Earnings Call: H2 2021

Mar 8, 2022

Ladies and gentlemen, welcome to the D'Ieteren Group 2020 full year results conference call. I now hand over to Mr. Francis Deprez, CEO, and Arnaud Laviolette, CFO. Gentlemen, please go ahead. Well, good afternoon or good evening, everyone. Welcome to our full year 2021 results conference call. Three main messages when we talk today about the 2021 results. First of all, as you may have noticed, last year, we have been expanding the D'Ieteren Group, in two ways, at least, by adding some new activities like TVH Parts that we added in 2021, and we are working on adding PHE in the course of this year. In a second way is that in some of our existing activities, most notably at Belron, with the transactions related to having some new investors on board, so EUR 21 billion EV price tag was also, let's say, anchored on the existing Belron activity. The main portion and second message of today is really on the results of 2021, which we can really label as record results. You may recall we put a 25% guidance at the beginning of the year, lifted that to 45%, at least, percent increase, and we ultimately ended up at +52% increase in the previous year. We are similarly to last year, guiding for this year an increase of at least 25% in the PBT group share, so profit before tax group share, which is our usable KPI. Third message of today is that we are also proposing to our general assembly an increase of our dividend per share of over 55% to EUR 2.1, and that we will be reactivating the share buyback program that, as you may recall, has been on hold for a while during the COVID crisis. Key highlights of the results, I will take you through that and then hand over to Arnaud to start going through our individual activities. Profit increased, and I will immediately go to page 4, sorry, on combined group sales to give you a highlight. +15.8% in combined group sales increase. Almost by chance or coincidence, I would say, Moleskine, Belron, and TVH Parts are all around 19%, 20%. TVH Parts slightly the highest growth to 19.5% over the last three months of the year last year, which are the three months that we consolidated. 19.2% at Belron, 18.9% at Moleskine. D'Ieteren Automotive, of course, in a very difficult supply environment, did manage to keep its sales flat or slightly up at +0.7%. In combined adjusted operating results, the increase is more substantial than the +16%. It is more +47.3%. Here, of course, driven by a very nice increase in our Belron results, with close to +40%, +39.6% to be precise. A very resilient D'Ieteren Automotive, that despite a very difficult market with a lot less deliveries of vehicles, managed to increase its profits with 8.1%. TVH Parts, which for the first time we included, is added here for EUR 46.3 million in this number. Also Moleskine is basically adding a positive number with EUR 12.3 million in our operating results. The translation of all of that in our adjusted PBT group share is exactly the 51%, 52% that I mentioned before. The difference between the two numbers being whether you take into account TVH Parts, and the Belron refinancing, that makes a difference between the 51% and the 52%. As you can see, in the 51%, all activities contribute to the increase over the year. Also important to note is that the baseline for 2020 from which we start off here is a little bit a different baseline than the one you may have had in mind last year, because now we are really accounting for the software as a service under IFRS in a more precise manner. Therefore, we start here with a baseline from 324.7 leading to 489.1 or 493.4 if you include everything for the full year. In terms of free cash flow generation is basically, we've delivered a good solid number. It's a bit lower than the year before, about 15.5% lower if you take Belron at 52.88%, landing at EUR 326.5 million for the group. It's basically a reflection of a flat development at Belron, around EUR 224 million. A nice increase at Moleskine at EUR 16 million. A very good level, actually, better than plans for sure at D'Ieteren Automotive at EUR 108 million. Then some corporate and unallocated costs of EUR 21 million. Last but not least, before going into the specific activities, the debt structure at the group level and the evolution of that between the different activities, basically leads to us at a group level still holding about EUR 1.1 billion in cash. It's actually EUR 780 million in real cash and some EUR 300 million in inter-segment loans, mainly to Moleskine, and a little bit to TVH. This of course, is a result of all the different transactions that happened throughout the year. This is of course still pre the PHE deal. Because of that, we of course will only pay when there is a closing, hopefully in the Q3 of this year. With that, I think I have given the highlight numbers. I reiterate that dividend will go up to EUR 2.1. Share buyback will be reiterated in our guidance for the future at least +25%. Without further ado, I suggest to hand over to Arnaud for some insight into Belron. Thank you, Francis. Good evening everyone. I am delighted to present the results of Belron. It is another record year for Belron in 2021, after you remember, relatively stronger 2020. Sales are growing by a little bit more than 19% for the whole year. It was a little bit softer during the second half of the year, but I will come back on that. The volumes were quite significantly higher with a growth of 13.6%, with also positive price impact because of the technological content of our windscreen. Windscreen in general, we are able to increase the value of the job we are performing and also some significant growth in recalibration of ADAS and a positive contribution of VAPS, Value Added Product and Services. This translates also into a much improved EBIT margin or operating profit margin during the year, growing by 40%. You see that the fall-through has been very positive, thanks to still a very disciplined cost policy in general. This is leading to a trading profit or an EBIT of EUR 815 million. Despite, and this is important, the fact that we have treated above the EBIT line, the transformation cost that we have already alluded to during the publication of the first half results. For the full year, a bit more than EUR 63 million of transformation costs. As those costs, those investments are in fact, for future cloud-based application, we have to expense those, and that is what we have done. Once again, we are not treating that as exceptional or adjusting items. The operating margin is improving to 17.5%. There was a significant increase in the margin during the first half. A small deterioration during the second half of the