DARING TO ADAPT
Investor Day - 8 December 2015 Morning session GOALS OF THE INVESTOR DAY
• Present the activities
• Provide insight into Belron and D’Ieteren Auto’s business model, recent financial and commercial performance
• Provide a detailed update on the medium-term financial and strategic targets
Investor Day 2015 2 PROGRAMME
Timing Topic Speaker
10:00 - 10:30 Group overview Axel Miller
10:30 - 12:00 D’Ieteren Auto Denis Gorteman
12:00 - 12:30 Q&A – D’Ieteren Auto
12:30 – 13:30 Lunch break
13:30 – 15:00 Belron Gary Lubner
15:00 – 15:30 Q&A – Belron
15:30 – 15:45 Short break
15:45 – 16:15 Financials Arnaud Laviolette
16:15 – 16:45 Wrap-up & next steps Axel Miller
16:45 – 17:15 Q&A – Group
Investor Day 2015 3 SPEAKERS
Axel MILLER Denis GORTEMAN Group CEO CEO of D’Ieteren Auto
Arnaud LAVIOLETTE Gary LUBNER Group CFO CEO of Belron
Investor Day 2015 4 GROUP OVERVIEW
Axel MILLER Group CEO A HISTORY OF MORE THAN 2 CENTURIES
Jean-Joseph D'Ieteren, Launch of short-term car Internationalisation through the a wheelwright and Entry into the car rental service; becoming two acquisition of a majority stake wheel manufacturer assembly business years later an Avis licensee in Avis Europe Signature of import Sale of Avis Europe to contract with the the Avis Budget Group Listing on the Volkswagen group stock market
1805 1897 1929 1931 1935 1948 1954 1956 1976 1989 1999 2011
Exit of the car assembly business Acquisition of Belron, One of the first companies Import of US brands Inauguration of the world leader in vehicle involved in the production Studebaker, Pierce- assembly factory in glass repair & of automobile bodywork Arrow and Auburn Brussels (Forest) replacement
Investor Day 2015 6 WHY WE EXITED THE SHORT-TERM CAR RENTAL BUSINESS
• Good run until the early 2000’s. Four major challenges from that point on: Internet competition: substantial increase of small, local players, creating price pressure 9/11: severe impact on air travel sector, thus also on peripheral economy (of which car rental companies) Car resale value: overcapacity in automobile industry drove prices down Capital-intensive nature: aggravated by financial crisis from 2007 on (higher interest rates made Avis Europe’s refinancing tougher, thus demanding D’Ieteren’s participation to 2 rights issues)
Investor Day 2015 7 AN INTERNATIONAL GROUP
D’Ieteren Auto D’Ieteren Auto + Avis Europe
TODAY: D’Ieteren Auto + Belron
Investor Day 2015 8 TODAY: LEADER IN BOTH OUR ACTIVITIES
D’Ieteren Auto Belron Vehicle distribution in Belgium Vehicle Glass Repair & Replacement worldwide
• #1 car distributor in Belgium • World #1 Vehicle Glass Repair & Replacement specialist
• ~170 independent dealers • 34 countries
• 22 corporately-owned car centres • 2,440 branches
• Vehicle financing and long-term car rental through • 9,400 mobile units Volkswagen D’Ieteren Finance
Investor Day 2015 9 CONTRIBUTION TO THE GROUP’S KEY METRICS (2014)
Revenues: Current result before EUR 5.5 billion tax, group’s share: EUR 157.2 million 33%
48% 52% 67%
Current operating result: Average EUR 198.6 million workforce: 6% 28,360 FTE 27%
73% Belron D’Ieteren Auto 94%
Investor Day 2015 10 BOARD OF DIRECTORS
Chairman Deputy Chairmen CEO
Roland D’IETEREN Nicolas D’IETEREN Olivier PÉRIER Axel MILLER
Joined the Board in 1968 Joined the Board in 2005 Joined the Board in 2005 Joined the Board in 2010
Non-Executive Directors
Pierre-Olivier BECKERS* Michel ALLÉ* (permanent representative of Christine BLONDEL (permanent representative of Pascal MINNE Pierre-Olivier Beckers SPRL) Gema SPRL)
*Joined the Board in 2014 Joined the Board in 2009 *Joined the Board in 2014 Joined the Board in 2001
Denis PETTIAUX* Frédéric DE VUYST* (permanent representative of (permanent representative of Michèle SIOEN S.A. de Participation et Nayarit Participations S.C.A.) de Gestion (SPDG))
*Joined the Board in 2001 *Joined the Board in 2001 Joined the Board in 2011
Appointed on the proposal Independent Director of family shareholders
Investor Day 2015 11 FAMILY-CONTROLLED SINCE 1805
• 7 generations of family shareholders (see opposite) FAMILY CEO’S:
• Listed since 1929 Jean-Joseph D’Ieteren (1805-1831)
• In 2005, decision to hand over the executive Alexandre & Adolphe management to an external CEO D’Ieteren (1831-1857)
Jean-Pierre BIZET (2005-2013) Alexandre D’Ieteren (1857-1878) Axel MILLER (2013-…) Alfred & Emile D’Ieteren • Today: (1878-1922) Lucien D’Ieteren Company’s capital still controlled by the D’Ieteren- (1919-1966) Périer family (57.10%)* Pierre D’Ieteren 7th generation: Deputy Chairmen of D’Ieteren (1961-1975)
Group & Directors of the Board of Belron Roland D’Ieteren (1975-2005) Remain close to the activities while respecting the management’s and the Board’s role and autonomy
* In voting rights at end-2014: 60.66%
Investor Day 2015 12 OUR ADDED VALUE
• No defined investment term: we invest for the long haul with a view to developing our leadership in our activities (we are not a private equity company)
• The group offers support and challenge to the businesses: Management appointment Alignment of management incentive programmes with group’s targets and shareholders’ interests Strategy definition and (re-)investment for profitable growth Ad-hoc support on specific matters ‘Sparring partner’ for management through budgeting / reporting processes Financial, tax and legal support
During recent years, the group’s strategy has evolved towards increased implication in our businesses
Investor Day 2015 13 VEHICLE DISTRIBUTION
Investor Day - 8 December 2015 D’IETEREN AUTO, THE NATURAL CHOICE FOR MOTORISTS
ALL THE PRODUCTS
ALL THE SERVICES
FOR EVERY STAGE OF LIFE
Investor Day 2015 15 OUR BUSINESS
Denis GORTEMAN CEO of D’Ieteren Auto WHAT WE DO
1 WHOLESALE (IMPORT)
SPARE PARTS & D’IETEREN NEW VEHICLES SERVICES SPORT
2 RETAIL
3 FINANCING Volkswagen D’Ieteren Finance (joint venture with Volkswagen Financial Services)
Investor Day 2015 17 WHAT WE DO – WHOLESALE OF VW & YAMAHA GROUP BRANDS 1
SPARE PARTS & NEW VEHICLES D’IETEREN SPORT SERVICES
• Import, logistics, • Import, logistics • Import and marketing and and distribution of distribution of distribution of new spare parts and Yamaha and MBK vehicles of 9 accessories products in vehicle brands Belgium & • Management of Luxembourg • Management of maintenance & 166 independent warranty contracts dealers • Technical support to dealers
Investor Day 2015 18 WHAT WE DO – WHOLESALE 1
NEW VEHICLES
Optimising sales (defining quotas) Delivering Distribution network to the dealers (166 in 2014) Following up importer and factory strategies
Above the line Marketing & Below the line Vehicle communication sale / purchase Press relations
Defining an import Service development programme VW GROUP FACTORIES After-sales strategy Quality development Negotiating prices Dealer support Negotiating volume & mix targets Applying policies Brand/fleet policies to maximise sales Managing inventory
Investor Day 2015 19 WHAT WE DO – WHOLESALE 1
SERVICE MANAGEMENT & MAINTENANCE
Import, logistics and distribution of spare parts and accessories
44,000 m² ±300 drop 100,000 storage points references surface
96% 2 or 3 55 trucks service deliveries/ daily level day
Kortenberg warehouse Management of maintenance / warranty contracts
Technical support to dealers
Investor Day 2015 20 WHAT WE DO – WHOLESALE 1
D’IETEREN SPORT
ON-ROAD MOTORBIKES OFF-ROAD MOTORBIKE SCOOTERS ALL TERRRAIN VEHICLES WAVERUNNERS
OUTBOARD ENGINES
CAPELLI ZODIAC BOMBARD
Investor Day 2015 21 WHAT WE DO – RETAIL 2 14% of total deliveries* Sale of new vehicles & Zoom on after-sales through: Brussels 16% of total after-sales* • 9 D’Ieteren Car Centers in the Brussels region
• 6 recently acquired Belgium dealerships on the Brussels-Antwerp axis*
• 6 Porsche Centers
Sale of used vehicles through 9 My Way centres
* D’Ieteren Auto decided to acquire these formerly independent dealerships in 2013 and 2014 because of their location in a strategic region for the fleet market. * At 2014 year-end
Investor Day 2015 22 WHAT WE DO – FINANCING 3
VOLKSWAGEN D’IETEREN FINANCE… Joint venture between D’Ieteren Financing products …SELLS and Volkswagen Retail finance Operating lease Financial lease Financial Services ~58,000 contracts ~22,000 contracts ~7,000 contracts since February 2012 After-sales loyalty products (Wecare) & insurances (Actel) Board of Directors Additional services equally made up of (vehicle servicing/repairs, tyres, fuel cards,…) representatives of D’Ieteren and VW Financial Services …FINANCES Dealer inventories Financing provided by VW Financial Services …GENERATES Positive impact on import and dealer activities
Customer loyalty (repurchase & after-sales)
Investor Day 2015 23 MARKET ENVIRONMENT & BUSINESS DRIVERS
Denis GORTEMAN CEO of D’Ieteren Auto WE OPERATE ON 5 MARKETS
