Delticom : Revenues and EBITDA 2014 within the forecasted corridor (19 03 15)

Hanover, 19 March 2015 - Delticom (German Securities Code (WKN) 514680, ISIN DE0005146807, stock market symbol DEX), Europe's leading online tyre dealer, has pub-lished its full report for fiscal year 2014. In the reporting period, the company recognized revenues of € 501.7 million, a decrease of 0.8 % (2013: € 505.5 million). Revenues in the E-Commerce division were with € 493.4 million flat year-on-year (2013: € 493.1 million). EBITDA for the reporting period came down from € 22.2 million to € 15.3 million. The de-crease of 31.1 % reflects the higher cost base following the Tirendo takeover. Earnings per share amounted to € 0.24 (2013: € 0.97).

Q4 14: Mild winter

Market environment. Continued mild temperatures until well into December placed a drag on winter tyre business. Although greater demand for winter tyres was experienced at the year-end due to weather conditions, this proved unable to offset the fall in sales in the winter tyres business that had meanwhile occurred.

Revenues. Delticom group generated € 187.6 million of revenues in the fourth quarter (Q4 13: € 196.5 million, -4.5 %). Due to the holidays, some of the orders that were received at the end of the year were not shipped until the start of the new year. In the closing quarter, € 17.7 million in revenues were received through the Tirendo shops (Q4 13: € 18.1 million, -1.9 %).

Gross Margin. The group offered more attractive prices in its online shops during the fourth quarter in order to reach the sales targets that it had set for itself. The quarterly gross margin de-creased from 25.6 % in Q4 13 to 23.3 %.

Marketing. Marketing expenses in Q4 14 totalled € 8.8 million (Q4 13: € 10.7 million, -18.0 %). Marketing spent with 4.7 % of quarterly revenues was lower than last year's 5.5 %.

€ 3.1 million of the marketing spent in Q4 can be assigned to Tirendo (Q4 13: € 5.8 million, -47.6 %). The reduction in the Tirendo marketing costs in the final quarter arises from the optimization of existing campaigns and the attendant efficiency enhancement. The company closely controls the success of specific measures, and adopts a flexible management approach to marketing mix.

Personnel expenses. Personnel expenses of Delticom group amounted to € 4.2 million in the closing quarter (Q4 13: € 4.3 million, -2.7 %). Personnel expenses for Tirendo totalled € 1.2 million in Q4, a decrease of 16.5 % compared to the previous year.

EBITDA. In Q4 14, the Delticom Group generated € 7.3 million of EBITDA, comparing € 10.2 million in the previous year's quarter. The decrease in EBITDA of € 2.9 million, or 28.4 %, derives mainly from the reduced gross margin in the final quarter. Tirendo's EBITDA in the final quarter amounted to € -3.2 million, compared with € -4.5 million in Q4 13. The € 1.3 million improvement is chiefly due to the optimized cost structure, especially in marketing.

EBIT. Depreciation in Q4 remained with € 2.1 million nearly unchanged (Q4 13: € 2.1 million). Fourth quarter EBIT of the Group saw a decline of 35.8 %, from prior-year's € 8.1 million to € 5.2 million or 2.8 % of revenues (Q4 13: 4.1 %).

Net income. Net income for Q4 14 amounted to € 3.8 million (Q4 13: € 5.4 million)

Fiscal year 2014

According to initial estimates by industry associations in January 2015, winter tyre sales in Ger-many fell by 13.3 % in 2014. This major decline resulted in a fall in sales figures in the German replacement tyre business compared to the already weak business in 2013 - despite the slight increase of 2.5 % in replacement summer tyres for cars. The recent business survey of German association of tyre dealers (BRV, Bundesverband Reifenhandel und Vulkaniseur-Handwerk e.V.) shows a similar trend: among the participating outlets car winter tyre sales 2014 on average were down by 9.3 % compared to the previous year.

Revenues. Over the course of 2014, Delticom group generated revenues of € 501.7 million, a decrease of 0.8 % from prior-year's € 505.5 million. Revenues in the E-Commerce division with its 163 online shops were with € 493.4 million flat year-on-year (2013: € 493.1 million). Revenues of € 39.6 million were attributable to the Tirendo shops in the period under review.

Price development at the end of the year meant that sales volume rose disproportionately to revenues. Full-year Group revenues came to € 501.7 million at the lower end of the forecasted range of € 500-520 million.