year, but it is essentially due to the increased transformation cost for that period. There were also some pressure on the supply chain during the second half of the year with availability of glass, which was more difficult, and that led to some adverse buy in our purchased goods. The adjusted PBT group share increased by close to 42% compared to last year with, once again, strong growth despite the investment we do for the transformation program and despite also additional financial costs because as you remember, in April last year, we did a significant restructuring of the capital structure of the company, distributing important dividends and leveraging a little bit more the company. That led to increased financing costs. The free cash flow remains very, very solid, at EUR 423 million. It is relatively stable. It was EUR 429 million in 2020. So much increased EBITDA, some increased CapEx, big delta in the working capital. Working capital coming back to normal after a very positive in terms of free cash flow generation, of working capital generation in 2020. That reversed in 2021, and this is why the improved EBITDA has not been translated into an improved free cash flow, but still very, very solid. Strong liquidity position with EUR 245 million of cash and liquidity thanks to the RCF of EUR 665 million, which has not been drawn, which remain very, very comfortable. If I look at the details in terms of sales, organic growth is 21.3%, very solid, very robust. We have done some acquisitions, but relatively minor impact on the top line. We had a little bit negative headwind from FX because of the depreciation on average on the year of the US dollar. In terms of geographies, the U.S. has been really strong with close to 23% organic growth. That was partially due to volume, a little bit more than 10% volume increase and some positive price development or value development in U.S. The Eurozone has really caught up versus last year. You remember that in 2020 we had a significant impact from the lockdown in Europe, less so in the U.S. So Eurozone came back with a very solid organic growth too, and the rest of the world, still very robust, with close to 15% organic growth. Volumes are based really on market recovery, but also, and this is very, very positive for us, continued market share gains in all the regions, nearly all the markets we are present. We are still not totally at the level of the volumes of 2019 before COVID, but we've really caught up quite significantly. We continue to see an increase in the value of the jobs we are performing due to the technological content of the windscreen. It's ever increasing. There is no end of that insight. So we enjoy that positive tailwind. ADAS has really been flying. This is due in part to the fact that indeed the car park is more and more equipped with ADAS camera, but also we've been able to gain significant market share in that segment. We are a little bit disappointed for value-added product and services because the attachment rate is not the one we had expected, but still making progress on that front and more to come. Now, when I look at the operating profit, it's a record one, as you can imagine, with quite a significant increase in the operating profit margin, going from 15% to 17.5%. Once again, we've been penalized or we penalized ourselves, but I think it's really good for the long term because we invested massively, as I mentioned, in the transformation program. More to come in the coming years, but it's really the first leg of that program with EUR 63 million for the full year and EUR 15 million for the second half of the year. The adjusted PBT, I've commented on that, and also on the group share, which is a consequence of the improved operating results. If I look now at adjusting items, quite significant amount, and sorry for that because it makes the reading maybe a little bit difficult, but we've got the usual amortization of brands and customer contracts. This year, we also had a few new items, and we explained them when we issued the last press release announcing that we are preparing something which is very important for the company, which is the Belron Thank You. So in the framework of the transaction we've done with the new shareholders, there is quite a significant number of shares which are still not allocated to the management, which are in the employee benefit trust, and which we have decided to partially allocate to the employees of the group. So the 26,000 employees of the group have received a cash payment of EUR 1,500 per person. Plus, they received a package of restricted share units, which will be vested at the moment of the future exit of the current partners or the current shareholders, financial shareholders, within Belron. This has no impact, dilutive impact, no economic impact on D'Ieteren. Because the EBT, so the employee benefit trust, is consolidated within Belron, we had to take that into account in the P&L. But it has also a parallel impact, positive impact on the equity. So there is really a neutralized impact on the value or on the economic value of the company. On top of that, we did some restructuring in some countries. We closed contact center in the U.S. We have sold the activity of ADR, so auto damage repair and replacement in Belgium, which led to a loss. We restructured German activities. We stopped some franchise activity in the Netherlands. We made a small restructuring, another restructuring in the U.S. So all in all, it led to that relatively important adjusting items, but which are really one-off elements. At the level of the finance cost, as you remember, we've got a relatively well-balanced leverage or financial debt. Close to 70% of that debt is denominated in U.S. dollar. Part of that U.S. dollar debt is in Europe with a mismatch between accounting or reporting currency and the transactional currency. We had to report the difference in value because of the appreciation at the end of the year of the dollar. We had to report the appreciation of the dollar in the P&L instead of reporting that in the equity. But next year or this year, we'll be able, because we hedged that position, to report it under the quasi equity method. So you won't see that kind of impact next or this year in the accounts. That's all the adjusting items. For the free cash flow, still very solid as I mentioned, driven by increased EBITDA. But the swing of working capital was negative this time, which is normal because of the growth of the business and because of a return to normal. Net CapEx, higher than last year. We continue to invest quite significantly in the footprint in ADAS in general, in ADAS equipment tooling. Capital paid on lease liability is