1 2 3 4 5 VEHICLE TWO-WHEELERS NEW VEHICLES USED VEHICLES AFTER-SALES FINANCING (& OTHER)
Investor Day 2015 25 OUR MARKETS – 1. NEW VEHICLES
2 3 4 5 VEHICLE TWO-WHEELERS USED VEHICLES AFTER-SALES FINANCING (& OTHER)
1
NEW VEHICLES
Investor Day 2015 26 STABLE AND RESILIENT BELGIAN NEW CAR MARKET
Source: Febiac & ACEA 1 • Belgian market (in 2014, 4% of European new car registrations and 3.5% of VW group new car registrations*) was resilient during the financial crisis vs other European countries
• 2014 net car registrations were up 0.7% (gross: -0.6%)
New car registrations in Belgium New car registrations (in thousands) (rebased to 100 in 2005) 572 547 526 525 536 486 483 120 480 487 476 462 455 458 110 100 90 80 70 60 61 66 65 62 59 52 53 55 54 54 50 40 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Passenger cars: gross figures Light commercial vehicles Belgium Germany Spain Passenger cars: net figures (excl. deregistrations) France Netherlands UK * EU-15 countries
Investor Day 2015 27 VERY STRONG MARKET STILL DOMINATED BY DIESEL ENGINES Source: Febiac 1 • Strong presence of the car in Belgium vs other European countries • Despite its decline over the last ten years, diesel engines remains predominant in Belgium; weak penetration of new energies
New car registrations per 100 inhabitants Fuel types of which: (in 2014) hybrid 1.9%, 0.2% 2.2% electric 0.3%, 4.31 Other gas 0.2% 3.76 3.85 Gasoline 27.2% 35.9% +8.7%
2.73 2.30 1.84 Diesel 72.7% 62.0% -10.7%
Spain Netherlands France Germany UK Belgium 2005 2014
Investor Day 2015 28 HIGH SHARE OF BUSINESS CARS DUE TO BELGIAN TAX LEGISLATION Source: Febiac & VDFin 1 Employee Employer Return No company car Cost of owning a private vehicle Cost of higher wage
Yearly EUR 9,040 (4-year financing) EUR 18,534 49% Company car Economy of employee receiving a Cost of company car company car = cost of car – personal income tax on benefit in kind Yearly EUR 7,970 EUR 6,904 115%
Model used for calculation: Audi A4 Avant 2.0 TDI 136 hp / EUR 34,220
Customer segments in new car registrations (2005-2014 evolution)
52% 54% 51% 52% 57% 58% 56% 49% 51% 50%
48% 46% 49% 48% 43% 42% 44% 51% 49% 50%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Private Business
Investor Day 2015 29 LEADING CAR DISTRIBUTOR IN BELGIUM / STRONG BRAND
POSITIONING Source: Febiac 1 • D’Ieteren Auto’s net market share improved from 19% in 2005 to nearly 23% in 2014, mainly thanks to the growing share of Audi, Škoda and Porsche; Volkswagen N°1 brand since 2011
• Share in light commercial vehicles in excess of 10% since 2011 (will be lower this year)
D’Ieteren Auto’s market share (%) D’Ieteren Auto’s market share by brand (%)
23.16 11 10.17 24 22.39 21.89 22.67 10 10.45 22 19.97 22.12 9 21.78 20 19.01 20.13 21.15 8 19.76 19.43 7 6.20 18 19.34 6 4.91 16 5 3.57 4 14 12.52 3 11.07 11.21 1.79 12 1.39 11.85 2 9.30 9.70 10 8.87 8.94 9.12 1 1.65 9.33 0.20 0.44 8 0 05 06 07 08 09 10 11 12 13 14 05 06 07 08 09 10 11 12 13 14 Market share passenger cars Volkswagen Škoda Porsche Market share passenger cars, excl. deregistrations Audi Seat Market share light commercial vehicles
Investor Day 2015 30 GREAT PERFORMANCE ACHIEVED IN BELGIUM 1 Source: ACEA & Association Auxiliaire de l’Automobile Market share VW group in Europe* (%) 39.77 40
35
30
25 23.66
21.78 20 20.73 19.87
15 13.98
13.42 10 05 06 07 08 09 10 11 12 13 14
Belgium France Germany Italy Spain UK European average1 excl. Germany
* Scope: EU 28 countries (excl. Cyprus and Malta) + Iceland, Norway and Switzerland. Data for 2005 and 2014: Western Europe (EU 15 countries + Iceland, Norway and Switzerland).
Investor Day 2015 31 EMERGING BRANDS IN CONSTANT PROGRESS / GENERALIST BRANDS NOW ACCOUNT FOR <50% Source: Febiac 1 D’Ieteren Auto brands market share Belgian new car market by segment (%) vs competition in 2014 (passenger car segments split, %) 63.5 65 Porsche Toyota 3.8 Volvo Seat 60 Kia 0.4 3.3 1.4 Ford 5.1 2.7 55 49.5 Fiat Opel 50 Mercedes 2.8 6.6 45 5.2 Dacia Citroën 3.4 40 Nissan 6.7 3.2 35 Peugeot Audi 30 Škoda 8.0 6.2 25 21.3 3.6 20 16.6 Renault 9.1 Other 15 15.4 7.6* 15.2 BMW 10 Hyundai 4.7 13.8 Volkswagen 6.6 4.1 5 10.2 0 05 06 07 08 09 10 11 12 13 14 Generalist Premium Emerging Other
Generalist Premium Emerging Other * Of which the combined market share of Bentley and Lamborghini totals 0.01.
Investor Day 2015 32 STRONG POSITIONING IN EACH SEGMENT
Source: Febiac 1 D’Ieteren Auto’s market share by segment Market share by segment in 2014 (2005-2014; %) (4 main brands, %)
10.6 26 10.2 9.8 25 8.6 24 24.2
23 21.8 6.2 22 21.7
21
3.9 20 19.4 3.6 3.6 19.0 3.6 19 1.9 18 1.4 0.9 17 16.5 0 05 06 07 08 09 10 11 12 13 14 Volkswagen Audi Škoda Seat
Total Private segment Business segment Total Private segment Business segment
Investor Day 2015 33 SIGNIFICANT INTER-BRAND CUSTOMER LOYALTY 1 Source: Market research & BI Customer loyalty – repurchase of new vehicles* (2014 vs 2009; %) 67.7 59.0 48.1 49.4 48.4 47.3 41.8 44.3 31.9 34.7
09 14 09 14 09 14 09 14 09 14 D’Ieteren Auto Volkswagen Audi Škoda Seat
Customer loyalty – repurchase of new vehicles* (D’Ieteren Auto brands in 2014 vs 2 main competitors in segment; %)
63.9 61.4 61.9 50.7 53.7 55.2 47.3 51.6 48.1 49.4 40.5 34.7
Volkswagen Renault Peugeot Audi BMW Mercedes Škoda Hyundai Dacia Seat Nissan Fiat
* Data based on a sample of customers.
Investor Day 2015 34 OUR MARKETS – 2. USED VEHICLES
1 3 4 5 VEHICLE TWO-WHEELERS NEW VEHICLES AFTER-SALES FINANCING (& OTHER)
2
USED VEHICLES
Investor Day 2015 35 STABLE USED VEHICLE MARKET / A LARGE NUMBER OF BELGIAN USED VEHICLES ARE SOLD ABROAD Source: Febiac 2
Registrations of new and used vehicles Used vs new vehicles ratio (2005-2014; in thousands) (in 2014)
700 689 4.4 673 680 666 660 646 642 650 637 633 640 654 645 2.9 3.0 620 600 2.3 572 580 1.7 560 547 1.4 536 540 526 525 520
500 486 483 480 480 476 487 460 UK Spain France
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Belgium Germany Netherlands New vehicles Used vehicles
Investor Day 2015 36 OUR MARKETS – 3. AFTER-SALES
1 2 4 5 VEHICLE TWO-WHEELERS NEW VEHICLES USED VEHICLES FINANCING (& OTHER)
3
AFTER-SALES
Investor Day 2015 37 D’IETEREN AUTO REPRESENTS MORE THAN 1/5TH OF VEHICLES ON BELGIAN ROADS Source: Febiac 3 • Slight yearly increase over the last decade
• Favourable positioning of the brands distributed by D’Ieteren Auto
Belgian car park (millions of vehicles) Focus on 2014 – D’Ieteren Auto
CAGR Brand Number of %age of total +1.4% vehicles Belgian car park 5.5 5.3 5.4 5.4 5.4 5.1 5.2 4.9 4.9 5.0 Volkswagen 613,391 11.13
Audi 271,231 4.92
Škoda 122,817 2.23
Seat 87,490 1.59
Porsche 27,927 0.51
Total 1,122,856 20.37 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013
Investor Day 2015 38 AGEING CAR PARK AS VEHICLES BECOME MORE RELIABLE…
Source: Febiac 3 Belgian car park – average age (in years) Max. number of km between services 8.0 8.0 30,000 7.8
7.6 15,500 7.4 7,500 7.2
7.0 05 06 07 08 09 10 11 12 13 14 Before 1986 Before 2000 Today
D’Ieteren Auto car park – average age Average period between two services (in years) 7.7 7.7 7.6 Before 1986 6 months 7.5 7.4 Before 2000 1 year 7.3 7.2 Today 2 years 7.1 7.0 05 06 07 08 09 10 11 12 13 14
Investor Day 2015 39 …CAUSING A SLIGHT DECLINE IN AFTER-SALES CUSTOMER LOYALTY / BODYWORK JOBS DO NOT FOLLOW THE SAME TREND 3 Customer loyalty in after-sales Customer loyalty in after-sales (D’Ieteren Auto brands) – Service & repair (D’Ieteren Auto brands) – Bodywork (by segment; 2010-2014; %)* (2005-2014; %)* 54.5 100 54.3 53.8 95 53.7 95.4 96.1 95.5 95.2 53.2 90 85 84.7 80 51.4 75 78.7 78.0 77.2 76.6 50.7 70 67.6 65 68.7 67.5 66.4 66.7 49.7 60 48.9 48.8 55 56.5 50 45 49.6 48.2 47.6 40 46.0 38.4 35 2010 2011 2012 2013 2014
Segment 1 (0 to 4 years) Segment 3 (8 to 10 years) 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013 Segment 2 (5 to 7 years) Total
* Data based on the number of customers who have serviced/repaired their vehicle in the past 2 years.
Investor Day 2015 40 OUR MARKETS – 4. VEHICLE FINANCING
1 2 3 5 TWO-WHEELERS NEW VEHICLES USED VEHICLES AFTER-SALES (& OTHER)
4
VEHICLE FINANCING
Investor Day 2015 41 1 OUT OF 4 CUSTOMERS OF D’IETEREN AUTO FINANCES HIS/HER VEHICLE THROUGH VDFIN Source: VDFin (Listen Research & Intelligence) & Driver 4 Penetration rate in new vehicle registrations of D’Ieteren VDFin’s total & segment penetration rate in new Auto brands of top-5 players by segment (%) vehicle registrations of D’Ieteren Auto brands* 33.0 (2012-2014; %)
34 33.0
31.2
32 (2014)
30 FINANCE RETAIL 3.3 2.8 1.9 1.9 28 26.8 VDFin BNP Paribas Belfius/Dexia ING KBC 26 25.1 Fortis 27.5 24 23.3
22 20.5 16.1 20 18.7 11.1 10.2 10.0 18 17.2
16.1 09/2015) (YTD OPERATIONAL LEASE OPERATIONAL 0 VDFin Arval ING Car KBC Leaseplan 2012 2013 2014 Lease / Autolease Fleet Total Retail Fleet Alphabet Management
* Excluding Porsche, Bentley and Lamborghini.
