of EUR -12.4 million was lower compared to the previous year (H1 16: EUR -9.1 million).
In the reporting period Delticom invested EUR 1.8 million into property, plant and equipment. Further EUR 1.2 million were invested in intangible assets (H1 16: EUR 0.2 million). As a result, the cash flow from investment activities totalled EUR -3.1 million (H1 16: EUR -20.2 million). The figure for the previous year resulted from the acquisition of the efood and logistics companies in H1 16.
In the reporting period, Delticom recorded a cash flow from financing activities amounting to EUR 11.9 million, thereof the dividend payout for the last financial year of EUR 6.2 million and the repayment of long-term loans of EUR 1.3 million. The cash outflow was offset by inflows from financial liabilities of EUR 19.4 million.
Revenues in the first half of the year developed as scheduled. In a weak market environment, the company succeeded in increasing the volume of sales in its core business compared to the year before.
More than half of the world's population already uses the internet and this trend will continue. In many areas, online trading is now a key growth driver.
As Europe's leading online retailer of tyres and automotive accessories as well as efood specialist and expert in the field of efficient warehousing logistics, Delticom is set to profit in the coming months from the increasing trend towards E-Commerce. We expect to see a further positive trend in sales in the second half of the year.
We continue to anticipate that Delticom Group revenues in the current year will increase to EUR 650 million. We also expect that Delticom Group's EBITDA for the full year to be at EUR 16 million. Given a normal winter, we anticipate to see a positive effect on margins in the second half of the year.
The full report for the first six months 2017 stands ready for download within the "Investor Relations" section of the website www.delti.com.
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