no big change on that front. Those are the rents we pay for our premises. You see the trading cash flow is still very robust and above last year. Then some adjustment for acquisition tax paid, which, thanks to the increased profit, has been increased last year. And the net interest payments that I've mentioned earlier. Very robust, very solid free cash flow, and the net debt landing at a little bit below EUR 3.8 billion, leading to a leverage compared to the EBITDA of 3.22, which is very controllable and totally under control and manageable as you can imagine. The latest development, we continue to deliver or to deploy the transformation program. This is a very important one, you know, for the future. We'll be active there till 2025, a little bit in 2026. You won't see the real benefit on the P&L before 2023 and beyond. When I say you won't see the benefit, you will see the cost initially, but not yet the benefit of that program before 2023. It's really a massive one, and we are very happy about the progress to date. I've mentioned the Belron Thank You, and also the contribution to a charity, which is important. And in terms of ESG targets, we managed to recycle much more glass than we did before, reaching 72% of glass waste recycling. We continue to target for higher levels. I think that the objective is to go to 100%, and we will get there in a very near future. We are also engaged into deploying or putting some very strict science-based targets for CO2 emission, and that will be done before the end of 2024. The outlook. Well, as you know, there is a war between Russia and Ukraine. We have activities on the ground. We have one franchise in Ukraine, which is closed for the moment, and we had a franchise in Russia, but we have decided to stop that for the time being. Additionally, we have some sourcing from Russia in terms of glass. Two of our suppliers, they have factories over there. Represent a little bit less than 5% of our global glass supply, but we are finding alternative solutions in order to get the glass delivered. So the impact will be relatively benign on Belron. We are still expecting double-digit growth, low double-digit top line growth for this year. We continue to see increased volumes across all the regions. We still expect a positive price mix evolution, continue to see positive development on the ADAS penetration front and also on the VAPS contribution. We are expecting to have a relatively good fall-through with a higher increase of our EBIT, of our operating profit, higher than the top-line growth. Despite the fact that this year, we will have probably to assume EUR 80 million of transformation costs, which will go through the P&L compared to the EUR 63 million of last year. The adjusted free cash flow is expected to remain high, probably comparable to 2021. We continue to invest quite significantly in our footprint in ADAS, tooling, and in some premises for the U.S. So there, we should still have a very robust free cash flow for this year. Hafiz, the floor is yours for D'Ieteren Auto. Thank you, Arnaud. On D'Ieteren Automotive, I will move right away to page 19, giving some details on the markets and then how D'Ieteren Automotive delivered against that. Very tough market environment, 11.2% less new car sales in the overall market, and that is also including registration of less than 30 days. That does not really change the picture. In that environment, D'Ieteren Automotive managed to slightly increase its share to 23.7%. The commercial vehicles was a slightly growing market, and our market share declined a bit because some models like the Amarok and so on, were not really available anymore. But I think just looking at the graph on the page, you can see that 2021, after 2020, which was already abnormally low, has really been low. We are back at the levels that we have not lived through since 1995 in terms of overall market. But in terms of market share, we are also at levels that we haven't lived through since quite a while, but then on the positive side. In terms of mix of cars being sold, on page 20, the fuel mix is really noticeably different than a couple of years ago. By now, the new energy sources, so the mix of hybrid, CNG, LPG, and full electric, has reached the same size as diesel at 24%. And I'm sure this year, they will clearly overtake diesel. And within the 24%, 24% again is full electric. So that's still small, but becomes a noticeable and visible number, which is rapidly increasing. And fortunately, we have a quite attractive market share in those segments, so that's really good news for us. In terms of buyer mix, the market has become even more B2B-focused than it already was last year. So now we reached 60% in 2021. And it's a trend which continues actually as we speak. The B2B is really using their car policies to modernize and greenify the car parks. And the SUV mix is still very much the same story as the last couple of years, meaning an increasing number of SUVs, not just large ones, but also smaller ones. Not just combustion engine ones, but also electric ones. And we're now at about 48% of the mix being SUVs. In terms of shares of D'Ieteren Automotive within that market, you can clearly see on page 21 that Audi has been the big winner, as well as Porsche. The Porsche numbers are of course very small at 0.8%, but Audi with 7.4% is really a nice jump. And that was good because after a couple of years in which they had more difficult times, they had a very nice model line up with the A3, the Q3, the e-tron, the arrival of the Q4, which is a beautiful car. VW brand was more or less stable, 9.3%, 9.4%. The arrival of the electric ID models has been a good success. The SUVs continue to also work very well. At the same time, the Golf, clearly less than before, and therefore, you immediately see that in the numbers of the VW brands. Škoda was also some decline, with Octavia and Superb being a bit less new or novel in the market. And the combination of SEAT and Cupra, which are a bit under the same heading, with a slight increase, thanks to the Cupra mainly, really. Our share of SUVs, which was always trailing, has now caught up more or less. Now we're at 44% of our mix versus 48% in the market. And in terms of new energy, we're very happy that we're close to 30% in terms of our market share of full electric cars, which bodes very well for the future. In terms of financial numbers, in this very tough environment, really good that they kept the sales number slightly up, +0.7%, which is a testimony to the good mix of modules of vehicles. And an 8.1% increase in operating results, so that they actually reach a 3.2% return on sales, which is very decent in the market that we have been