Investor Day 2015 42 HIGH PENETRATION RATES ACROSS BRANDS, ESPECIALLY IN RETAIL FINANCE FOR ŠKODA & SEAT 4 Source: VDFin (Listen Research & Intelligence)
Penetration rate of Volkswagen D’Ieteren Finance by brand & by segment (2014; %) 47.8 46.3
39.7
33.1 31.8
26.6 23.9 22.0 21.2 22.1 20.6 19.8 21.0 17.8 16.8
Volkswagen Volkswagen Audi Škoda Seat Commercial Vehicles
Total Retail segment Fleet segment
Investor Day 2015 43 OUR MARKETS – 4. TWO-WHEELERS
1 2 3 4 VEHICLE NEW VEHICLES USED VEHICLES AFTER-SALES FINANCING
5
TWO-WHEELERS (& OTHER)
Investor Day 2015 44 YAMAHA #4 PLAYER IN A CHALLENGING MARKET
Source: Febiac 5 • Market down 23% between 2008 & 2014. Slight turnaround observed this year. • Yamaha number 4 in a challenging market; significantly up in 2014 thanks to range renewal
Motorcycles & scooters – Registrations (in thousands) Motorcycles & scooters – Top 10 brands market share evolution & Yamaha’s market share (%) (2014 vs 2013; %) 15.5 14.6 13.4 12.8 12.8 13.8 13.0 10.4 10.6 26 9.8 8.2 8.6 10.9 10.6
25 25 24 6.2 6.1 5.8 5.7 23 23 3.9 3.7 22
20 20 - 20 KTM SYM BMW Suzuki Honda Harley Triumph Piaggio Yamaha Davidson 05 06 07 08 09 10 11 12 13 14 Kawasaki 2013 2014 Yamaha’s market share Total registrations
Investor Day 2015 45 SUMMARY OF RECENT TRENDS IN OUR MARKETS
1 2 3 4 5 VEHICLE TWO-WHEELERS NEW VEHICLES USED VEHICLES AFTER-SALES FINANCING (& OTHER)
• Leading position • Stable market • Belgian Car • 1 out of 4 • Market down on a stable and park: 1.4% customers 23% between • A large number resilient market finances his/her 2008 and 2014 of used vehicles CAGR over the vehicle through due to financial • Tax legislation sold abroad last decade VDFin crisis and explains high • 1 out of 5 cars currency business segment on the Belgian • Dominating market share in translation impact • Market still roads belongs to retail segment diesel-dominated one of the • Yamaha’s models distributed • High penetration renewal in 2013; • Emerging brands brands rate in retail strong comeback segment x3 over finance for the last decade • Ageing car park generating Škoda and Seat • Significant inter- slightly declining brand customer customer loyalty loyalty (not in bodywork)
Investor Day 2015 46 PERFORMANCE REVIEW
Denis GORTEMAN CEO of D’Ieteren Auto SALES: 2.4% CAGR OVER THE LAST DECADE, MAINLY ATTRIBUTABLE TO NEW VEHICLE SALES
Sales* 2005-2014 (EUR million)
CAGR +2.4% 3,048 2,787 2,660 2,550 2,564 2,580 2,627 2,385 2,281 2,142
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Sales* – Source of change (2014 vs 2005; EUR million) 37 466 19 32 1 2,660 -37
2,142
2005 excluding New Vehicles Used cars Spare parts After-sales D’Ieteren Sport Other 2014 D’Ieteren Lease & accessories
* Sales have been restated to enable comparison between 2005 and 2014. It consists in deconsolidating the leasing activities from 2005 to 2011.
Investor Day 2015 48 NEW VEHICLE SALES: 2.5% CAGR OVER THE LAST DECADE / THE RISE IN MARKET SHARE & PRICE/MIX HAS OFFSET A LOWER MARKET
Sales of new vehicles* 2005-2014 (EUR million)
CAGR +2.5% 2,716 2,461 2,243 2,272 2,265 2,321 2,317 2,076 1,985 1,851
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Sales of new vehicles* – Source of change (2014 vs 2005; EUR million) 314 2,317 287
1,851 -122 -13
2005 Excluding Market Market Share Spread Deliveries Price / Mix 2014 D’Ieteren Lease vs. Registrations
* Sales have been restated to enable comparison between 2005 and 2014. It consists in deconsolidating the leasing activities from 2005 to 2011.
Investor Day 2015 49 CURRENT OPERATING RESULT & MARGIN
Current operating result (EUR million) & margin (%)* (D’Ieteren Auto + Corporate)
3.4 3.0 2.9 2.7 2.6 1.9 2.0 2.2 1.8 2.2 86 89 73 68 68
51 54 53 46 47
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
REBIT margin excluding D’Ieteren Lease activities REBIT excluding D’Ieteren Lease activities
* Sales & current operating result have been restated to enable comparison between 2005 and 2014. It consists in deconsolidating the leasing activities from 2005 to 2011.
Investor Day 2015 50 TRADING UPDATE
Denis GORTEMAN CEO of D’Ieteren Auto SUMMARY OF TRADING UPDATE (YTD 10/2015)
• Sales: +6.9%. Improving trend since H1 2015
• Net new car registration: 406,666 units, +0.48% yoy
• D’Ieteren Auto’s net market share reached 22.34% (vs 22.02% in H1 2015 and 22.67% in FY 2014)
• Registrations of new light commercial vehicles: 52,780 units, + 14.6% yoy. D’Ieteren Auto’s market share: 9.38% (vs 9.35% in H1 2015 and 11.23% in FY 2014)
• Total new vehicles delivered: +1.8% to 97,100 units
• New vehicle sales: +7.1%, thanks to positive price/mix effect
Investor Day 2015 52 ‘EMISSIONGATE’ – WHAT HAPPENED & HOW D'IETEREN AUTO REACTED
22.09.2015 22.09.2015 Works to clarify irregularities concerning a particular software Reaction to irregularities concerning a software used in some of involving some 11 million diesel vehicles with type EA 189 engines. Volkswagen group’s diesel engines. 25.09.2015 25.09.2015 Matthias Müller appointed new CEO Volkswagen AG. Launch of ‘Customer Care’ website in response to customer concerns. 29.09.2015 26.09.2015 Announces action plan to refit diesel vehicles with EA 189 engines. Decides to stop the commercialization of vehicles potentially fitted with the non-compliant software. 15.10.2015 28.09.2015 Federal Motor Transport Authority (KBA) decides on recall for Offers to replace existing orders by diesel EU6 vehicles. affected EA 189 engines. 02.11.2015 16.10.2015 Emphasizes that no software has been installed in the 3-liter diesel About 320,000 vehicles will be recalled in Belgium. power units. 03.11.2015 05.11.2015
Internal investigations at VW identify irregularities in CO2 levels. Temporary sales suspension of models that may be affected by the Around 800.000 group vehicles could be affected. irregularities with respect to CO2 emissions. 13.11.2015 20.11.2015
Next steps in clarifying the CO2 issue. Is confident that no fiscal adjustment will be passed on to the customers affected by the irregularities with respect to CO2 emissions.
Investor Day 2015 53 ‘EMISSIONGATE’ – TWO-PRONGED
8.5 million
NOx 11 million ~320,000 Non-compliant EA189 diesel engines software 1.2 / 1.6 / 2.0 L VW / VW CVI / Audi / MANDATORY Škoda / Seat RECALL
~700,000 EA288 diesel engines ~6,000 1.4 / 1.6 / 2.0 L CO2 VW / Audi / Škoda / Seat Emissions irregularities ~100.000 NO RECALL EA 211 gasoline engines 1.4 L
Investor Day 2015 54 ‘EMISSIONGATE’ – IMPACT ON D’IETEREN AUTO
• Impact difficult to evaluate at this stage.
• D’Ieteren Auto suspended the commercialisation of a number of models twice, during a seasonally low period (customers waiting for Brussels Motor Show in January 2016). The loss in orders as a result of these actions is estimated at 1,260 units (approximately 1% of yearly sales).
• 320,000 recalls: commercial opportunity as 90,000 of these customers have not visited our workshops in the past two years. Spread over 250 workshops, it entails 3.2 extra jobs/workshop/day.
• Current operating result in H2 2015: impact of approx. EUR 8 million (incentives, bonuses & stock management)
• Unusual costs in H2 2015: approx. EUR 11 million, of which: EUR 9 million at the operating profit level, of which provisions for extra costs (e.g. logistic and mailing costs related to the upcoming recalls). EUR 2 million under the share of result of entities accounted for using the equity method (VDFin). • No impact on the implementation of D’Ieteren Auto’s strategy.
Investor Day 2015 55 ‘EMISSIONGATE’ – WHAT ABOUT THE RESIDUAL VALUE? (VDFIN)
• Limited risk: mainly relates to operating lease (34% of earning assets) • Resell value of vehicles remains resilient • Funding costs of retail & leasing products: 130bp increase since 11/2015
EARNING ASSETS CONTRACTS RISK ON RESIDUAL VALUE (EUR million; 30 June 2015) (units; 30 June 2015)
STANDARD FINANCING 439 53,046 None Retail BALLOON FINANCING 37 4,455 None
FINANCIAL LEASE 145 6,648 None Leasing OPERATING LEASE 377 22,372 Low MAN LEASE 39 635 None
Wholesale DEALER FINANCE 84 n.a.
