Delticom publishes Annual Report 2022

Overall statement

Inflationary price trends and uncertainty about geopolitical and macroeconomic developments have left their mark on consumers over the course of the year, and consequently on the willingness of private consumers to spend, and not least on the European replacement tyre business. Once again, Delticom AG's ability to adapt to rapidly changing market conditions proved its worth. All extraordinary cost burdens that arose during the course of the year beyond the planning at the beginning of the year were offset by corresponding earnings contributions in the operative EBITDA. The company took advantage of growth and earnings opportunities and continued to optimise processes in order to further improve cost structures for the future.

With revenues of € 509.3 million and an operating EBITDA of € 15.0 million in the past financial year, the company achieved the targets set for the past fiscal year despite a difficult market environment.

In March of the current fiscal year, the syndicated financing of the Delticom Group was successfully extended until December 20^th, 2024. Due to the positive company development and stringent working capital management, the company was able to reduce the financing framework by a further € 20 million to a total of € 40 million.

Fiscal year 2022

Market environment. According to the European Tyre & Rubber Manufacturers Association (ETRMA), the European passenger car replacement tyre business recorded an increase in sales of 7.4 % in the first six months of the past year. However, the war in Ukraine and the resulting increase in energy and living costs had an impact on the development of sales over the course of the year. For the year as a whole, 2.0 % fewer consumer tyres (passenger, SUV and light truck tyres) were demanded by retailers (sell-in) compared to the previous year. In Germany, the largest single market in Europe, 6.2 % fewer replacement passenger car tyres were sold by retailers to consumers (sell-out) compared to the previous year. At 41 million units sold, a new low was reached since the beginning of the Corona pandemic last year. In the pre-Corona year 2019, 48.5 million replacement passenger car tyres were still in demand in the German tyre trade.

Revenues. In the past fiscal year, the Delticom Group recorded total revenues of € 509.3 million (2021: € 585.4 million). In the 2021 financial year, the US business, which was successfully sold at the beginning of last year, contributed around € 78 million to consolidated revenues. In the core business Tyres Europe, revenues were 0.4 % higher than in the previous year. The increase is primarily associated with the inflationary price development over the course of the year.

Gross margin. The gross margin (trading margin excluding other operating income) was 21.6 % for the past financial year, compared to 21.9 % in the corresponding period of the previous year. Due to the price development on the raw material markets, purchase prices increased during the course of the year. The company succeeded in passing on the price increase to customers accordingly. The slight decrease in margins compared to the previous year results from a change in the sales mix. Due to the weaker demand in the business with private end customers, the share of sales with commercial customers increased compared to the previous year. Although the margins here are lower than in the business with private end customers, this share of business also has a lower cost structure.

Other operating income. Other operating income increased to € 33.6 million in the reporting period (2021: € 28.6 million). The increase of 17.2 % is mainly due to the contribution to earnings of € 3.8 million in connection with the sale of the US company. Due to damage to the building, a rented warehouse can no longer be used. The reversal of the liability for the remaining rental period resulted in income from the disposal of assets in the amount of € 1.2 million. The rights of use were written off in the corresponding amount. Other operating income also includes gains from exchange rate differences in the amount of € 7.1 million (2021: € 4.7 million). Currency losses are reported under other operating expenses (2022: € 9.0 million, 2021: € 4.0 million). The balance of currency gains and losses amounted to € -1.9 million in the reporting period (2021: € 0.7 million).

Gross profit. In the reporting period, the gross profit decreased by 8.2 % from € 156.6 million to € 143.7 million compared to the corresponding value of the previous year. In relation to the total operating performance of € 542.9 million (2021: € 614.0 million), the gross profit amounted to 26.5 % (2021: 25.5 %). In the core business Tyres Europe, the gross profit margin is almost unchanged compared to the previous year (2021 without USA: 26.4 %).