knowing. So really good, resilient performance of automotive, mix driven, but also great cost containment driven. And that's really good news. There will be an adjusting item, or there has been an adjusting item in 2021 of about EUR 22 million, which basically is linked to the closure of the two Brussels-based retail centers, which was one of the outcomes of the non-negotiations, I would say, that we had last year. It was not our plan A, but it was our plan B. These loss-making sites have been closed. In terms of free cash flow implication, really good performance, clearly better than planned. To some degree, of course, also helped by the shortage of vehicles, which led us to deplete our stocks faster than planned. With less stock, less working capital, with less working capital, a better translation from EBITDA into cash flow. Even if you take acquisitions and taxes paid, et cetera, out of that, we get to a number of EUR 108 million, which is really a good number for the type of year that we've had. Also the net debt, we now have really D'Ieteren Automotive as a completely separate legal entity. They have their own financing structure and so on. But at the end of the year, they are with a lower net debt than at the beginning of the year, EUR 55.7 million. In terms of latest developments, supply chain is of course, had been an issue and continues to be an issue. The semiconductor issues are not yet solved and will still keep a couple of months. On top of that, due to the crisis in the Ukraine, some of the critical cable tree suppliers or supplier who had a huge plant or had a huge plant in Ukraine, is not delivering anymore to many brands, including the Volkswagen brands, but other ones as well. It actually has, as you may have read in the press, triggered the closure of a couple of days here or a couple of weeks there of quite a number of car assembly lines of the Volkswagen Group. Which basically means that our super strong backlog of orders that we have just keeps running up and that the delivery visibility that we can give to our clients is clearly not yet there. The closure of two sites I had mentioned. The setup of its own sustainability-linked loans is an important milestone in setting up its own financing structure. The strategic objectives remain the same. It's around transform, expand, and innovate. So keep working on improving the core business. It's one of the reasons why we continue to expect this year an at least 15% increase of our operating results despite the difficult supply chain issues. But we continue to invest also in expansion activities and innovation activities with Lab Box and others, the bikes, for instance. Therefore, our free cash flow expectations for the year is to remain in positive territory, but it will be a lower number compared to 2021, especially if we will be in a position to kind of stock up again in the type of stocks that we would like to have towards the end of the year, and that will require a bit of additional working capital. The product pipeline is nice. If only we can get our hands on getting them delivered. The ID.3, the ID. Buzz at the end of the year, and so on. I will not go into much detail on that. I will continue on TVH Parts, if you allow me. We've, of course, only consolidated the last three months of the year as the closure was on October 1. But if I look at those three months alone, a very enjoyable development at TVH Parts, a 19.5% increase in sales. Also an EBIT growth, which is even higher than that at 28.4% EBIT growth. So a very nice increase of the EBIT number there as well. At the adjusted operating results, we adding EUR 46.3 million, which in itself is 88 basis points higher than the comparable number of the fourth quarter of 2020. Overall, it is such that the Q4 is a bit of a soft season for TVH Parts. The beginning of the winter months, there is less ordering of spare parts in several parts of their business. This is not a representative quarter, I would say, for the full year. Anyway, it has been a nice development if you compare it to 2020. The contribution, therefore, in our PBT group share is about EUR 17 million, and their net debt level has been relatively stable at about EUR 760 million. It includes the EUR 41 million intersegment loan from our side, the rest being more a bank related debt. So financially speaking, on page 27 you can see exactly the same breakdown that I was already talking about between the sales, the operating results, the adjusted PBT, of which our group share is, of course, 40% only. In terms of latest developments, almost all the growth at TVH Parts has been organic. There's a bit of inorganic in there because we did integrate Battery Supplies, which was acquired in the middle of the year, and also Van Gent and Intella, relatively small acquisitions, but they do have a bit of a contribution on the top line and on the bottom line, of course. They continue to invest in state-of-the-art warehouses. The big automated WB3 warehouse, the building exists, but there was still a section of the building not filled with automated racks, and that's an extension of which the works have started a couple of months ago. There's also a completely brand new pallet warehouse, a couple of hundred meters behind WB3 called R7, which is now complete and is being filled up as we speak. Also the headquarter building, which was almost ready, is now being used since a couple of weeks. All that on the Waregem site. Similar to Belron with its Fit for Growth transformation program, there is an Innovatis transformation program being set up at TVH. It's relatively at the beginning. It's mainly triggered to avoid having growth limitations linked to the ERP and other related IT systems, and to avoid that in a couple of years, the company is already today anticipating a modernization and a harmonization of the ERP setup across the world to be able to continue to grow organically and inorganically in a smooth manner. There's a good engagement score, by the way, in terms of non-financials towards personnel, 85% engagement score, very nice. On ESG, several initiatives have been ongoing, but there was no, let's say, coherent and well-worked-out ESG strategy yet. It's something we have been insisting on from day one. They've now nominated a sustainability manager, and this is really taking on a lot of additional ambitions and plans and concrete elements to work on. Our outlook for the year. The Russian-Ukrainian crisis has a small impact on TVH Parts. They make about EUR 50 million revenues on a typical year in both countries together, so about 3% of sales, if you like. Of course, as we speak today, Ukraine is not active and Russia still has its local depot