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Delticom publishes 9-Monthly Report 2014

Hanover, 13 November 2014 - Delticom (German Securities Code (WKN) 514680, ISIN DE0005146807, stock market symbol DEX), Europe's leading online tyre dealer, has published its full report for the first nine months of 2014. In the reporting period, the company recognized revenues of 314.1 million, an increase of 1.6 % (9M 13: 309.1 million). EBITDA came in at 8.0 million. This equates to an EBITDA margin of 2.5 %, after 3.9 % the previous year.

Business in the third quarter

Following a significant increase in sales in the first quarter, the tyre business already cooled considerably in the second quarter due to the effects of customers purchasing tyres early on in the season. The first three months of the second half of the year are typical of the transitional period between the summer and the winter tyre business. After the business with summer tyres had already cooled off in the second quarter, sales performance also lagged behind expectations in the third quarter. According to initial estimates by trade associations, 5 % fewer summer tyres were sold in Germany in the third quarter. Persistent mild weather also had the effect that drivers had not begun to switch from summer to winter tyres as at the end of the reporting period. During the third quarter, one-third fewer winter tyres were sold by German traders than in the same period of the previous year. In the other countries that typically switch from summer to winter tyres, the temperatures at the end of September were likewise too warm for an early start to the season.

Revenues. In the third quarter, the company generated revenues of 88.1 million (Q3 13: 96.9 million, -9.1 %). In 9M 2014 the Delticom Group recognized revenues of 314.1 million, an increase of 1.6 % after 309.1 million in the prior-year period. Revenues in the E-Commerce division with its 144 online shops increased year-on-year by 2.5 %, from 299.8 million to 307.2 million.

Tirendo. Revenues of Tirendo for nine months 2014 amounted to 21.8 million, a decrease of 14.7 % compared to the previous year (9M 13: 25.6 million). The focus at Tirendo this year is on optimizing costs to create a basis for a profitable growth course. The 46.8 % decline in revenues in the third quarter, from 8.1 million in Q3 13 to 4.3 million, is partly due to weaker demand on account of the mild weather. The drop is also attributable to the strategy of cutting advertising costs and aligning them more flexibly to market conditions with a view to increasing the efficiency of such measures in the future. Since its acquisition, Tirendo has benefited from Delticom's strengths in procurement and logistics. Tirendo's gross margin in the third quarter amounted to 18.3 % (Q3 13: 13.9 %). Thanks to the improvement in margins and a lower cost base, Tirendo's EBITDA stood at -1.9 million in Q3 14, which was 48.6 % higher than in the same period in the previous year (Q3 13: -3.7 million).

New customers. In the reporting period, Delticom and Tirendo together acquired a total of 643 thousand new customers (9M 13: 634 thousand, Delticom excluding Tirendo, +1.5 %). Over the same period, 550 thousand existing customers bought their tyres from the Delticom Group again.

Gross margin. Group COGS increased by +0.4 % from 234.1 million in 9M 13 to 235.1 million in 9M 14. Gross margin came in with 25.2 %, after 24.3 % the previous year. Despite the weak market environment, the quarterly gross margin increased from 24.1 % in Q3 13 to 26.1 %.

Personnel expenses. Personnel expenses for nine months 2014 amounted to 11.4 million (9M 13: 7.0 million). The 9M 14 personnel expenses ratio stood at 3.6 % (staff expenditures as percentage of revenues, 9M 13: 2.3 %). On 30.09.2014, the company had a total of 257 employees, of which 154 were employed at Delticom (including trainees) and 103 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 reduction in staff numbers in the course of the third quarter.

Other operating expenses. Among the other operating expenses, transportation costs is the largest line item. They increased in the reporting period from 27.2 million by 3.5 % to 28.1 million. The share of transportation costs against revenues went up from 8.8 % in 9M 13 to 8.9 % in 9M 14.

Marketing. For the year so far, marketing expenses grew by 49.1 % to 15.4 million (9M 13: 10.3 million), equating to a ratio of 4.9 % (9M 13: 3.3 %). This significant increase is mainly due to the 6.1 million additional marketing spend of Tirendo in the first nine months of the current fiscal year. Q3 14 marketing expenses of 4.4 % of revenues were higher than last year's 4.0 %.

EBITDA. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the reporting period came in at 8.0 million (9M 13: 12.0 million). This equates to an EBITDA margin of 2.5 % (9M 13: 3.9 %). The negative result contribution from Tirendo during the first nine months of 2014 comprises an important reason for the -33.3 % year-on-year decline of group EBITDA.