Gross margin. The gross margin (trade margin ex other operating expenses) for the full year was 24.5 % after 24.8 % in the prior-year period.

Personnel expenses. In the reporting period on average 247 staff members were employed at Delticom group (previous year: 179). Personnel expenses amounted to € 15.6 million (2013: € 11.3 million). Compared to the prior-year period, the personnel expenses ratio (staff expenditures as percentage of revenues) increased from 2.2 % to 3.1 %.

On 31.12.2014, the group had a total of 188 employees, of which 150 were employed at Delti-com (including trainees) and 38 at Tirendo (including interns). As at 30 June 2014, this number was much higher, totalling 300 employees. The integration of Tirendo was accompanied by a step-by-step reduction in staff numbers in the course of the second half-year.

Other operating expenses. Among the other operating expenses, transportation costs is the largest line item. Despite the slight fall in revenues, Delticom sold more tyres in the period under review than in the previous year. The 2.4 % increase in transportation costs from € 43.6 million to € 44.6 million reflects the higher business volumes and the country-mix. The share of transportation costs against revenues went up from 8.6 % in 2013 to 8.9 % in 2014.

Marketing. In the reporting period, costs for advertising totalled € 24.2 million, after € 21.1 million in 2013. This represents a marketing expense ratio (marketing expenses as a percentage of revenues) of 4.8 % (2013: 4.2 %).

EBITDA. EBITDA for the reporting period came down from € 22.2 million to € 15.3 million. The 31.1 % fall reflects the higher cost base following the Tirendo takeover.

Depreciation. Depreciation for 2014 rose by 90.2 % from € 4.3 million to € 8.3 million. Deprecia-tion from PPA amounted to € 5.2 million.

EBIT. EBIT amounted to € 7.0 million in the reporting period (2013: € 17.8 million, -60.6 %). This equates to an EBIT margin of 1.4 % (2013: 3.5 %).

Income taxes. In 2014 the expenditure for income taxes was € 3.4 million (2013: € 6.2 million).

Consolidated net income. Consolidated net income for 2014 decreased from € 11.6 million to € 2.9 million. This corresponds to earnings per share (EPS) of € 0.24 (undiluted, 2013: € 0.97), a decrease of 75.0 %.

Dividend. 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 - a decrease of 50.0 % compared to the dividend for financial year 2013 of € 0.50 per share.

Inventories. Among the current assets, inventories is the biggest line item. Since the beginning of 2014 their value came down by € 16.7 million to € 56.2 million (31.12.2013: € 72.8 million). Despite mild weather conditions Delticom was able to sell the tyres bought in the preceding quarters, according to plan.

Liquidity. In the reporting period, cash and cash equivalents registered net inflows of € 18.7 million. On 31.12.2014, liquidity totalled € 29.9 million (prior year: € 11.5 million). At the reporting date, the company's net cash position (liquidity less liabilities from current accounts) amounted to € 25.3 million (31.12.2013: € -10.3 million).

Free cash flow. The free cash flow (operating cash flow less cash flow from investing activities) improved in 2014 from € -35.2 million to € 35.0 million.

Outlook. Based on the poor sales development last year, excess inventories in the supply chain cannot be ruled out in the case of winter tyres at least. For Germany, the BRV cautiously esti-mates that there will be no widespread improvement in the situation in 2015.

At the current time, there is still major uncertainty when it comes to market and price develop-ment in the European replacement tyre market in 2015. Our aim is to increase sales volume year on year and to reinforce our market-leading position. Assuming a deflationary price climate, we believe that an increase in sales may not necessarily lead to an increase in revenues. In absolute terms, we aim to generate revenues in the current financial year that are at least on a par with 2014.

An increase in unit sales results in a rise in volume-based costs. Should these rise more sharply in 2015 than revenues, a positive sales 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.

The integration of Tirendo in the Delticom Group is practically complete. Against the backdrop of the measures implemented within the past few months, we assume that Tirendo will reach break-even over the course of the year.

The full report for fiscal year 2014 stands ready for download within the "Investor Rela-tions" section of the website www.delti.com.

Delticom is Europe's leading online tyre retailer. Founded in 1999, the Hanover-based company has more than 160 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. More than 200,000 car parts, including motor oil, replacement parts and accessories, complement the product portfolio. 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 40,000 service partners (9,300 in Germany alone) for professional fitting directly on to the customer's vehicle at a reasonable price.

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