that is working, but we are not delivering any more to that local depot as transportation has become increasingly difficult and payments become more difficult. There may be some top-line impact coming from that, depending on how long the crisis lasts. Our overall expectation for 2022 at TVH Parts is a double-digit growth at the top-line level. Some bolt-on acquisitions. There's a nice pipeline. These are relatively small things, but they do contribute, of course, and we do want to land at least above EUR 230 million in terms of adjusted operating result or EBIT at TVH Parts. I hand back to Arnaud for Moleskine. Thank you, Francis. Moleskine, much improved performance in 2021. We are very happy about the work done by the CEO, by Daniela Riccardi and her team, and it is now leading to much-anticipated, much-expected results. Sales growth has been relatively strong from a low base, but relatively strong with a growth close to 19%. That growth has been really accelerating during the second half of the year with a growth closer to 24%. 21%, sorry. It was driven by recovery from the pandemic, of course, but also from relatively strong improvement in some product categories. I will take one example, which is the paper category, which has been growing, which is key for the company, as you can imagine, which has been growing by 24% last year. The notebooks itself, the notebook category, increasing by 45%. Those are really strong and positive signs that the brand is still extremely strong and that there is still a lot of potential over there. In terms of regions, we've been able to make a real difference in America with a growth of 30% compared to last year. EMEA was relatively strong with 17% growth, while APAC suffering for store closures during the year has been declining by 3%. The strategy, fewer, bigger, better, is really yielding results and more to come, hopefully, in the coming years. We continue to be very disciplined on the cost side. The gross margin has been suffering a little bit from some price increase in paper, some increase in the logistic chain in transport cost, but remain very high and solid. Thanks to the discipline on the other cost, on OpEx, on personal cost, we have been able to improve quite substantially the EBIT margin of the company. EBIT margin has been increased by 11% in absolute amounts, which is quite significant from a low base, but still, we are on track for improved performance and EBITDA margin being close to 20% for this year. The adjusted PBT has been also improving quite significantly, been positive for this year. The cash conversion has been very strong, generating EUR 16 million of cash leading to a much improved net profile. The bank debt was EUR 44 million with cash of EUR 38 million, so the net debt due to banks was very limited and represented less than 0.3 times EBITDA at the end of the year. In terms of channels, the indirect channels remain really the ones performing very solidly in 2021. The direct channels, we have been closing stores, so not all the stores were open during the year, but they are catching up quite significantly during the last quarter and still performing strongly at the beginning of this year. E-commerce has been suffering. We have changed the e-commerce site in May, but traffic has not been recovering to previous levels, even if we see some improvement in terms of average ticket per transaction. In terms of geographies, I have already mentioned the very strong performance of the U.S., America, but mainly the U.S. The operating profit improving significantly, same for free cash flow. In terms of latest developments, we continue on our strategic axis, which has been defined when Daniela entered the company, and so we are delivering on that, simplifying the processes, rationalizing the product offering, focusing on new product. The velvet collection, all the new collections that we have launched in 2021 have encountered success. The velvet one, some very special tissue covers, the charms, the new pen writing set is also performing strongly. So very happy about the new product development over there. The strategy of winning with the winners is leading to positive results, too. We focus on very important, significant account, and we want to grow with them, so encouraging signs on that front. Also on the ESG front, we have been able, thanks to a very conscious strategy of eliminating undue packaging, we have been able to save 45 tons of plastic waste during 2021. The outlook, the geopolitical tensions are not expected to have any impact on Moleskine, except if there is big travel ban and travel disruptions. Sales are expected to grow by at least 25% year on year, and the operating result is expected to more than double during 2022. On corporate and unallocated, nothing really specific to mention except that the performance has been much improved in 2021. Real estate continues to perform strongly. We continue to build the portfolio. We continue to increase the rents, and the profitability has been marginally improved. There is a big swing in the P&L linked to the fact that, as you remember, we had provided for in 2020 for the solidarity program. We have been using that partially in 2020, not that much in 2021, and so that provision has no impact on the account in 2021. All right. Francis, anything Wrapping it up, compared to the last pre-COVID year, which was 2019, our PBT group share is now about 65% above the level of then. We have a portfolio of strong companies that are leaders in their markets, that are customer centric, two very important attributes that will continue to be critical in the world of 2022, where geopolitical events on the one hand, sourcing items on the other hand, and potential inflationary pressures for sure on the other hand, will play their role. Being a leader and being customer centric helps to pass along part of that inflation in a good manner. Thirdly, origination. We have been extremely active already as well next to TVH with PHE this year, and we of course continue with our investment strategy to continue to add new growth pillars, a limited number of them, to our family of businesses. On ESG, Eufemia had skipped at the beginning, but which is very important, is that as an active shareholder, but also as a responsible investor, and as being publicly quoted, we put a lot of emphasis at the group level and at each of our activities to have the right set of non-financial KPIs, to have carbon emission reduction plans that are credible and making a difference, to have adaptive sustainability strategies, activity per activity, based on their own materiality analysis, can be more waste focused or more package material focused or what have