Personnel expenses. As of the reporting date 31 December 2022, the Group had a total of 178 employees (including apprentices) (31 December 2021: 174). In the reporting period, the Group had an average of 183 employees (2021: 174). Personnel expenses amounted to € 14.0 million in the reporting period (2021: € 13.4 million, +4.8 %). The personnel expense ratio (ratio of personnel expenses to revenue) was 2.8 % in the past financial year (2021: 2.3 %).

Other operating expenses. Among the other operating expenses, transport costs is the largest line item. They amounted to € 40.7 million in the reporting period. The significant decrease of 24.2 % compared to the previous year (2021: € 53.6 million) is largely due to the sale of the US business. Due to the volume development in the core business Tyres Europe and partly shorter delivery distances to customers after the commissioning of the new warehouse location in the border triangle of Germany, France and Switzerland at the beginning of the previous financial year, the transport costs in the core business Tyres Europe also decreased over the course of the year.

Marketing. Marketing expenses amounted to € 13.8 million in the reporting period (2021: € 18.8 million, -26.5 %). The significant year-on-year decline is largely due to the sale of the US company. In the core business Tyres Europe, the company adjusted marketing expenses in the course of the year in line with the weaker demand in the business with private end customers. The marketing expense ratio is 2.7 % of revenues (2021: 3.2 %).

EBITDA. EBITDA fell from € 17.1 million to € 15.0 million in the reporting period, a decrease of 12.2 %. The EBITDA margin for the full year is 2.9 % (2021: 2.9 %). Expenses unrelated to the accounting period in the amount of € 2.5 million burdened EBITDA in the past financial year. The currency development also resulted in a negative effect on earnings in the amount of € 2.6 million (FX result 2022: € -1.9 million, 2021: € +0.7 million). In 2022, the extraordinary earnings contributions from the US sale are offset by extraordinary expenses of almost the same amount. Operating EBITDA amounts to € 15.0 million (2021: € 15.7 million reported). Group EBITDA is the starting point for the calculation of operating EBITDA. The expenses unrelated to the accounting period also have a corresponding negative impact on the operating EBITDA, as these are not eliminated.

Depreciation. Depreciation increased by 7.4 % from € 10.0 million to € 10.8 million in the reporting period. Due to building damage to a rented warehouse, this location can no longer be operated by the company. The rights of use from the underlying rental agreement were written down accordingly. This depreciation amounts to € 1.2 million.

Financial income. Financial income of € 863 thousand was generated in the reporting period (2021: € 158 thousand). This income resulted primarily from the exchange of collateral at the beginning of the year. The rental collateral deposited in cash at the time for the warehouse location in Alsace was replaced by a rental guarantee. Interest expenses for the past financial year amount to € 1.9 million (2021: € 2.3 million). The decrease goes hand in hand with the company's debt reduction, which led to a lower utilisation of credit lines in the course of the year compared to the previous year.

EBIT. The EBIT achieved in 2022 amounted to € 4.2 million, after € 7.1 million in the previous year. This corresponds to an EBIT margin of 0.8 % (2021: 1.2 %).

Income taxes. For the past financial year, tax expenses amounted to € 0.4 million. This is made up of the use of previously recognised deferred tax assets and, to a lesser extent, income taxes. In 2021, deferred tax assets were recognised on loss carry forwards that were not taken into account in the previous year. This led to tax income of € 1.9 million in the previous year.

Net income. The consolidated net income of € 2.8 million or € 0.19 per share is lower than in the previous year (2021: € 6.8 million or € 0.49 per share).

Inventories. While part of the summer stockpiling for 2022 had already been brought forward to the end of 2021, the company acted end of last year in accordance with the set inventory targets. At € 43.3 million, inventories are € 3.3 million lower compared to the reporting date (31.12.2021: € 46.6 million). Due to the higher average inventory level for the year, the average range of coverage (average level of inventory divided by average cost of materials per day) increased to 41.1 days (2021: 33.3 days).

Liquidity. Cash and cash equivalents recorded a net outflow of € -3.0 million. As of 31.12.2022, cash and cash equivalents amounted to € 3.0 million (31.12.2021: € 4.9 million). Due to the seasonal nature of the business and the typical payment terms in the tyre trade, liquidity at the end of the year is comparatively low.

