Published: 17-08-2016 19:01

Stern Groep N.V., the Dutch listed automotive group, announces its results for the first half of 2016:

Key points in H1-2016

  • Net revenue up 9.0% to € 562.4 million. Dealer Group Stern realised an increase of 8.8% and SternLease realised an increase of 19.6%
  • Operating profit rises to € 8.8 million (H1-2015: € 6.5 million)
  • Gross EBITDA amount to € 35.8 million (H1-2015: € 32.0 million)
  • Net EBITDA at € 12.7 million (H1-2015: € 11.6 million)
  • Strong increase in the result after tax to € 5.2 million (H1-2015: € 3.4 million), up 52%
  • Earnings per share up 53% to € 0.92 (H1-2015: € 0.60)
  • The solvency ratio at the end of June 2016 stood at 25.7% (year-end 2015: 25.7%), with net asset value per share of € 26.72 (year-end 2015: € 26.57)
  • Dealer Group Stern virtually maintained its market share for passenger cars at 5.6% (H1-2015: 5.7%) and increased its market share for light commercial vehicles to 8.4% (H1-2015: 8.0%)
  • Financing facilities increased at more favourable conditions
  • Forecast for the whole of 2016 is upwardly adjusted

Market share

The market for registered new passenger cars showed a limited 3.6% decline in H1-2016 to 193,983 units
(H1-2015: 201,582 units). Dealer Group Stern’s market share for new passenger cars was 5.6% in H1-2016
(H1-2015: 5.7% and for the whole of 2015: 5.4%).

In H1-2016 Dealer Group Stern sold around 300 new passenger cars that were registered in Stern’s name at year-end 2015, thus securing the 7% additional tax liability rate for these cars for 60 months. Due to the conditions of the importers, these cars may not be reported as new passenger cars sold. If these sales are taken into account, Dealer Group Stern maintained its market share for new passenger cars.

The market for new light commercial vehicles showed a clear increase of 25.5% in H1-2016 to 40,450 units H1-2015: 32,226 units). Mercedes-Benz (up 40%), Ford (up 44%) and Renault (up 36%) outperformed the market as a whole.

Against this national background, Dealer Group Stern sold 32.5% more new light commercial vehicles, thus outperforming the national market. Dealer Group Stern’s market share for new light commercial vehicles in H1-2016 accordingly came to 8.4% (H1-2015: 8.0%).

Progress in H1-2016

Net revenue increased by 9.0% compared to H1-2015 to € 562.4 million. The increase was visible at Dealer Group Stern (up 8.8%) and at SternLease (up 19.6%). Partly due to the changed composition of revenue from sales and from after-sales, gross profit as a percentage of revenue declined from 17.5% in H1-2015 to 17.0% in H1-2016.

Total employee expenses rose by € 0.3 million (0.5%), mainly due to an increase in the number of FTE of 77 (3.9%) compared to H1-2015 to 2,043 FTE as at 30 June 2016. This increase was partly due to the replacement of temporary (and more expensive) personnel with Stern employees and partly due to the increased level of operations.

The industry reached agreement on a new collective labour agreement in mid-June 2016 that runs until the end of October 2018. The main agreements in 2016 are that the premium shift (a changed allocation of pension costs that for Stern will involve an increase in cost of approximately 1.5%) will not be implemented until the beginning of 2017, that wages will be increased by 2% as of 1 September 2016 and that employees will receive a gross lump sum payment of € 300 in December 2016. The provision regarding the allocation of pension costs that was accrued in 2015 was, due to the reached agreement, partly released in H1-2016 (€ 0.8 million).

Depreciation expenses fell by € 1.1 million (21.7%), mainly due to the sale and leaseback transaction for 10 strategic premises in November 2015.

Operating expenses were up by € 3.5 million (13.2%) to € 29.7 million. Over € 2.0 million of this increase was due to the additional rental expenses of the 10 sale and leaseback premises. The cost savings related to the sale and leaseback are accounted for at the line-items depreciations and interest cost. Another reason for higher operating expenses was the increase in costs of sales resulting from additional marketing efforts by Dealer Group Stern and Mango Mobility to achieve additional revenue.

The operating result (EBIT) in H1-2016 came to € 8.8 million, compared to € 6.5 million a year earlier. This is an increase of 35%.

Dealer Group Stern

The decline in the number of new passenger car sales was partly offset by a 2.0% increase in the average sale price. The significant increase in revenue from light commercial vehicles of 35.3% and the important increase in revenue from used cars of 16.4% resulted in a € 43.0 million increase in sales. The sales margin was € 1.8 million higher than in H1-2015. The relative sales margin was unchanged at 4.9%.

Revenue from after-sales increased by € 2.4 million (8.8%), among other things due to higher revenue fr0m parts (+11.3%). Revenue from workshops was up 5.0% compared to H1-2015. This increase in revenue from workshops was achieved by the application of customer-contact centres (CCCs) and more intensive use of internet in approaching customers and prospects.