you. D&I, diversity and inclusion focused in the activities. And we, of course, continue to improve every single year our non-financial reporting that we will include in our annual report for the third time this year, taking into account the newest sets of recommendations around TCFD and others that are, of course, coming at us, with the objective to be as qualitative, comparable, and transparent as possible, and also having these things externally assured. We do let ourselves be measured by several of the ESG ratings, in MSCI, where we are double A, Sustainalytics where we are at 11.6, so a low risk. This will, of course, continue to increase in overall importance. Last wrap up maybe, it is of course, a bit early in the whole conflict of Russia and Ukraine, what the intent will be. We've tried to give you some flavor activity per activity as we were talking about the outlook, but it doesn't change our belief for our new guidance, that is to at least deliver a 25% plus increase in our PBT group share. With that, I would suggest we open the floor for any questions you may have. Thank you, sir. Ladies and gentlemen, if you wish to ask a question, you may press 01 on your telephone keypad. So 01 on your telephone keypad. First question is from Mr. David Vagman from ING. Sir, please go ahead. Yes. Good evening, everyone. Thanks for taking my question. First, on Belron, could you quantify the negative impact of adverse glass buying, wage inflation, or fuel cost, et cetera? Explain us what could be the impact, for 2022. I let you say the best judge of whether you need to quantify this in terms of gross margin or percentage of sales, et cetera. Then, second question, also on Belron. Could you explain us why we should see very limited or let's say limited operating leverage in 2022? If I'm correct, the transformation plan has a EUR 20 million incremental impact in 2022, and that is a 40 BP negative, let's say margin impact, but not much more than that. Let's say then my last question, what are in your view the key risk that you see for your core geographies still at Belron related to the rising oil price, so fuel cost? Thank you. So maybe if I start on adverse buy, if you like. That was really a temporary effect that we have had, especially in, let's say the late Q3, beginning of Q4 in the U.S., given that there were supply issues of some of the suppliers of glass at that time. And we ended up getting back to adverse buy levels around 11% or so, which is not the type of levels that we used to have in a normal setup. In a normal setup, it's closer to half than that or below that. And we are now back to almost normal levels, I would say, of adverse buy. So for 2022, we do not anticipate any continued adverse buy effects to a large degree for this particular year. In terms of wage inflation, again, we all know that there has been some wage inflation, again, mainly in the U.S. last year. We have been adapting to that. We have put it into place as a variable cost item, mainly linked to productivity. Now, the one thing that has happened since then, since October, November, is that we have been recruiting a lot of people to prepare ourselves for the busy season, which is happening as we speak. And we have added a lot of people, almost a quarter of the technical force field, human force in the U.S. And these are people that we've put on board. We've trained them. That leads to some productivity losses, of course, that we had in Q4. But as we have now in 2022, you still had a little bit in the beginning, but very quickly, these people become now at good levels of productivity. And as we get into the busy season, we're happy that we have recruited those people. And so there is this typical seasonality effect, I would say, that you have around that, and that we now between 2021 and 2022 is more normal again, where we had some weird anti-cyclical effects during this COVID stop and go environment. In terms of the margin 2022, you're actually right. So this EUR 20 million extra compared to the EUR 63 million become EUR 80 million on the transformation cost. So that is true. That is there. And as you know, we continue to work on all of the different P&L line items. The one that we spent quite a lot of money on in 2021 is sales and marketing. All the other ones were improving throughout the year. This year, we will see a little bit depending on how the business goes, whether sales and marketing continues to be an important spender or whether there we can also go back into some more normal levels. On oil price, maybe I know you maybe actually hedge oil price to some degree. Yeah, to some degree, yeah. So we use 31 million liters of gas oil every year. We hedged that, so we are hedged till October, but of course we renew that so that there will be at some point, it will hit us in the coming month. We have been relatively cautious in terms of price increase in the budget, David. I hope we will be able to do better there on that front, being conscious of indeed some inflationary tensions. On the glass front, there also we have got a relatively long-term contract, so we won't see a big impact of price increase, but it will progressively kick in 2022. So we need to be careful and cautious about that. There is an improvement in our margin for next year. Due to the transformation cost and due to the fact that we have been relatively cautious in terms of pricing of our services, the impact is more limited. The fault is not improving massively in 2022. To maybe put the margin development a bit in perspective, you may recall we came from 10% and then did the jump to 15% in one year. I had said to you a year ago, we are not going to repeat that every year. Then at H1, everybody said, "Oh, yeah, maybe you are going to repeat that this year." Well, we did go to 17.5%, so 2.5. Now, if you, of course, extract the transformation costs, transformation costs we would have gotten close to 19% or something like that. Anyway, we have this transformation. I think it's the right time, in a moment of strength, to do this, and then the benefits will come in as of next year and the year after, and so on. From our point of view, this trajectory of margin development is a very healthy one, it's a very positive one, and it will continue without any doubt. To come back on the key risks, it's more, I think, macroeconomic. What will be the impact of rising oil price on miles driven in general? That's difficult to assess as we speak. We don't know if the spike is temporary or if it is long-lasting, so we'll have to assess the impact of that in the coming- That would be a volume effect. That would be a potential volume effect. There is a volume effect, and because of potentially