TOTAL 1,121 87,156
Investor Day 2015 56 OUTLOOK
• FY 2015: Solid improvement in current result before tax, group’s share, in spite of ‘Emissiongate’
• FY 2016: sales should be negatively impacted by Volkswagen scandal. Orders should however benefit from Brussels Motor Show (held in January 2016) and new model launches (especially the Audi A4)
• Models to be launched/revamped in 2016:
Volkswagen Tiguan Audi A5 Coupé, Q1 and Q2 Seat compact SUV
Investor Day 2015 57 MEDIUM-TERM STRATEGY
Denis GORTEMAN CEO of D’Ieteren Auto A CHANGING MARKET ENVIRONMENT – 5 TRENDS IMPACTING OUR BUSINESS MODEL (1/2) Source: Febiac II I DOWNSIZING OVERCAPACITY Economic crisis Mobility issues Saturated/flat new vehicle market Environmental imperatives Increased competition Regulatory issues: Industry-wide margin pressure . CO2 incentives in 2010 & 2011 (despite supporting the individual customer segment) . New taxation of benefits in kind (fleet segment)
Outlook new car registrations 2014 vs 2004 Belgian market evolution by vehicle class (%) Examples Vehicle 1% class VW up!, Seat Mii 483,000 490,000 A00 15 VW Polo, Škoda Fabia A0 7
VW Golf, Audi Q3, Seat Leon A 17
VW Passat, Škoda Superb B -33
Porsche Cayenne, Audi A6 C -31
Audi A8, Porsche911 D 2 2014 2019e
Investor Day 2015 59 A CHANGING MARKET ENVIRONMENT – 5 TRENDS IMPACTING OUR BUSINESS MODEL (2/2) Source: SPF Mobilité et Transports - IV Direction Mobilité III
CONSUMER BEHAVIOUR ERODING AFTER-SALES MARKET
Customers are more demanding Decrease of miles driven (individual customer segment) (higher quality experience) and better informed Increased reliability of vehicles Internet purchases Competition from independent workshops Additional investments and highly skilled staff Arrival of the electric vehicles are needed New mobility models (car sharing, carpooling, Uber, etc.) Evolution of km driven in Belgium* Outlook after-sales market (number of jobs/year) 16,000 -11% V 100 15,500 89 TECHNOLOGY 15,000 Increasing technology (vehicles with connected 14,500 technology, alternative fuels ources, digital showrooms, etc.) require more and different 14,000 competencies in all activities (sales & after-sales) 05 06 07 08 09 10 11 12 13 2014 2019e
* Incomplete data for 2014.
Investor Day 2015 60 PROFITABILITY UNDER PRESSURE – DEALER NETWORK (I)
• A vast number of dealers are facing serious financial challenges, especially at Seat and Volkswagen
Number of dealers losing money by brand* (2010-2014; %) 75
60 55
46 43 40
29 27 25 26 22 23 19 20 17 16 15 13 14
5
10 11 12 13 14 10 11 12 13 14 10 11 12 13 14 10 11 12 13 14 Volkswagen Audi Škoda Seat
* Data based on limited sample of dealerships. Multi-brands dealerships have been excluded.
Investor Day 2015 61 PROFITABILITY UNDER PRESSURE – DEALER NETWORK (II)
Average result before tax margin of the dealer network* (2005-2014; %)
1.8
1.3 1.4 1.2 1.3
1.0 1.0 0.9 1.1
Government 0.5
CO2 incentives
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014**
* All brands included. ** The sample used to compute this average increased from 128 to 169 dealers between 2013 and 2014, partially explaining the net margin increase.
Investor Day 2015 62 THIS SITUATION LED TO A DECLINING TREND IN THE NUMBER OF DEALERS
Volkswagen Audi (incl. commercial vehicles) Number of independent dealers (2005-2014) -10.1% -40.4%
194 238 99 195 214
190 59 189 185 181 180 183 178 -14% 176 176 175 2005 2014 2005 2014 175 173 Škoda Seat 170 +36.0% 165 -19.3% 166 68 57 160 46 50 155
150 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2005 2014 2005 2014
Investor Day 2015 63 D’IETEREN CAR CENTERS ARE LOSS-MAKING FOR MORE THAN A DECADE
• D’Ieteren Auto’s own D’Ieteren Car Centers are facing similar difficulties: before the ‘Pole Position’ plan was launched in 2014, they were losing approx. EUR 10 million/year
Result before tax of the D’Ieteren Car Centers (2003-2013; EUR million)
5.0
7.4 7.0 8.4 8.7 9.6 9.7 10.2 11.0 12.0 12.8
16.2
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Investor Day 2015 64 A NECESSARY CHANGE – “THINK OUT OF THE ROAD”
Long-term vision
To be the natural choice for our customers, partners and employees
“Think out of the road” strategy
• Strengthen our leadership, both in volumes as in customer delight
• Ensure profitability for our operations through a suitable organisational structure
• Cultivate a rewarding and motivating working environment
Investor Day 2015 65 “THINK OUT OF THE ROAD”, A THREE-WINGED STRATEGY LAUNCHED IN 2014
1
REORGANISING THE DEALERS NETWORK (MARKET AREA)
2
IMPROVING THE PERFORMANCE OF THE D’IETEREN CAR CENTERS (POLE POSITION)
3
STREAMLINING THE IMPORT STRUCTURE
Investor Day 2015 66 MARKET AREA – HOW WE’RE PLANNING TO RESTORE THE DEALERS’ PROFITABILITY
1
REORGANISING THE DEALERS NETWORK (MARKET AREA)
OBJECTIVES
Improve competitive Create economies of scale positioning and leverage synergies
Investor Day 2015 67 MARKET AREA – CHANGING OUR MODEL 1 HISTORICAL VISION MARKET AREA STRATEGY
From a model where …to a model where dealerships are undifferentiated dealerships tailored to customers’ needs and compete in a given area… collaborate within a given area
Market area Municipalities allocated to a Market Area leader Dealerships where all activities are Hub: mult-brand gathered location gathering all activities
Branch: sales and/or after-sales point managed by a strong local partner
A coherent customer catchment area is allocated to a Several dealers… leading dealer (or group of dealers)… • … operate in contiguous regions • … exploiting all brands and activities • … compete with each other • … relying on strong local partners • … to sell the same brands and services
Investor Day 2015 68 MARKET AREA STRATEGY – 8 KEY PRINCIPLES 1
Coherent customer The Belgian territory has been divided into coherent customer catchment areas 1 catchment areas… ("Market Areas”), in line with customer behaviors
… including all brands and The 5 VW-group brands and all activities will be represented on every Market 2 activities… Area … with exclusive client All client contact points with a brand will be exclusive. Therefore brands will be contact points on single- or featured in exclusive showrooms, either on single-brand locations or, when 3 multi-brand locations… necessary, on multi-brand locations, and after-sales receptions will be brand- exclusive and located in the showroom … organized in order to While front-office functions will always be exclusive, back-office functions will be 4 maximize synergies… mutualized when possible for VW/VW Commercial Vehicles/Škoda/SEAT in order to reap synergies … and run by a Market All business operations will be fully-owned by the Market Area holding which will 5 Area Leader… be jointly held by dealers (and eventually third party inventors) and will appoint a ‘Market Area Leader’ … supported by strong Local actors, socially well-integrated, will be key in order to maintain a close 6 local actors… proximity with customers
… with 3 key managerial 3 functions are key for the strategy's implementation: the location manager, the 7 functions… brand manager and the Market Area leader
… all of this in the The implementation will be gradual, within continuity and with D'Ieteren's follow- 8 continuity of the existing up and supervision
Investor Day 2015 69 MARKET AREA STRATEGY – OUR VISION 1
PROGRESSIVE CONTINUITY SUPERVISION
• Evolution, not • All parties must • Approval of all revolution subscribe to this movements and strategy alliances by • Gradual D’Ieteren Auto implementation: • No disruption in • Follow-up (finance, 2020 horizon terms of volume, management, quality and legal,…) by profitability D’Ieteren Auto • Capitalizing on the existing
Investor Day 2015 70 MARKET AREA STRATEGY – WHERE ARE WE TODAY? 1 1 The Belgian territory has been divided in 52 catchment areas, based on customer consumption habits and patterns
2 From these catchment areas, 26 market areas* have been defined
3 Market Area Leaders have been selected based on several criteria (management capabilities, financial health,…)
4 A dedicated team of 6 Network Managers has been set up
5 All dealers were officially informed about the strategy in May 2014
6 Discussions between D’Ieteren Auto, Market Area Leaders and other dealers are currently ongoing – ~12 Market areas currently being created
* 27 initially.
Investor Day 2015 71 POLE POSITION – HOW WE’RE PLANNING TO RESTRUCTURE OUR CORPORATELY-OWNED DEALERSHIPS
2
IMPROVING THE PERFORMANCE OF THE D’IETEREN CAR CENTERS (POLE POSITION)
OBJECTIVES
Improve our operational Optimise our performance commercial approach
RATIONALISE OUR FOOTPRINT … WITHOUT MASS REDUNDANCIES
Investor Day 2015 72 POLE POSITION – OUR STRATEGY 2 RATIONALISE OUR FOOTPRINT
From 12 to 6 more functional sites
2013 Today 2018
IMPROVE OUR OPERATIONAL PERFORMANCE
Optimised sales & after-sales workflows will increase productivity and promote synergies
OPTIMISE OUR COMMERCIAL APPROACH
Creation of the Brussels market area & integration of the area’s independent dealerships
Investor Day 2015 73 POLE POSITION – WHERE ARE WE TODAY? 2
1 End-2014: activities of the Vilvoorde & Fort-Jaco dealerships relocated at the Meise, Woluwe, Zaventem and Mail sites
2 H1 2015: activities of the Expo dealership relocated at the Drogenbos and Loozenberg sites
Ahead of schedule & Cost savings exceed expectations
Investor Day 2015 74 OTHER MEASURES
3
STREAMLINING THE IMPORT STRUCTURE
Restructuring the dealer network will allow us to optimise the import structure
Improve the efficiency of the ‘Below the line’ marketing
Improve the customer loyalty rate in after-sales
Develop Volkswagen D’Ieteren Finance
Investor Day 2015 75 MEDIUM-TERM OBJECTIVES – KPI’S
COMMERCIAL FINANCIAL CUSTOMER DELIGHT
2.5 2.5 96.4 600 565 97 Leads*: 2.0 2.0 95.8 1.9 96 550 +10%/year 2.0 1.8 between 95 500 2014 & 2018 Targeted minimum 1.5 94 1.1 94.5 level: 95% 1.0 450 93 1.0 400 92 91.6 363 386 0.5 327 0.5 350 91 89.8 Targeted minimum 0 0.0 90.5 level: 91% 0 2012 2013 2014 2018 2012 2013 2014 2018 (target) (target) 2012 2013 2014
Leads (number (in thousands) Current operating margin of Sales (%) After-sales (%) D’Ieteren Auto (incl. Corporate) (%) Result before tax margin of dealer network (%) * Lead: potential sales contact.
Investor Day 2015 76 OUR “THINK OUT OF THE ROAD” STRATEGY WILL ULTIMATELY ALLOW US TO IMPROVE OUR TOTAL MARKET SHARE
1 REORGANISING THE DEALERS NETWORK (MARKET AREA)
2 IMPROVING THE PERFORMANCE OF THE D’IETEREN CAR CENTERS (POLE POSITION)
3 STREAMLINING THE IMPORT STRUCTURE
D’Ieteren Auro’s market share (medium-term):
25%
Investor Day 2015 77 WRAP-UP
Denis GORTEMAN CEO of D’Ieteren Auto D’IETEREN AUTO, THE NATURAL CHOICE FOR MOTORISTS
ALL THE PRODUCTS
ALL THE SERVICES
FOR EVERY STAGE OF LIFE
Investor Day 2015 79 VIDEO – ‘2016 HERE WE COME’
Investor Day 2015 80 Q&A
QUESTIONS?