The relative margin on after-sales was slightly lower due to the change in the composition of this revenue in H1-2016. The gross profit and operating profit of Dealer Group Stern increased significantly (operating profit +43.7% to € 8.1 million) in comparison to H1-2015.

Jager Auto Blankespoor (a Jaguar dealer in The Hague) was sold in July 2016. The positive transaction result realised will be recognised in Q3-2016.

Stern Financial Services

The number of lease contracts at SternLease rose by 5.5% in H1-2016 to 9,538 (year-end 2015: 9,045 contracts). Compared to 30 June 2015 (when there were 7,993 lease contracts), this is an increase of 19.3%. Growth was slightly hindered in H1-2016 due to the bankruptcy of a relatively large customer. The losses related to this bankruptcy have been recognised directly in H1-2016.

The operating profit of Stern Financial Services came to € 4.4 million, an increase of € 0.9 million (25.2%) compared to H1-2015.

Stern Mobility Services

Based on the Audatex calculations, the car body repair market in the Netherlands increased by 6.8% in H1-2016. Revenue at SternSchade rose 12.3% in H1-2016 compared to H1-2015. The use of a customer contact centre (CCC) made it possible to achieve an increase in revenue that outperformed the market. The positive result of SternSchade will clearly increase if market prices are used for the inter-company supply of repair parts.

The result at SternPoint was still negative, partly due to one off costs related to the decision to integrate these operations into SternSchade and increase the cooperation with Dealer Group Stern. The integration allows for savings on management and marketing costs, and for a clearer proposition to the market.

SternTec realised a strong improvement in its result due to the increase in the market for light commercial vehicles and a new product line introduced in 2015.

Mango Mobility achieved a good increase in revenue of 26.8% in H1-2016. The result was however still negative, due to lower margins in combination with a less favourable margin mix and non-recurring costs relating to the opening of two new branches.

According to plan, the SternRent car rental fleet was reduced in comparison to year-end 2015 to 2,073 vehicles in H1-2016 as at 30 June 2016 (a decrease of 2.2%).

Operating profit at Stern Mobility Services was on balance lower in H1-2016 compared to H1-2015.

Solvency

The balance sheet total stood at € 590.5 million at 30 June 2016, up 0.8% on year-end 2015. The increase was mainly due to the growth in the car lease fleet (increase of € 7.5 million) and the purchase of the head office building in Amsterdam (€ 5.2 million). Group equity rose to € 151.6 million (year-end 2015: € 150.8 million) as a result of the addition of the result in H1-2016 and the payment of the final dividend of € 0.75 per share (€ 4.3 million) in June 2016.

The solvency ratio of Stern Group at 30 June 2016 stood at 25.7% (year-end 2015: 25.7%). Based on a standard solvency ratio for the car lease operations of 12.5% and for car rental operations of 20.0%, the solvency of the other activities at the end of June 2016 came to 34.0%, compared to 33.7% at year-end 2015.

Excess solvency at the end of June 2016 (after payment of the final dividend for 2015 in June 2016) amounted to € 4.8 million.

Finance

The Group’s operating capital is funded by three banks and consists of Facility A for the retail finance (limit
€ 70 million) and Facility B (limit € 130 million) for financing of the leasing operations.

Stern has agreed with its bankers that Facility A of € 70 million is extended by one year and that Facility B has been increased by € 30 million to € 160 million. Both facilities will now mature on 30 June 2017. The documentation for this financing arrangement was completed at the end of June 2016. The new agreements with the banks are similar to those in the previous arrangement. The interest conditions are however clearly more favourable and the ICR covenant has been reduced.

New agreements have also been reached with Mercedes-Benz Financial Services (MBFS), whereby the finance limit has been raised from € 127 million to € 145 million. MBFS finances new cars for Stern Auto, but also for SternRent and the entire Stern Group inventory of used cars.

Outlook is clearly more favourable

Despite the as yet somewhat disappointing results at Stern Mobility Services, the results show a clear improvement compared to previous forecasts. The profit after tax in H1-2016 is encouraging, as is the development of the order book for a number of car brands and at SternLease. Furthermore, contrary to previous assumptions, the additional tax liability for plug-in hybrids will be raised from the current level of 15% to 22% in one step with effect from 2017. Originally, the intention was to phase in this increase over a period of three years. This means that once again we expect to see a rush to register and deliver plug-in hybrids at the end of 2016, since business drivers purchasing (or registering) plug-in hybrids after 1 January 2017 will no longer be able to benefit from the 15% additional tax liability for 60 months. The rush in Q4-2016 will probably not be as intense as it was last year, partly because of the contrary effect that more expensive models will actually be assigned a reduction in the additional tax liability from 25% to 22% in 2017.

At Stern Financial Services, SternLease continues to show strong organic growth and good results. At Stern Mobility Services, SternRent and SternSchade (to be renamed and combined with SternPoint) are developing according to plan and SternTec continues the positive development shown in 2015. Revenue at Mango Mobility is growing strongly, however a positive result is not expected until 2017.

Press here for the press release dated 17 August 2016 in English

Klik hier voor de pdf van het volledige persbericht d.d. 17 augustus 2016 in het Nederlands