lower miles driven, you could have a negative volume effect. That's probably the most important risk I see in our guidance. Thank you. If I may, a very quick follow-up on your cautiousness on price increase in your budget. Could you remind us when you negotiate, let's say, with the insurance companies, when you negotiate for price increase, is it on a yearly basis? When you say you have been cautious, you mean just purely from a theoretical point of view in the budget, or you mean you have been cautious when asking for price increase? Thank you. It is really case by case, David, and it is on a rolling basis, so there are continuous renegotiation with the insurance companies. With some of them, we have got two-year contract. With some others, we have got three-year contract. So it is on a rolling basis, really. There is no one single moment where we renegotiate all the contracts. Okay, thank you. Thank you, sir. Next question is from Mr. Kris Kippers from Degroof Petercam. Sir, please go ahead. Yes, good evening. Couple of questions from my side. Firstly, on Belron still, if you look at the pace of ADAS incrementally going up, of course, could you share with us the expectations for this year and next year and what still needs to be taken in? Because indeed, we have the modernization of the fleet, but could you share with us the differential between the U.S. and European market, for example? They are speeding up, but some guidance would be appreciated. Thank you. Chris, thank you for the question. We've always guided for close to 4% increase in penetration rates, and I would keep that. Even if we've done much better in 2021, we've gained significant market share, we invested quite heavily in tooling and training, and so we enjoyed a significant catch-up over there. For this year, I think that the trend of 4% penetration rate per year is a good one. In terms of variation per country, indeed, there are countries with a higher penetration rate of ADAS, but there are no massive differences, I must say. A country like Germany historically has a more modern and high-end car park, so is above the rest of the market. But the difference between Europe and the U.S. is not really significant. What is significant, it's sometimes the difference in pricing of the service. Okay, thank you. Second question, if you look at your presentations more and more, of course, now you've got the recent acquisitions, which we have all applauded, but there's also, of course, the clear mentioning of the real estate part. What is the ambition of this part? Should it grow or should it become something separate over time? Is that an ambition as well, or how should we see that? It's relatively important, indeed. We are not really focusing on that. We'll be giving a little bit more light on that during the Investor Day that we'll have at the end of April. It's a little bit more than 30 location. It's net rental income of close to EUR 20 million, with some important projects, because we've got 65,000 sq m here at the Rue du Mail, which will have to be redeveloped at some point. We've got significant land in Herk-de-Stad near Zaventem. The premises there will also be modernized. We've got an important project around Brussels called Mobilith, which is already being built as we speak. So indeed, we've got some specific project which will be mobilizing a little bit of cash because it's significant, those investments, and we'll give a little bit more light during the Investor Day. Okay, thank you. No further questions for now. Thank you, sir. Next question is from Mr. Emmanuel Carlier from Kempen. Sir, please go ahead. Yes. Hi, good evening, all. Few questions, I will do them one by one. First on Belron. Indeed, miles driven is the key risk, I would say. What is kind of included in the guidance right now on this point? What we have in the budget, it is continued volume growth, which are relatively significant in 2022. Because of the trajectory of the market share gains that we have had in 2021, and we expect that to continue, we still have increased spend in marketing, in sales and marketing. That was the hypothesis of the budget. And slowly- Pre-COVID levels of traffic. Pre-COVID, it is returning. Exactly, returning to pre-COVID levels. By the way, the winter has been very mild in Europe. While it has been relatively extreme in the U.S., we may see a kind of bifurcated market, differentiated market between Europe and the U.S. As we speak, there is no reason to revisit that. If we see that the mile driven are declining, we will take the correct attitude in order to compensate. There is no negative impact of lower mile driven included in the volume guidance right now? No. Yeah. The second question is on ADAS pricing. Is this still around the EUR 180 level, if I remember that well, on average? We don't give the number on that. But if your question is, do we see price pressure on that, if we're expecting declining prices, the answer is no. Yes. Okay. We have been able to slightly increase it and we continue to see opportunities in specific countries that the value pricing is not necessarily yet reflected in the historical pricing of those markets. But we have not seen, and we are not seeing changes in that trend. Yeah. Okay. On the adverse buy, good to hear that it will normalize again in 2022. But could you quantify the negative impact it had on the EBIT line in the second half? We are not giving that detail. No, but I think it's a bit of impact on the gross margin that you may have had in those two, three months of time where that happened in the U.S. It's Yeah it's relatively significant. Well, you are buying the glass from an OEM dealer, which is clearly at a higher price than what we typically have in our suppliers. It is a double-digit number on EBIT, I guess. Yes. Yeah. Okay. On D'Ieteren Auto, you closed the two centers there. What are the losses that these centers made? In other words, what will be the saving this year? Thinking about EUR 4 million losses, I would say, at the Brussels plaque, as we call that. With those sites, we believe we can actually avoid that and really now start with a cleaner sheet in Brussels. It has been some heritage of the past. Brussels had been loss-making for a very long time. Several initiatives have been taken to reduce that loss over time. At the end, these two sites were still loss-making and did not have a potential very easy to change that. This has been then the more radical solution to get that over with and start focusing on the future again. Yeah. Okay. My final question for now is on TVH Parts. You guide for an EBIT above EUR 230 million. Just want to be sure this excludes any M&A, and what does it assume with