Investor Day 2015 81 DARING TO ADAPT
Investor Day - 8 December 2015 Afternoon session VEHICLE GLASS REPAIR & REPLACEMENT (VGRR)
Investor Day - 8 December 2015 BELRON, THE NATURAL CHOICE IN VGRR
• World’s #1 VGRR business
• Operating in 34 countries
• Serving 11 million customers annually
• Owner of the world’s leading VGRR brands
• 3rd largest automobile glass buyer
• Available to customers when and where they want – relentless focus on service
• Long-term partnerships with most of the world’s leading insurance, fleet and lease companies
Investor Day 2015 3 OUR BUSINESS
Gary LUBNER CEO of Belron OUR HISTORY DATES BACK TO 1897
International acquisitions grouped Belron acquires Jacobs and Dandor Ronnie Lubner joins together under the Belron name, Safelite, the US founded in South Africa Plate Glass with Ronnie Lubner as CEO market leader International expansion Contract with General begins with the acquisition Motors and Ford to supply D’Ieteren group acquires of O’Brien in Australia glass for vehicle assembly a majority stake in Belron
1897 1899 1929 1930 1952 1953 1971 1983 1990’s 1999 2000 2007 2013
Further international expansion Gary Lubner through the acquisition of becomes CEO Autoglass in the UK Company purchased and Plate Glass begins Company wins the name changed to Glass Medic acquired in the D’Ieteren raises its stake selling safety glass for rights to manufacture Plate Glass Bevelling and US, allowing the group to in Belron to 94.85% vehicles curved vehicle glass Silvering Company offer a chip repair solution
Investor Day 2015 5 24 CORPORATE AND 10 FRANCHISED COUNTRIES
Corporate country Franchise
Investor Day 2015 6 PILLARS OF BELRON’S STRATEGY
Investor Day 2015 7 THE ROUTE TO THE MARKET – OUR SALES & MARKETING APPROACH Motorist Insurer Advertising Word of Direct Marketing PR
MARKETING mouth Van & Branch
Internet
Insurer direct KEY ACCOUNTS Motorist SALES
Broker/Agent LOCAL
Dealer, garage, bodyshop,… TRADE
Investor Day 2015 8 TRUST AND BRAND LOYALTY ARE KEY
Exceptional Brands OUR PHILOSOPHY
Brand awareness • Be at the front of mind of the motorist (2014 top of mind awareness; %) when glass damage is identified 88 • Focus on brand strength and financial 77 77 return for marketing campaigns 76 67 61 • Leverage international learnings and 57 47 scale to increase marketing efficiency 44 • Ensure accessibility of our service 27 through search engine optimisation
• Leverage the quality of our service through amplification of reviews UK USA Italy Spain France Belgium Canada Australia Germany Netherlands
Investor Day 2015 9 OUR APPROACH TO ADVERTISING
Exceptional Brands OUR APPROACH
• Create strong brands that consumers will connect with – a ‘call to action’
• Tried and tested TV and radio formula that resonates with consumers – the same jingle worldwide
• Leverage successful approach to deliver cost effective advertisements Digital advertising • Develop new approaches to reach more Local advertising Search and PPC motorists, for example: Mass media Digital advertising
Search engine optimisation and PPC
Local advertising
• Harness the power of customer reviews: on our own websites and by sharing with insurance partners
Investor Day 2015 10 VIDEO – SAFELITE ADVERT
Investor Day 2015 11 LONG-TERM PARTNERSHIPS WITH THE LARGEST INSURANCE COMPANIES Higher insurer NPS leads to higher value for the insurer through OUR PHILOSOPHY * better retention Outstanding Partnerships • Build strong partnerships with our key Glass repairer account insurance and corporate (NPS 6 months after job; %) partners. Autoglass 38.8 The higher Autoglass customer satisfaction… • Help insurers and corporate customers reduce their overall glass claims cost Competitors 7.7 Insurer by: moving away from high cost (NPS; %) dealers to specialists; using repair first …translates into Autoglass 16.2 approach to reduce the average claim higher satisfaction for the insurer… cost; and reducing administration costs. Competitors 8.3 Insurer • Delight the policyholder and increase (Historical retention; %) policy renewal propensity or improve the corporate customers service to their Autoglass 67.9 …resulting in 9.6% points better customer customers. retention for the Competitors 58.3 insurer.
* Market research conducted in the UK by Research Now, February 2011. Sample size Autoglass® n=~900; Other providers n=~600
Investor Day 2015 12 ‘REPAIR FIRST’ STRATEGY
Outstanding Partnerships Also reduces our impact on the environment Repair / replacement jobs split (2005-2014) 100% 90% 80% 70% 60% 50% 40% 30% 20% 30% 30% 29% 28% 27% 26% 25%
10% 24% 24% 24% 0% 2014 2005 2006 2007 2008 2009 2010 2011 2012 2013
Replacement Repair
Investor Day 2015 13 THIRD PARTY ADMINISTRATION (TPA)
Outstanding • We operate a developed TPA business Partnerships in the US and Canada
• We handle and administer VGRR • In Europe, insurers typically view claims claims for many of our largest North management as a core competency American insurance partners and the opportunity to provide TPA • We are actively looking to develop services is accordingly lower and expand this service offering with • However, we are performing claims other insurance partners handling and TPA services for certain • TPA deepens and enhances our key European insurance partners relationship with these partners and is • We continue to actively pursue a key value add for them opportunities in this area in all our major geographies
Investor Day 2015 14 FOCUS ON CUSTOMER SERVICE – OPERATIONS & SUPPLY CHAIN
OPERATIONS SUPPLY CHAIN
• Offering a consistently superior service vs competition • Dedicated logistics functions • Converting multichannel • Partnerships with 7 major glass opportunities (web, phone, drive-in) suppliers using OEM quality glass • Focusing on efficiency, productivity • Global supply agreements ensure and flexibility through internal consistency of supply sourcing of glass, flexible labour contracts and technical training • Up to 18,000 inventory lines
• Leveraging group scale in • 15 distribution centres globally procurement of glass, polyurethane, • State of the art warehouse tools, fitting techniques management system
Investor Day 2015 15 FOCUS ON CUSTOMER SERVICE – OPERATIONS & SUPPLY CHAIN
OUR PHILOSOPHY Mobile rate by country (Belron’s jobs segmentation • Mobile: typically lower fixed cost but in 2014; corporate countries) less flexible in response to seasonality and short-term fluctuations in volume Less than 20% • Branches: provide a physical brand • Austria • Norway presence in the market and allow to • Brazil • Russia • Canada • Spain perform multiple jobs in a single • Germany • Sweden location and in all weathers, which can • Greece • Turkey increase efficiency • Italy 20 to 50% • The mix of branch and mobile work varies in each country for various • Belgium/Luxembourg • New Zealand • France • Portugal reasons: weather, customer preference, • Netherlands traffic density, population distribution, cost, efficiency More than 50% • Australia • Switzerland • Innovations such as mobile branch • Denmark • UK and proxy pro help drive down the • Hungary • USA costs of our physical footprint • Ireland
Investor Day 2015 16 FOCUS ON CUSTOMER SERVICE – EXTREMELY HIGH NET PROMOTER SCORES
2014 Net Promoter Scores (Belron’s top-10 markets; %)
88 88 85 84 82 82 80
73 73
67
USA France Germany UK Canada Italy Australia Belgium Netherlands Spain
Investor Day 2015 17 INNOVATIVE TECHNOLOGY – FITTING APPROACH & INFORMATION
FITTING APPROACH INFORMATION
• Glass: more complex and integral to vehicle structure • Decentralised strategy to meet local market conditions • Forefront of technology to maintain global lead: • IT underpinning Belron operational o GLASS MEDIC® – World’s most popular glass repair system excellence: Multichannel booking o HPX3 ® - Proprietary resin with age resistant qualities o Automated scheduling • Continuously developing new technologies: o Virtual branches o ADAS calibration o Warehouse management o Improved polyurethane to deliver faster drive away o times o Route planning o Next generation resin (HPX4 ®)
o Automatic repair tool
Investor Day 2015 18 EXTRAORDINARY PEOPLE
THE ‘BEST OF BELRON’ • Capability • Efficiency • Competition rewarding the best technician o Stringent recruitment Flexible working criteria – skills and o of Belron, held every two years since practices competencies 2000 Our way of working o Performance • • Features technicians from every corner of evaluation, feedback the world, who all won preliminary o Global training and supported national and regional competitions development o Speak-up line • The winner of ‘Best of Belron’ goes home o Dedicated training centres • ‘Giving back’ with a cash prize of one year’s salary philosophy • Celebration of the technical and • Engagement innovative skills and training within Belron o Global corporate o Structured pay and reward charity
o Recognition o Local ‘giving back’ programmes programmes
o Best employer awards (e.g. Belgium, US)
Investor Day 2015 19 VIDEO – ‘BEST OF BELRON 2014’
Investor Day 2015 20 INSPIRING LEADERSHIP
OUR PHILOSOPHY Belron executive leadership climate fulfilment scores (2005-2014; %)
• Ensure leaders have the 80 80.0 capabilities to deliver performance
• Develop leaders for the 75.0 performance of their current roles 74.3 75.2 75 73.8 73.3 within the business 73.7 • Focus on the climates that leaders 73.2 create for their direct reports 72.0 70 69.6 • Measure leadership on a consistent and regular basis 60 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Investor Day 2015 21 PILLARS OF BELRON’S STRATEGY
Investor Day 2015 22 MARKET ENVIRONMENT & BUSINESS DRIVERS
Gary LUBNER CEO of Belron MARKET OVERVIEW
• Consumer led, distressed purchase
• Market size dependent on:
o Vehicle parc x frequency of glass breakage x do something rate
o Glass breakage drivers: KM driven; Speed; Vehicle type; Road conditions; Weather; Vehicle crime
o Do something rate: dependent on legal, economic, political, technological, social factors and advertising
• Motorist ultimately chooses service provider but insurers and fleet/lease companies are significant influencers
o Motorists focus on speed, quality and convenience
o Insurer and fleet/lease company relationships dependent on service quality, geographic coverage, cost
• Markets are therefore national in nature
Investor Day 2015 24 BUSINESS DRIVERS: VEHICLE PARC, FREQUENCY OF GLASS BREAKAGE & CUSTOMER PROPENSITY TO ACT
1 2 3
# OF CARS BREAKAGE RATE DO SOMETHING RATE
Frequency
• Km’s driven / car Medium / Long term • Speed • Vehicle testing drivers • Road conditions • Level of damage • Vehicle design / type • Cost to customer • Vehicle crime
Short term drivers • Weather • Advertising
Investor Day 2015 25 MILES DRIVEN – THE CASE OF THE US
Source: US Department of Transportation
• US miles driven were down during financial crisis
• Recovery since 2014; significantly up this year (too early to say if this will continue); upswing not seen in Europe
• VGRR jobs in the US were also impacted by other factors incl. weather (harsh winters)
Miles driven in the US – % change US VGRR market – % change (2005-09/2015) (2006-2014) 2.9% 8.0 3 8 6 3.4 2 1.6% 4 2 0.0 1 0.7% 1.0% 1.4 1.0 0.3% 0 0.7% -0.1% 0.3% -2 0 0.1% -4 -2.7 -4.0 -0.7% -5.0 -1 -6 -1.6% -8 -2 -10 -10.0 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2006 2007 2008 2009 2010 2011 2012 2013 2014 09/2015
Investor Day 2015 26 RELATIONSHIP – VEHICLE SPEED VS BREAKAGE RATE
Source: TNS – Market survey US 2010
Windscreen breakage and repair/replacement rate Breakage rate comparison – 2 German regions in the US by speed limit zone* (2009-2013) (2010; %) 28 Year Bayern Bremen 2009 9.5% 6.7%
2010 11.6% 10.7%
2011 11.4% 8.4%
2012 8.8% 8.3% 14 2013 8.5% 7.9%
9 8 Average 10.0% 8.4%
Comparison between a region (Bremen) that has speed limits against another region (Bayern) that has not => there is higher likelihood of higher breakage rate and higher 65 mph 70 mph 75 mph 80 mph (n=164) segment size on those regions that have not (n=3,190) (n=10,902) (n=2,587) implemented speed limits
* Including Texas as 75 mph zone.