Depreciation. Depreciation for 9M 14 rose by 174.1 % from 2.2 million to 6.2 million. Main reason for this increase is the scheduled depreciation of intangible assets. Depreciation from PPA amounted to 4.0 million in the reporting period.

EBIT. EBIT for the reporting period came down by 81.3 % from 9.7 million to 1.8 million. This equates to an EBIT margin of 0.6 % (9M 13: 3.1 %).

Delticom excluding Tirendo. Delticom generated revenues of 292.3 million in the reporting period, compared to 306.2 million in 9M 13 (-4.5 %). EBITDA amounted to 17.0 million, an increase of 31.7 % (9M 13: 12.9 million). This corresponds to an EBITDA margin of 5.8 % (9M 13: 4.2 %). Against the backdrop of a weak market environment, Delticom's revenues in the third quarter decreased by 10.9 % to 83.8 million (Q3 13: 94.0 million). Despite the downturn in revenues, Delticom succeeded in raising EBITDA significantly by 37.6 % in the third quarter.

Income taxes. The expenditure for income taxes amounted to 2.1 million in the reporting period (9M 13: 3.5 million).

Net income. For the period under review, consolidated net income totalled -0.9 million after 6.2 million the previous year. This negative performance was primarily attributable to Tirendo's accumulated losses after tax of -9.8 million in 9M 14.

Inventories. Among the current assets, inventories is the biggest line item. Since the beginning of the year their value grew by 44.5 million to 117.4 million (31.12.2013: 72.8 million, 30.09.2013: 120.7 million). This corresponds to a share of 50.7 % of total assets (31.12.2013: 41.1 %, 30.09.2013: 51.8 %).

Liquidity position. Liquidity (cash and cash equivalents plus liquidity reserve) as of 30.09.2014 totalled 24.5 million (30.09.2013: 9.2 million, 31.12.2013: 11.3 million). On 30.09.2014, the company's net cash position amounted to -3.2 million (liquidity less liabilities from current accounts, 30.09.2013: -16.6 million).

Outlook.

The fourth quarter is of central importance in terms of revenues and profitability for the full year. This year, the switchover to winter tyres only began to gather pace in mid-October in many regions. Although the volume of incoming orders at Delticom and Tirendo has been significantly higher in a year-on-year comparison since the second half of October, the course of business in the fourth quarter will be impacted by the weather conditions in Europe in the weeks ahead. Given the unusually mild weather, the market situation in the first nine months and the uncertain course of business in the fourth quarter, Delticom has adjusted its full-year forecast for the current financial year. On the basis of current planning, consolidated revenues will lie in a range of between 500 million and 520 million on a full-year view. Depending on the respective market situation over the coming weeks and related price trends, the company is aiming for EBITDA of between 15 million and 20 million in the 2014 financial year.

Tirendo. We will continue to improve cost structures and profitability at Tirendo over the next few months.
Due to the fact that Tirendo is now fully integrated in the Delticom Group, there will be further planned job cuts at Tirendo through to the end of the current financial year. Starting next year, the crew in Berlin will consist of a core team of about 20 employees. Operational activities will be mainly outsourced to long-standing partners of Delticom, and existing processes in the Group will be standardised and streamlined.
Advertising costs at Tirendo were reduced significantly in the third quarter, and we intend to make additional cost savings and improve the efficiency of our advertising measures in the months ahead. With regard to the measures described above, we expect that Tirendo will become break even during the course of the financial year ahead and will make a positive contribution to the company's success in future.

The full report for the first nine months 2014 stands ready for download within the "Investor Relations" section of the website www.delti.com.

9-Monthly Report 2014 Download pdf-file

Company Profile:

Delticom is Europe's leading online tyre retailer. Founded in 1999, the Hanover-based company has more than 140 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 (9,000 in Germany alone) for professional fitting directly on to the customer's vehicle at a reasonable price.

On the Internet at: www.delti.com

Contact:

Delticom AG Investor Relations
Melanie Gereke
Brühlstraße 11
30169 Hannover
Tel.: +49(0)511-936 34-8903
Fax: +49 (0)89-208081147
e-mail: melanie.gereke@delti.com

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Delticom AG
Brühlstr. 11
30169 Hannover
Germany
+49-(0)1805-Delticom (+49-(0)1805-335842)

URL: http://www.delti.com
E-Mail: info@delti.com