Current financial liabilities amounted to € 22.6 million on the balance sheet date, an increase of € 8.7 million compared to the previous year (2021: € 13.9 million). They include the current portion of the lease obligations from the long-term leases in the amount of € 9.9 million (31.12.2021: € 8.6 million). Current financial liabilities to banks amounted to € 12.7 million at the end of the year (31.12.2021: € 5.3 million). The increase in credit line utilisation compared to the previous year is accompanied by a reduction in trade payables.

Free cash flow. The free cash flow (operating cash flow minus cash flow from investment activities) fell from € 16.5 million in the previous year to € -2.4 million. This development goes hand in hand with the significant reduction in trade payables from € 84.6 million to € 53.9 million on the reporting date and the corresponding development in working capital.

Equity. Equity increased by € 1.7 million or 4.4 % to € 39.7 million (previous year: € 38.0 million). The consolidated net income of € 2.8 million achieved in the past financial year contributed to a further strengthening of equity. Against the background of the significant balance sheet contraction compared to the previous year, the structure of liabilities shows an increase in the equity ratio from 17.5 % to 20.3 %. The total of property, plant and equipment, intangible assets, rights of use, financial assets and inventories amounting to € 138.4 million was 69.9 % covered by long-term financing funds as of the reporting date 31 December 2022 (previous year: 63.3 %).

Outlook 2023

It remains to be seen to what extent the ECB's key interest rate policy will put a stop to inflation in the currency area in the current year. Further increases in the cost of living and energy and the associated burden on consumer spending cannot be ruled out at this point in time. Whether and to what extent European demand for replacement tyres can benefit this year from a catch-up effect as a result of last year's downward trend will depend not least on the overall economic conditions in the course of the year. So early in the year, it is not yet possible to derive any indicators for the year as a whole from the business development. In our planning for the current business year, we do not anticipate any further deterioration in the general economic and industry-related conditions. We also do not expect external factors to have a positive effect on the business. We are planning revenues for the full year in a range of € 500 million to € 534 million.

For the current business year, the company is also pursuing the goal of passing on possible price increases in purchasing to the customers. Although the company continues to work on improving its cost structure, an inflationary effect cannot be ruled out at present with regard to the development of costs for the year as a whole. In order to reduce fixed costs in the current year, the company will allocate a good part of the existing programming capacities to the further automation of downstream processes and to the harmonisation of the existing system landscape. Depending on revenues, we are aiming for an operating EBITDA of between € 14 million and € 18.9 million for the year as a whole.

The complete report for the 2022 fiscal year can be downloaded from the website www.delti.com in the "Investor Relations" section.



About Delticom:

With its brand Reifendirekt, Delticom AG is the leading company in Europe for the online distribution of tyres and complete wheels.

The product portfolio for private and business customers comprises an unparalleled range of more than 600 brands and over 40,000 tyre models for cars and motorcycles. Complete wheels and rims complete the product range. The company operates 351 online shops and online distribution platforms in 72 countries, serving more than 18 million customers.

As part of the service, the ordered products can be sent to one of Delticom's around 30,000 partner garages in Europe for mounting at the customer's request.

Based in Hanover, Germany, the company operates primarily in Europe and has extensive expertise in the development and operation of online shops, internet customer acquisition, internet marketing and the establishment of partner networks.

Since its foundation in 1999, Delticom has built up comprehensive expertise in designing efficient and fully integrated ordering and logistics processes. The company's own warehouses are among its most important assets.

In fiscal year 2022, Delticom AG generated revenues of around 509 million euros. At the end of last year, the company employed 178 people.

Delticom AG shares have been listed in the Prime Standard of Deutsche Börse since October 2006 (ISIN DE0005146807).

On the internet at: www.delti.com



Contact:
Delticom AG
Investor Relations
Melanie Becker
Brühlstraße 11
30169 Hannover
Phone: +49 (0)511-93634-8903
Fax: +49 (0)511-8798-9138
Email: melanie.becker@delti.com