Investor Day 2015 27 ROAD CONDITIONS – THE CASE OF THE NETHERLANDS
• Road conditions in the Netherlands have changed over the past 5 years due to the implementation of ZOAB+, an improved road surfacing technology, by the government
• ZOAB+ is likely to be implemented on all the roads by 2020
• Breakage rate was historically twice the European average; now in line with average
ZOAB+ vs other road surface technologies on motorways in the Netherlands (based on km’s driven; 2005-2020 (f); %) 100%
80%
60%
40% ZOAB+: 72% of roads in 2014
20%
0% 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 (f) (f) (f) (f) (f) (f) Other road surfacing technology ZOAB+
Investor Day 2015 28 COMBINED IMPACT OF DRIVERS – THE CASE OF BELGIUM
• The evolution of the number of frost days and the breakage rate were closely correlated until 2011
• After the harsh 2010/2011 winter, the Belgian government invested heavily in road repairs
• Since 2011 the positive impact of frost days is mitigated by improved road conditions
Breakage rate vs frost days in Belgium (Brussels) Number of jobs of Carglass in Belgium (2009-2014) (2009-2014) 19.8 14.8 9.7 10.9 8.1 6.8
61 51 58 54 26 6
2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014
Breakage rate (%) Frost days
Investor Day 2015 29 SUMMARY: ALL MAIN MARKET DRIVERS HAVE EVOLVED UNFAVOURABLY
• KM driven/vehicle have declined
• Speeds have declined
• Road conditions have improved
• Vehicle sizes have declined
• Weather has remained unpredictable ?
Investor Day 2015 30 OVERALL MARKET GROWTH UNTIL 2009…
• Over the period, market growth resulted in an additional 30,000 jobs for Belron (estimated impact on revenues: approx. EUR 10 million)
Market evolution in volume: 2009 vs 2005 20% 15% 16% 15%
10% 8% 5% 4% 0% 1% 0% 0% -5% -3%
-10%
-15%
-20%
-25% -23%
USA France Germany UK Canada Australia Italy Netherlands Spain
Investor Day 2015 31 …SIGNIFICANT MARKET DECLINE SINCE THEN
• Over the period, market decline removed 2.1 million jobs at Belron (estimated impact on revenues: EUR -497 million)
Market evolution in volume: 2014 vs 2009
0%
-5% -3% -10% -9% -15% -13% -17% -20% -19% -25% -22% -23% -26% -30% -35% -40% -45% -42% -50% -46% USA France Germany UK Canada Australia Italy Belgium Netherlands Spain
Investor Day 2015 32 OUR 3 CUSTOMER SEGMENTS
Tend to be higher value vehicles and therefore higher value glass and service Insured motorists tend to look for service rather than pure price Insured Price negotiations generally happen at the contract level with the insurer In some countries insurers are able to steer large volumes towards preferred suppliers vehicles Insurers focus on average claim cost which lends itself to a repair first strategy National nature of insurance lends itself to national service providers
Price negotiations happen at the contract level with the fleet management company/vehicle owners Fleet/lease Tend to be sole provider arrangements More price sensitive to unit pricing than insurers vehicles Requirement for speed of service to avoid off-road time Prefer local relationships with service providers (more of a B2B relationship)
Tends to be lower value vehicles Uninsured (for glass) motorists tend to be very price sensitive Uninsured Each contact is a potential negotiation Customer tendency to shop around vehicles Customer influenced by the brand Influence of search engines (Google) or telephone directories is high Repair is of interest in preventing future replacements
Investor Day 2015 33 CUSTOMER SEGMENTATION IS DIFFERENT IN EACH MARKET
Market mix by customer type in 2014 – Belron’s top-10 markets
59% 54% 64% 71% 76% 71% 81% 84% 84% 94% 92%
21% 30% 18% 9% 15% 10% 5% 21% 10% 6% 17% 16% 20% 14% 14% 3% 10% 2% 14% 4% 6% 6%
USA France Germany UK Canada Italy Australia Belgium Netherlands Spain Belron
Insured Fleet / Lease Uninsured
Investor Day 2015 34 EUROPEAN MOTOR INSURERS ARE UNDER PRESSURE
Source: ECB Financial Stability Review (November 2015) & SCOR – Motor Insurance & Reinsurance (February 2015) • ECB Financial Stability Review (November 2015)
On insurance sector outlook: “Prospects are suppressed by low investment income expectations in particular”
On motor insurance: “Pressures in non-life insurance arise mainly from retail business, in particular motor insurance. Intense competition and claims developments are likely to continue to weigh on profitability.”
Motor insurers – written premiums and loss ratio (2008-2012)
Investor Day 2015 35 COMPETITION – BELRON HAS NO DIRECT PEER
VGRR SPECIALISTS CAR DEALERS INDEPENDENT GARAGES
• Brand • Price • Relationship with Quality & technical • Accept lower returns • motorists STRENGTHS information • Local & responsive • Speed • Relationship with • Focused • Price perception motorists
• Price • Service weakness • Low repair • VGRR not prime focus • No effective glass • National brand • Uncoordinated advertising • Standards / • Relationship with • Service weakness WEAKNESSES Compliance insurers • VGRR not prime focus • Purchasing power • Lack of customer • Uncoordinated • Technology appeal • Relationship with insurers • No stock held • Low/no stock held
Investor Day 2015 36 COMPETITION – OVERVIEW
Indication on market share by country – Belron vs main competitors (2014; corporate countries only)
Country VGRR SPECIALISTS CAR DEALERS INDEPENDENT GARAGES BELRON
Australia medium low low medium
Belgium low low low high
Canada high low low medium
France low medium low high
Germany low medium low medium
Italy medium high low medium
Netherlands medium low low high
Spain medium low medium medium
UK medium low low high
USA medium medium low medium
Investor Day 2015 37 VGRR MARKETS HAVE A VARYING ATTRACTIVENESS (I)
Is the market How Is the Are there What is the a level competitive is insurance sufficient market playing the structure jobs? price? field? environment? favourable?
• Economic • Volume of • Type of • Steering power • Price levels stability VGRR jobs competition • Typology • Pricing • Safety of • Passenger cars • Share / mechanism Concentration Belron’s is the key focus concentration • people of competition • Repair maturity • Collaboration • Glass insurance levels • Legal & levels • Insurer ethical profitability environment
MARKET SIZE COUNTRY AND COMPETITION POWER OF MARKET PRICE PROFILE ANTICIPATED INTENSITY INSURERS LEVELS GROWTH
Investor Day 2015 38 VGRR MARKETS HAVE A VARYING ATTRACTIVENESS (II)
COUNTRY PASSENGER CAR MARKET SIZE COUNTRY COMPETITION POWER OF MARKET PRICE VGRR MILLION & ANTICIPATED PROFILE INTENSITY INSURERS LEVEL JOBS/ANNUM* GROWTH USA 16.1 Russia 3.3 France 2.3 Germany 2.0 UK 1.7 Brazil 1.7 Canada 2.0 Mexico 1.5 Japan 1.5 Spain 1.4 Italy 1.1 India 1.2 Australia 0.8 Belgium 0.4 Netherlands 0.4
* 2014 data except Mexico, Japan and India (2013 data).
Investor Day 2015 39 PERFORMANCE REVIEW
Gary LUBNER CEO of Belron JOBS BREAKDOWN
Total repair & replacement jobs 2005-2014 (million units)
CAGR +8.5%
11.7 10.7 11.3 10.4 10.8 11.0 8.4 9.4 5.3 6.1
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Jobs split in 2014
Repair 26.0%
48.0% Branches Mobile 52.0%
74.0% Replacement
Investor Day 2015 41 SALES: 9.7% CAGR OVER THE LAST DECADE, THANKS BOTH TO ORGANIC AND EXTERNAL GROWTH
Sales 2005-2014 (EUR million)
CAGR +9.7% 2,881 2,801 2,843 2,769 2,727
2,423
2,156 2,000
1,507 1,254
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Investor Day 2015 42 DECLINING CURRENT OPERATING MARGIN SINCE 2012
Current operating result (EUR million) & margin (%) 2005-2014
CAGR current EBIT: +4.3%
9.5 8.9 9.1 8.1 7.2 7.9 7.9 7.8 256 262 6.1 5.0 216 196 174 174 157 145 120 99
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Investor Day 2015 43 WHAT HAPPENED SINCE REBIT PEAK IN 2011 ? UK & BRAZIL ACCOUNT FOR 50% OF DECLINE (I) UK: THE PERFECT STORM
• Market declined by approx. 30% since 2011
Reduced speed, vehicle size & car crime
Introduction of deductibles on repairs
• Increased competitor activity
• Intense competition in insurance market (dominance of direct insurers, price comparison websites)
• UK has the highest level of insurance steering power
• Extensive availability of glass
Investor Day 2015 44 WHAT HAPPENED SINCE REBIT PEAK IN 2011 ? UK & BRAZIL ACCOUNT FOR 50% OF DECLINE (II)
BRAZIL: FROM HIGHLY PROFITABLE TO LOSS-MAKING
• Unique market: VGRR players assume the glass breakage risk The insured segment of the VGRR market was created by Belron in the 1990s. An innovative product was developed whereby Belron receives a service fee for each vehicle on which the insurer sold glass insurance.