respect to Russia and Ukraine? It basically does exclude M&A, as you say, and we don't anticipate a major impact on that number for the crisis as we know it today. If, of course, this escalates and becomes bigger and bigger, we don't know. Okay. Thank you. Thank you, sir. We have one last question from Mr. Michiel Declercq from KBC Securities. Sir, please go ahead. Yes, hello. Thank you. Maybe on the auto business. You guide for a 15% increase in the adjusted operating results. Can you maybe address a bit on what recovery and registrations this is based on for the Belgian car market, and how do you see this market evolve over the longer term? We have, of course, seen quite some losses, or lower registrations over the past 2 years. Is this expected to be fully caught up at some point, or do you believe that not all of the lost volumes will return? That is my first question. I think our expectations for the car market in Belgium this year are around 440,000. Is more or less what Febiac also said, I think. But that was more or less, I would say, about a week ago before some of the car plants started closing down. It depends. If this is a matter of a couple of days and a couple of weeks, then I think that number holds. If that will really become a couple of months, then we are going to probably have the same issue as last year, where we all hope we are going to deliver it in H2, but then it does not necessarily happen anymore. That is the current outlook that we have. We had anticipated a bit of an increase for this year compared to our long or medium-term average, is always around 450,000. We had anticipated 2022 to be a bit ahead of that because our order book is very good and very high, but we do not count on that anymore this year, given the supply chain issues that continue to be there. But the 450,000 for the medium term remains our outlook for the Belgian markets overall. Okay, good. Also a bit on the inflation impact, but on maybe on the TVH Parts business and maybe also on PHE later on. Of course, we have seen quite some increase in prices of iron, aluminum as well. Is there some impact of that included in your guidance already, or? We believe that due to the strength of their positioning in the market, we can pass the price increases through. That's a very conscious attitude. I cannot really speak for PHE because we are not yet owner of that, but for TVH, very conscious commercial attitude that any cost increase linked to inflation of raw materials has to be passed through to the end customer. Okay, good. One final question just to clarify on TVH Parts. Can you give the adjusted operating result of last year? Because so far you only disclosed the last 12 months the EBITDA margin. Is this a number that you can give just to compare it to your underlying top-line growth trends? Which number you want to have detailed? The full year 2021 operating result at TVH Parts. I can give you the EBITDA. The precise one was EUR 251 million. Oh, okay. Thank you very much. That is clear. Thank you, sir. Ladies and gentlemen, I would like to remind you that if you wish to ask a question, you may press 01 on your telephone keypad. Next question is from Mr. Emmanuel Carlier from Kempen. Please go ahead. Yeah, thank you. I still have two questions left. One is on the share buyback. I just would like to understand why you mentioned that you want to kick it off, I think, before the summer, and why not immediately, given the recent share price weakness. The size of this program is unchanged, if I read it well. Yeah. So basically, it is reactivating where we had stopped last time. It was put on hold in, what is it, three years ago. No, exactly, I think more or less in April 2020. Our intention is to reactivate it shortly, but we just have to get it organized technically and set it up and make sure that we can get the whole thing up and running. You shouldn't look at anything more specific in this before the summer type of setup. We do it whenever it starts making sense, but we just have to get organized because it was a discussion we had today in the board, and that we just triggered real-time as we speak. Yeah. Okay. The final question is on the PBT group share. Could you disclose the right basis for 2021 and also what it implies in terms of like-for-like growth? Because TVH is only included for, what is it, two or three months, I think. Yeah. TVH was included for three months in the 2021 numbers, and of course, for 2022, 12 months numbers. I think if you take out TVH part of the PBT, at least 25%, I don't know exactly what it means for this as well. Emmanuel, the base, for a fraction of the percentage in Belgium, it is a 50.01%, so that has a negative effect. Okay? The base is EUR 474 million. Okay? That's the base. That is the number we start from 2021. Exactly. to now compare 2022. Exactly. The 25% is based on that. Yes, at least 25%. 25% is at least. Yeah. If you exclude TVH, I can do the calculation. That is fine. Yes, you can easily do it, because the contribution of TVH is approximately EUR 17 million in the last quarter. That is it. Yeah. Okay. Yes. Thank you. Thank you, sir. Next question is from Mr. David Vagman from ING. Sir, please go ahead. Mr. Vagman, your mic has been opened. Yes. Sorry. I was on mute. Sorry. Just one question left on Moleskine. Could you explain us how we should best model or understand the operating leverage? I understand that you had quite a nice sales recovery in H2. Was there any impact from inflation on gross margin? Or let's say the indirect cost evolving when we have this sales recovery, is it related? Was there an increase in indirect cost related to the reopening of shops, et cetera? What's basically the dynamic of the P&L in H2? Thank you. Indeed, the dynamic was relatively positive, and we expect further improvement in the full 2 in 2022. We are leading to a 25% sales increase, which translate into approximately EUR 30 million of additional sales and a relatively strong fall-through from that one. Just doing the math in my head, the fall-through will be above 50% for this year. Okay. Thank you. Thank you very much. Thank you, sir. We have no other questions. Back to you for the conclusion. All right. Well, thank you all very much for attending this call. If you have additional questions, you can always reach out to either Stephanie Badin or Arnaud or myself, and we will try to help. Looking forward to continue our dialogue and looking forward hopefully also to welcome you on our Investor Day on the 28th of April here in Rue du Mail 50 in Zaventem. Have a great evening. Bye-bye. Ladies and gentlemen, this concludes the conference call. Thank you for your participation. You may now disconnect.