DGAP-News: Delticom AG / Key word(s): Annual Report/Annual Results Delticom AG: Turnaround succeeded! Positive net income of EUR 7 million despite decrease in revenues // Expansion of the Management Board // Continuation of the US business 2021-03-26 / 09:41 The issuer is solely responsible for the content of this announcement. =---------------------------------------------------------------------------------------------------------------------- Delticom AG: Turnaround succeeded! Positive net income of EUR 7 million despite decrease in revenues // Expansion of the Management Board // Continuation of the US business Hanover, March 26, 2021 - Delticom AG (German Securities Code (WKN) 514680, ISIN DE 00005146807, stock market symbol DEX) today published its Annual Report 2020. . Measures taken across all business units to reduce costs, optimise processes and increase efficiency had a sustained impact . Significant improvement in EBITDA . Positive net income in the amount of EUR 7 million in 2020 - after a loss of EUR 41 million in 2019 . Clear focus on profitability also in 2021 Market environment. The Corona pandemic and the associated restriction of mobility did not remain without consequences for the demand of replacement tyres last year. According to the German Rubber Industry Association (WdK) and the European Tyre and Rubber Manufacturers' Association (ETRMA), 10.4 % fewer replacement tyres were sold to consumers in Germany last year. Looking at the European replacement tyre market, the ETRMA figures also show a downward trend in sales. In the largest sub-segment by volume, 12.1 % less consumer tyres (passenger, SUV and light truck tyres) were sold over the year as a whole. In absolute terms, this corresponds to a decrease of more than 26 million units. Revenues. Over the course of 2020, Delticom group generated revenues of EUR 541.3 million, a decrease of 13.5 % from prior-year's EUR 625.8 million. The discontinuation of unprofitable business areas led to a decrease in revenues of around EUR 30 million compared to the previous year. Revenues in the core business in the past financial year are 9 % behind the previous year due to cost-cuttings in marketing and price adjustments. The pandemic-related restrictions at the relevant times of the season in the European core markets in both the summer and winter business and the overall reduced mobility led to a significant decline in demand for replacement tyres in Europe last year. Our business performance is not completely independent of the underlying market development. Notwithstanding this, we assume that those tyre buyers who were unable to postpone the purchase of replacement tyres last year increasingly took advantage of online tyre purchasing. Our focus on profitability last year was accompanied by the objective of generating sufficiently profitable revenues. With regard to the weaker business development in December, the lower end of the forecasted revenues range (EUR 550 million) was undercut by 1.6 %. Due to the renewed lockdown measures in Europe and the tightening of the lockdown in Germany at the seasonal peak, which was delayed due to the weather, revenues at the end of the year were somewhat weaker than we had expected. Gross margin. The gross margin (trading margin excluding other operating income) came in at 22.7 %, compared with 21.6 % the previous year. In line with its objective to sustainably increase profitability in its core business, the company succeeded in increasing its gross margin in a difficult market environment influenced by Corona. Other operating income. Other operating income decreased in 2020 by 12.4 % to EUR 33.0 million (2019: EUR 37.6 million). In the course of the past financial year, the opportunity arose to realise a profit contribution from project development, which was realised at the end of the reporting year. This contribution to earnings amounts to EUR 9.5 million. In the previous year, income of EUR 14.0 million was generated from the participation in an ongoing logistics/property project. The year-on-year decrease in other operating income is therefore not attributable to the operating business, in which marketing subsidies, proceeds from transport losses and other income are regularly recognized. In addition, other operating income includes gains from exchange rate differences in the amount of EUR 3.7 million (2019: EUR 3.4 million). FX losses have been accounted for as line item in the other operating expenses (2020: EUR 5.4 million, 2019: EUR 6.5 million). In the reporting period the balance of FX income and losses totalled EUR -1.6 million (2019: EUR -3.1 million). Gross profit. In the reporting period, gross profit decreased by 9.7 % from EUR 172.7 million to EUR 155.9 million compared to the previous year due to the decreasing revenues development. Gross profit in relation to total income of EUR 574.2 million (2019: EUR 663.4 million) amounted to 27.1 % (2019: 26.0 %). Personnel expenses. On 31.12.2020, the group had a total of 177 employees (including