• Competition has led to price war in the insured segment
Investor Day 2015 45 OTHER FACTORS
• Significant declines in market size, particularly in Western Europe, caused by a number of underlying factors. These underlying market declines were initially offset by strong winters, notably in 2009, 2010 and 2011.
• As a result of these declining markets, we have witnessed increased competitor activity in all of our mature markets resulting in negative price pressure as well as increased insurer actions, in particular increased steering and a more centralised and price focused procurement process.
• Despite specific actions to offset these negative pressures by growing share and driving efficiencies through the business, these external factors have placed significant pressure on the revenue line and, consequently, on REBIT.
• In an environment of market declines, maintaining volume requires continued investment (for example promotions, incentives, footprint expansion), which places additional pressure on operating margins
Investor Day 2015 46 SUCCESS IN THE US PARTIALLY OFFSET DECLINES ELSEWHERE
US: BELRON’S SUCCESS STORY
• World’s largest VGRR market Number of jobs of Safelite in the US (2007-2014) • Belron: significant growth since Safelite acquisition in 2007… Fragmented market (Safelite is the only national player); average competitor has only 1 location Numerous acquisitions 10% CAGR Poor road conditions: 45% of major highways since 2007 are in poor or mediocre condition (3% since 2011) Significant contribution from TPA activity • …and still significant potential • Since the end of 2014: significant investment in technicians glass inventories additional and 2007 2008 2009 2010 2011 2012 2013 2014 led to step-up market share gains • 90 new branch openings in 2015
Investor Day 2015 47 TRADING UPDATE
Gary LUBNER CEO of Belron SUMMARY OF TRADING UPDATE (YTD 10/2015)
• Number of jobs: +0.5% to 9.6 million
• Sales: +11.7%
Sales Europe Rest of the world Total Total -0.6% +24.3% +11.7% Organic -2.6% +10.0% +3.6% Acquisitions +0.4% +0.1% +0.3% Currency translation +1.9% +14.3% +8.0% Trading days -0.3% -0.1% -0.2%
• Europe: market declines slowed since H1 2015
• RoW: US business continues to perform strongly (market growth & market share gains)
Investor Day 2015 49 OUTLOOK
• FY 2015 current result before tax, group’s share should show solid growth thanks to a very good H1. However, in H2 2015 yoy profit evolution is impacted by higher incentive costs. Moreover, the impact of cost savings is less pronounced in H2 2015 compared to H1 2015 as many efficiency initiatives were already underway in H2 2014.
• FY 2016: Belron’s US operations well-positioned to continue gaining market share next year in a market that is expected to show modest underlying growth but that may revert to normal weather conditions after two exceptionally cold winters. Assuming a normal winter, the European markets are expected to see further volume declines that Belron will try to compensate for with growth initiatives, commercial actions and efficiency gains. Increased competitive pressures in some countries and glass cost inflation due to the relative weakness of the euro could have a negative impact on profitability. Restructurings in UK and Brazil expected to continue to pay off next year.
Investor Day 2015 50 MEDIUM-TERM STRATEGY
Gary LUBNER CEO of Belron OVERVIEW
• Our medium term strategy in VGRR is clear: Nationally driven – globally supported Tailored growth and efficiency initiatives Clear people and leadership focus Opportunistic geographic expansion
• In addition, we are exploring opportunities to broaden our service offering
Investor Day 2015 52 VGRR STRATEGY – OVERALL APPROACH
• Our ambition is to be the natural choice for VGRR in every market in which we operate
• This requires a country specific approach, taking account of local market conditions, such as: Insurer penetration, strength and behaviour Competitor positioning and activities Market position and evolution Consumer preferences
• These will vary considerably from country to country and ultimately determine the overall strategy
• We have strong local management teams who determine and drive the local strategy
• These management teams are closely supported by a central team of experts who share knowledge and great practice by leveraging our global strength and expertise
Investor Day 2015 53 VGRR STRATEGY – SPECIFIC APPROACH
• In an environment where underlying market conditions remain unfavourable, we recognise that investment is required in order to gain share and deliver additional value
• While the detailed strategy will be country specific, in broad terms we will seek to develop the group in the medium term by: Targeted growth actions: investing in areas such as technology, footprint and advertising to grow share Continual innovation to drive additional cost efficiencies in all areas of our operations
• We will continue to drive performance through a clear focus on people and leadership
Investor Day 2015 54 VGRR STRATEGY
SPECIFIC ACTIONS
Defending our market position In our more mature markets, we will Innovative sales and marketing techniques to gain incremental volume MAINTAIN segment share by: Continuous improvement to effectiveness and efficiency of the operating model
Growing share organically and through acquisition Enhancing relationships with insurance partners in order to increase take up rates Where we believe we can GROW segment share we will do this by: Building the brand Continuously improving service offering to ensure differentiation Continuously enhancing the leadership capability
Transforming the market Where market conditions are less Transforming our market power favourable we will RESPOND by: Transforming our operating model
Building insurer relationships through national coverage, average claims cost etc In less mature markets we will Building the brand in a cost effective way DEVELOP the business by: Developing a differentiated service Building leadership capability
Investor Day 2015 55 UPDATE ON MEDIUM-TERM TARGETS
• VGRR markets in developed economies have declined more than expected since 2019 targets were announced in 08/2014, putting pressure on sales growth and operating margins. In addition, plans to enter emerging markets have been postponed. Current market outlook is for further declines.
• While sales growth target (of 4.0% on average between 2014 and 2019) is still considered to be achievable, the expectation of an 8% operating margin in 2019 has become challenging.
• Belron still aims at a continuously rising operating result. US: further growth opportunities Europe: offset market declines with market share gains in most countries & efficiency improvements. Fix Brazil and UK Potential new service extension areas that could generate additional revenues and profits.
Investor Day 2015 56 GEOGRAPHIC EXPANSION
• Experience to date in emerging markets has led to the conclusion that these markets are not yet suitably advanced for the Belron VGRR operating model
• No further corporate expansion into new markets in the short to medium term
• Continue to monitor potential opportunities
• Continue to operate with franchise partners
• Remain fully committed to existing franchise operations
Investor Day 2015 57 POTENTIAL SERVICE EXTENSION
• In light of the market declines and competitive challenges that exist in our mature, developed markets, we have begun to explore opportunities to broaden our service offering into new areas
• We have developed our thinking in this area with support from McKinsey
• Work in this area is on-going
• No decisions have been taken at this stage
Investor Day 2015 58 WRAP-UP
Gary LUBNER CEO of Belron WRAP-UP
• Outstanding historic performance in light of market pressures
• Further market declines expected necessitating further innovation in terms of both growth and efficiency
• Geographic expansion into emerging markets not considered viable in the near term
• New service offerings being evaluated
• Leadership capability remains strong
Investor Day 2015 60 Q&A
QUESTIONS?
Investor Day 2015 61 D’IETEREN GROUP
Investor Day - 8 December 2015 FINANCIALS
Arnaud LAVIOLETTE Group CFO SHARE PRICE: UNDERPERFORMANCE SINCE 08/2011
D’Ieteren’s share price vs MSCI Europe Small Cap Index 10-YEAR TRACK (2005-2015; rebased to 100 in 11/2005) RECORD
14.06.11 – Avis Europe: proposed disposal • TSR: EUR 15.37 01.08.11 – Approval by AGM Avis Europe or 69%, of which
Gross dividends: 23% Current EPS 21.12.12 – Profit warning growth: 5% Higher P/E: 41% • IRR: 5.7%
D’Ieteren MSCI Europe Small Cap Index
Investor Day 2015 65 GROSS DIVIDEND PER SHARE: 14.3% CAGR OVER THE LAST DECADE
Gross dividend per share & dividend payout ratio (2005-2014; % & EUR) • Dividend policy:
CAGR gross DPS: absent major +14.3% 34.9 32.4 unforeseen events, the 27.7 Board of Directors will
13.6 14.2 ensure a stable or, 10.9 9.9 10.4 9.8 10.0 results permitting, a 0.800 0.800 0.800 0.800 steadily growing dividend. 0.425 0.300 0.300 0.325 0.240 0.264 • Average dividend payout ratio (gross
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 DPS/current EPS): 17.4% Dividend payout ratio (%) Gross dividend per share (EUR)
Investor Day 2015 66 MODEST SALES GROWTH WITH DECLINING MARGINS
Sales, REBITDA & REBIT margin (2005-2014; EUR million & %) 14.6 14.0 13.8 13.1 13.1 12.7 12.2
7.5 6.6 6.1 6.1 6.5 6.2 6.0 5.4 5.6 5.8 4.5 4.0 7,054 7,139 3.6 6,501 6,270 5,967 1,520 1,161 5,514 5,471 5,542 5,254 1,666 1,393 4,757 1,325 1,255 2,769 1,276 2,801 2,727 2,843 2,881 2,000 2,156 2,423 1,507 1,254
3,208 2,227 2,491 2,642 2,679 2,454 2,733 2,787 2,627 2,660
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
REBIT margin Total sales Avis Europe Total sales D’Ieteren Auto + Corporate REBITDA margin Total sales Belron
Investor Day 2015 67 SINCE 2011, SIGNIFICANT IMPACT OF DECLINING MARGINS AT BELRON
Current PBT, group’s share (2005-2014; EUR million)
CAGR +3.2% 378
73 305 29
214 200 194 192 21 213 178 22 23 149 211 157 18 119 148 98 109 150 23 131 105 72 60 93 60 75 61 65 36 43 53 47 53
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Avis Europe Belron D’Ieteren Auto + Corporate
