Business in the first quarter

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.

Revenues. 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. Revenues in the E-Commerce division with its 163 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.

Gross margin. Group COGS increased by 21.9 % from € 71.2 million in Q1 14 to € 86.8 million in Q1 15. The gross margin for the first quarter was set to 22.0 %, after 24.5 % in Q1 14.

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 %). Other operating expenses. Other operating expenses amounted to € 25.8 million (Q1 14: € 20.1 million, + 28.5 %). 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 marketing spent with 4.7 % of revenues was lower than last year’s 5.1 %.

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

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 %).

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.

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 %).

Cash flow and liquidity position. Due to the development in net working capital, the Q1 15 cash flow from ordinary business activities (operating cashflow) of € -9.1 million was significantly lower than in the comparison period (Q1 14: € 10.7 million).

In the first quarter, Delticom invested € 75 thousand into property, plant and equipment and € 158 thousand in intangible assets. Q1 15 cash flow from investing activities amounted to € -0.2 million (Q1 14: € -0.2 million).

Due to repayment of loans of € -1.1 million and the raising of financial liabilities of € 0.7 million, the cash flow from financing activities amounted to € -0.4 million in the reporting period (Q1 14: € -0.9 million).

Liquidity (cash and cash equivalents plus liquidity reserve) as of 31.03.2015 totalled € 20.5 million (31.12.2014: € 29.9 million, 31.03.2014: € 21.1 million). The company’s net cash position amounted to € 15.3 million (liquidity less liabilities from current accounts, 31.03.2014: € 8.7 million).

Outlook.

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 tenaciously 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.

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 management continues to aim for revenues in absolute terms at least on par with fiscal year 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 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.

Download the full report for the first three months 2015 (pdf)

Company Profile:

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 (9,500 in Germany alone) for professional fitting directly on to the customer’s vehicle at a reasonable price.

On the Internet at: www.delti.com