trainees). In the reporting period on average 196 staff members were employed at Delticom group (previous year: 261). Personnel expenses totalled EUR 14.3 million (2019: EUR 19.9 million, -28.4 %). The discontinuation of non-core businesses since the end of the 2019 financial year was gradually accompanied by a corresponding reduction in staff within the Delticom Group. The personnel expenses ratio (staff expenditures as percentage of revenues) amounted to 2.6 % in the past financial year (2019: 3.2 %). Other operating expenses. Among the other operating expenses, transportation costs is the largest line item. Due to the decline in sales volumes and the measures implemented last year to further improve cost efficiency in the area of transport logistics, transport costs in the reporting period were with EUR 50.1 million 19.3 % lower than in the same period of the previous year (2019: EUR 62.2 million). Marketing. Marketing expenses in the reporting period amounted to EUR 18.9 million, after EUR 28.6 million in the previous year. The significant decrease of 34.0 % is the result of comprehensive cost-cutting measures. The efficiency and contribution to earnings of the various marketing channels within the Delticom Group are closely monitored by means of a marketing controlling system newly set up last year, in order to allocate the measures in line with the sales and profitability targets. The marketing expense ratio is 3.5 % of revenues (2019: 4.6 %). EBITDA. EBITDA for the reporting period increased by 326.6 % from EUR -6.6 million to EUR 15.0 million. The EBITDA margin for the fiscal year stood at 2.8 % (2019: -1.1 %). The significant increase in the operating result before interest, taxes, depreciation and amortisation in the last year goes hand in hand with the consistent cost management, the focus on the core business and the measures taken to increase margins and efficiency. The realized contribution to earnings from project developments in the amount of EUR 9.5 million compensated for both the extraordinary charges from restructuring in the amount of EUR 6.7 million and the EUR 0.5 million negative EBITDA contribution of the business units closed in the course of the year. Depreciation. Depreciation on property, plant and equipment decreased in the year under review to EUR 2.1 million (2019: EUR 11.5 million). In the 2019 annual financial statements, impairments of EUR 7.9 million had to be recognised in connection with the deinvestment concept. The amortisation of intangible assets amounted to EUR 2.2 million in 2020 (2019: EUR 19.1 million). The decision to close unprofitable business units in 2019 as part of the restructuring concept resulted the same year in impairment losses of EUR 14.2 million on the corresponding assets of these business units in preparation for the discontinuation of operations. Due to the capitalization of the long-term lease for the warehouse location in the border triangle France, Germany and Switzerland, depreciation and amortization for rights of use according to IFRS 16 increased from EUR 4.8 million in the previous year to EUR 5.4 million. Overall, depreciation and amortisation decreased by 72.7 % from EUR 35.4 million to EUR 9.7 million in the reporting period. No material impairment losses were recognized in the fiscal year under review. EBIT. The EBIT achieved in 2020 amounted to EUR 5.4 million, after EUR -42.1 million in the previous year. This corresponds to an EBIT margin of 1.0 % (2019: -6.7 %). In addition to the factors already described as having had a negative impact on earnings in the 2019 financial year, impairments on non-current assets of EUR 22.1 million were also necessary in connection with the deinvestment concept in the 2019 annual closing. The company has thus largely brought forward the factors affecting earnings from the closure of unprofitable business units to the 2019 group financial statements. Accordingly, no significant impairments were necessary in the 2020 financial year in connection with the closure of the various business units. The extraordinary factors of restructuring and refocusing, which had a negative impact on earnings last year, were fully compensated for by the extraordinary contribution to earnings from project developments. As a result, the improvement in EBIT last year is largely attributable to the positive development of costs and margins in the core business. Income taxes. Due to the positive pre-tax earnings (EBT) of EUR 2.6 million, there is a current expense of EUR 0.9 million in the item "Taxes on income". The income in 2020 mainly results from the capitalization of deferred taxes on loss carryforwards in the amount of EUR 5.2 million, which Delticom can use in the future. This results in total tax income of EUR 4.3 million for 2020. In 2019, the tax income amounted to EUR 2.7 million. Net income. The consolidated net income of EUR 6.9 million (respectively EUR 0.55 per share) is significantly higher than
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