Investor Day 2015 68 EARNINGS PER SHARE: 2.9% CAGR OVER THE LAST DECADE
Current earnings per share (2005-2014; EUR)
CAGR current EPS: +2.9% 5.65
4.26
3.33 3.02 2.89 2.89 2.47 2.43 2.29 1.77
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Investor Day 2015 69 HISTORICALLY VOLATILE FREE CASH FLOW / ROOM FOR IMPROVEMENT
Free cash flow by segment (2005-2014; EUR million)
700
313
154
53 98 233 72 16 56 34 63 62 99 53 82 26 63 36 36 29 30 19 30 -46 -28 -125 -119 -182 -162 -23 -28 -112 -84 -106 -146 -260
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Car Rental Vehicle Glass Automobile Distribution + Corporate
Investor Day 2015 70 FROM NET DEBT TO NET CASH
Net debt D’Ieteren Auto + Corporate (2014 vs 2005; EUR million)
+ EUR 616 million 138 37 -18
-197 -247 246
-41 -373 393 412 619 -216
-478
Net debt FCF Interest paid Other Subscription Sale of Change in Dividends Cash Own Dividend Consolidated Net cash 01/01/05 D’Ieteren by D’Ieteren acquisitions to Avis Avis Europe ownership received received shares paid to or decon- 31/12/14 Auto 2005- Auto + in D’Ieteren Europe in Belron from Belron from the shareholders solidated 2014 Corporate Auto capital contribution debt segment increase of D’Ieteren Lease to VDFin
Investor Day 2015 71 SUSTAINED EQUITY GROWTH
Net debt by segment & equity (2005-2014)
2,400 2.4 2,210 2,200 2,090 2.2 1,893 2.1 2,000 2.0 1,876 1.8 1,823 2.0 1,770 1,725 1,800 1,679 1,645 1.8 1.8 1.5 1,532 1,600 1,465 1.6 1,400 1.4 1,200 1,140 1,155 1.2 1.2 1,019 1,031 946 1,000 850 1.0 800 491 505 598 0.8 0.6 600 0.6 400 0.4 0.4 200 0.3 0.3 0.2 0 0.0 -200 -400 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Net debt / equity (%) Net debt Vehicle Glass segment (EUR million) Group equity and minorities (EUR million) Net debt Automobile Distribution + Corporate segment (EUR million) Net debt Car Rental segment (EUR million)
Investor Day 2015 72 FINANCIAL STRUCTURE – STRONG FIREPOWER AT D'IETEREN AUTO
EUR million 30 June 2015
D’IETEREN AUTO BELRON GROUP
Non-current loans and borrowings 5.7 694.7 700.4
Current loans and borrowings 104.1 48.3 152.4 Inter-segment loan -60.0 60.0 - Gross debt 49.8 803.0 852.8
Cash and cash equivalents -98.6 -39.1 -137.7 Other current and non-current receivables -20.4 - -20.4 Held-to-maturity investments -44.1 - -44.1 Total net debt -113.3 763.9 650.6
• D’Ieteren Auto + Corporate: EUR 100 million bond matured and was repaid in July 2015 4 bilateral credit lines of EUR 75 million each (maturity 2020)
Investor Day 2015 73 FINANCIAL STRUCTURE – LONG-TERM FINANCED MAINLY IN USD AT BELRON
• Belron: Debt maturity profile Financed autonomously and (2016-2025; EUR million) independently from D’Ieteren 195 US private placement (USD 625 million, EUR 75 million 152 and GBP 20 million) 140
o Loan notes issued to US life insurance companies 89 o Net debt/EBITDA covenant of 3.25x (2.73x at end-June 2015)
o Duration: 4 years & 10 months 45 Bank facility (EUR 350 million) maturing 19 20 in 2016 0 0 o Club deal with 7 banks Net debt/EBITDA covenant of 3.50x o 2017 2018 2019 2020 2021 2022 2023 2024 2025 Current effective interest rate: 4.6% Size of borrowing 69% of net debt was denominated in USD at end-June 2015
Investor Day 2015 74 ROCE D’IETEREN AUTO + CORPORATE: CONSISTENTLY ABOVE WACC
Capital employed (EUR million) & ROCE (pre-tax; %)* (D’Ieteren Auto + Corporate)
20.9 20.8 17.4 18.8 12.9 13.6 12.4 12.4 10.7 10.0
589 526 491 477 497 414 415 407 363 28% 364 33% 30% 33% 33% 34% 35% 36% 39% 39%
63% 59% 49% 55% 50% 48% 54% 53% 50% 52%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
ROCE Other JV and associates Intangible assets & goodwill Fixed assets WCR
* Pro forma data: total capital employed includes the equity value of leasing activities at 100% from 2005 to 2011 and at 50% thereafter. Results include the share of the group in net results of leasing activities.
Investor Day 2015 75 ROCE BELRON: UNDER PRESSURE
Capital employed (EUR million) & ROCE (pre-tax; %)
44.4 46.8 44.0 34.3 27.6 28.9 27.1 15.8 16.3 20.1 17.3 16.7 13.3 15.8 -1.0 12.8 13.0 10.0 10.4 -1.6 1,479 1,499 1,353 1,415 1,399
1,047 1,004 998 810 872 936 956 856 763 751 504 461 455 220 208
543 543 543 543 543 543 543 543 543 543
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
ROCE after GW & value of brands pushed down* Capital employed before GW & PPA pushed down* ROCE before GW & value of brands pushed down* GW & allocation to value of brands pushed down*
* When D’Ieteren acquired a majority stake in Belron in 1999, the spread between the equity value and the acquisition price (goodwill) was recognised directly in Belron’s consolidated financial statements. Part of this goodwill was allocated to the value of brands.
Investor Day 2015 76 MANAGEMENT INCENTIVE PROGRAMMES ARE ALIGNED WITH SHAREHOLDERS VALUE CREATION
D’IETEREN AUTO BELRON CORPORATE
• Basis: % of • Basis: % of TSR • Basis: stock option Economic Value (changes in equity + plan linked to Added* dividends) above a D’Ieteren’s share price hurdle rate • Period: 3 years • Vesting period: 3 years • EBITDA multiple: • Who: ~20 stable • Withholding taxes: managers paid upfront • Period: 3 years rolling • Who: ~10 managers
• Who: ~160 managers * (ROCE – WACC) x CE
Investor Day 2015 77 WE WILL CREATE VALUE THROUGH ROCE IMPROVEMENT
D'IETEREN AUTO + CORPORATE BELRON SALES
• Stable market • Tough market conditions & unpredictable weather • Market share increase • Continuous market share gains • Potential service extension RESULTS PROFIT
• Factory support • Return to profit or exit from loss-making businesses • SG&A savings ongoing • Efficiency improvement measures
CAPEX
• Investments in real estate & IT • Strict allocation needed to support growth CAPITAL initiatives & efficiency gains EMPLOYED WORKING CAPITAL
• Room for substantial improvement • Potential for monetising some receivables • Improved inventory rotation
ROCE IN 2014: 10% (D’Ieteren Auto + Corporate) & -1% (Belron)
MEDIUM-TERM ROCE TARGET: 15% FOR BOTH ACTIVITIES
Investor Day 2015 78 D’IETEREN GROUP
Investor Day - 8 December 2015 WRAP-UP & NEXT STEPS
Axel MILLER Group CEO WRAP-UP: D’IETEREN AUTO
1. Strengths:
o The natural choice for Belgian motorists (full range of products and services)
o Long-standing relationship with VW group (since 1948)
o Outstanding management team 2. Room for positive evolution…
o Market share
o Profitability (current projects for dealer network & retail)
o Free cash-flow: ~EUR 70 million today 3. … but there are constraints:
o Mature markets & limited growth prospects (leadership position, change in consumer behavior, increased quality of our products, safety regulations,…)
o Importer level
Investor Day 2015 81 WRAP-UP: BELRON
1. Strengths:
o The natural choice for VGRR – only global player o Customer delight, best techniques & products, strong partnerships o Outstanding management team 2. Room for positive evolution…
o Market share growth potential in most countries of operation o Profitability (fix UK & Brazil, efficiency improvement, cost control,…) o Looking into potential service extensions o Free cash-flow: ~EUR 70 million today 3. … but there are constraints:
o Market declines o Reaching high segment share in some countries o Challenges linked to geographic expansion (ex.: exit China) o Focus on vehicle 4. Considerable value creation since acquisition
Investor Day 2015 82 DARE TO ADAPT
Launch of short-term car Jean-Joseph D'Ieteren, rental service; becoming Internationalisation through a wheelwright and Entry into the car two years later an Avis the acquisition of a majority wheel manufacturer assembly business licensee stake in Avis Europe Signature of import Sale of Avis Europe to contract with the the Avis Budget Group Listing on the Volkswagen group stock market
1805 1897 1929 1931 1935 1948 1954 1956 1976 1989 1999 2011
Exit of the car assembly business One of the first companies involved in Import of US brands Inauguration of the Acquisition of Belron, the production of Studebaker, Pierce- assembly factory in world leader in vehicle automobile bodywork Arrow and Auburn Brussels (Forest) glass repair & replacement
ADAPTABILITY – In its history, D’Ieteren has entered and exited many activities
ENTREPRENEURSHIP – Ability to develop different business models in different geographies
EVOLUTION – We must write the new chapter of our industrial evolution
Investor Day 2015 83 SEARCH FOR NEW GROWTH DRIVERS
CRITERIA FIREPOWER
1. Solid fundamentals for 1. Net cash position (D’Ieteren Auto + long-term growth Corporate): EUR 113 million at H1 2015 2. World class management team 2. Net debt / EBITDA including target to 3. (Access to) majority control remain around 2.5x-3.5x (investment 4. Sector leader or opportunity grade) to be one 3. Potential size of the acquisition: 5. Platform for international expansion EUR 400-600 million (enterprise value). Could be larger if 6. Limited regulatory and technological risks • acquisition is made in partnership • progressive growth to full control 7. Fit with D’Ieteren’s culture
8. Not necessarily automotive-related
Investor Day 2015 84 2015 OPERATING MODEL (I)
. Legal CEO . Audit
. Accounting & Management Control & Tax . Financial Communication & Investor Relations CFO . M&A . Real Estate & Asset Management
. Business Unit 1 Operations . … . Business Unit X
Change and/or upgrade
New missions and/or new operating model
Investor Day 2015 85 2015 OPERATING MODEL (II)
• Missions: • Changes in organisation structure:
o Capital allocation o Move of D’Ieteren Auto’s Treasury to D’Ieteren Auto o Investments & divestments Move of D’Ieteren Auto’s legal Continuous improvement o o support to D’Ieteren Auto o Communication o Real Estate & Asset o D’Ieteren’s identity & Management reporting to values Group CFO
CHANGES IN OPERATING MODEL FOCUSED ON 2 ESSENTIAL MISSIONS: • Investments & divestments • Continuous improvement
Investor Day 2015 86 Q&A
QUESTIONS?
Investor Day 2015 87 CONTACT
Financial Communication & Investor Relations – D’Ieteren group
Pascale Weber [email protected] +32 2 536 54 39 DOWNLOAD THE D’IETEREN APP ON: Thierry Dossogne [email protected] +32 2 536 55 65 or [email protected]
www.dieteren.com
Investor Day 2015 88