Ladies and gentlemen, welcome to the D'Ieteren 2021 half year results conference call. I now hand over to Mr. Francis Deprez, Chief Executive Officer, and Arnaud Laviolette, Chief Financial Officer. Gentlemen, please go ahead.
Thank you, and good evening to all of you, or good afternoon, depending on where you're calling from. Yes, Arnaud and myself on the half year results 2021 for the D'Ieteren Group. In terms of key highlights at the highest level, while we are quite happy with our record results and strong performance over this H1 2021 period, that has really been driven by all our businesses across the board. In terms of guidance for the rest of the year or for the total year, we are confirming or reconfirming our latest guidance, which has been the one that we updated during the spring, to grow by at least 45% and is driven by all three activities as well for the full year. That's at the highest level.
If I take some of the key elements at the group level to your attention in terms of combined group sales, so the top-line, we have shown a +25.2% top-line growth that has been all double-digit in each activity. The highest this time around has been D'Ieteren Automotive with +25.5%, followed very closely by Belron at 25% plus 3% growth. Also, Moleskine had a solid 14.6% top-line growth, which left us in a combined sales slightly above EUR 4.2 billion. The translation of that into combined adjusted operating results has given us a whopping +119.3%. Basically, again, doubling at more or less Belron +98.7%, doubling, even a bit higher than doubling at D'Ieteren Automotive, +108.8% to EUR 73.5 million.
Moleskine, who was in negative territory during H1 last year, given lockdowns, et cetera, has landed in positive territory in this first semester of 2021, albeit a slight positive number with plus EUR 2 million. Group-wise, we of course always look at our group KPI, the adjusted profit before tax group share. There the number that we have reached is an absolute amount of EUR 288.8 million, which is a +183.3% increase versus last year. Again, of course, we had a comparison here to 2020, which was very depressed last year. Nevertheless, the EUR 289 million is a record number, I think, if you go back even 10, 16 years or so in the history of the group.
The biggest contribution has been, not surprisingly, Belron also in its absolute increase versus last year, but also Auto added a good EUR 40 million and about EUR 12 million added by Moleskine and our corporate session allocated is also about EUR 10 million higher than last year. Overall, a very satisfactory top line-- or sorry, top type of number in PBT group share. Free cash flow generation, albeit smaller than last year because we had quite an unusual free cash flow generation D'Ieteren Automotive last year. We are generating a EUR 218 million group share free cash flow adjusted this time around. Still EUR 18 million positive at Auto, slightly higher at Belron than the year before at EUR 143 million and also plus EUR 4 million for Moleskine.
The big change in free cash flow has mainly been driven that as we're more and more back in business, we of course need more working capital to manage the larger businesses that we have. At the same time, at D'Ieteren Automotive, we had some one-time effects last year that we did not have this year around credit notes, et cetera. Also at Belron, we had been extremely cautious last year in doing everything for cash preservation, whereas this year we were in a bit more normal state of business, meaning that both payables and receivables are managed in a more normal manner compared to the quite crisis mode in which we were last year at the same point of the year.
The implication of all of that for our debt structure is not surprisingly such, and this is of course a picture of the end of June, which means it is before the announced TVH transaction, but after the refinancing that we had done in April with Belron. You see that the EUR 2.1 billion, which is almost on our books in terms of negative net debt, if you like, is of course contributed by the dividend upstream we've seen from Belron on the one hand, but it's still before the payments to be done on TVH. That number and in terms of ESG, last but not least, before I hand over to Arnaud to go into a little bit more depth on Belron, is that in ESG we have continued to progress on working out a responsible investment charge on the one hand.
We were already PRI signatory, and we of course applied this in all our due diligence that we've done in the last month. We have also now introduced with Sustainalytics a kind of a metric that scores us compared to other diversified financial industry players or multi-asset holders as Sustainalytics does that, and they have given us a score of 11.6, which on a scale between zero and 100, zero being the best, is a clear indication of a very low risk level on sustainability as interpreted by Sustainalytics. We continue to work and implement on our business specific ESG strategies as well per activity. They work on the, let's say, most material items that had been identified the year before.
They're becoming very concrete, they are also flanked by a more top-down request to work on a couple of KPIs, amongst which carbon reduction ambition is quite an important one. For instance, D'Ieteren Automotive a couple of months ago has announced quite an ambitious plan to reduce by 50% by 2025. The other activities are also working on this. Last but not least, as you know, we had a solidarity program launched last year linked to COVID and its impact for our collaborators. This year, we unfortunately had to use it also for some effects we've seen, not with our collaborators, but more with our independent dealers in the Wallonia part of Belgium, where the water floods have actually affected some of their operations and their collaborators. We have used an amount of €100,000 from our remaining solidarity fund to support them in that.
This is just something to note as well. Let me hand over to Arnaud to give you a bit more details on the evolution at Belron.
Thank you, Francis. I'm really delighted to inform you about the stellar performance of Belron during the first half of the year. In terms of top line growth, we've seen close to 29% organic at the constant FX growth, which is subdivided into a little bit more than 20% volume growth and close to 9% of value growth, mainly explained by an increase in the product mix, the model mix, increased ADAS recalibration, and also of VAT. Our operating profit nearly doubled to EUR 465 million, with a record margin of 20%. This was driven by the top line growth, but also the kind of operating leverage that we have in the activity, with a clear focus on cost control, continuous improvement on all the cost fronts. The adjusted PBT also increased more substantially than the operating profit.
This is mainly due to the fact that the interest charges were stable compared to the first half of last year. The free cash flow remains very strong, with close to EUR 267 million for the first half. Once again, this is a consequence of much higher EBITDA, also controlled CapEx, and some negative swing in working capital, where we have kind of returned to normal compared to the first half of last year, which was quite extraordinary in terms of positive working capital swing. Very tight control on debt too. Even with the important capital distribution that we have had during the first half, we have been able to maintain very reasonable leverage ratios with net debt- to- EBITDA for the first half of 3.23x , compared to 2.57x at the end of December 2020. Also very important, we focus a lot on customer satisfaction.
Some downward pressure there, with still an incredibly high rating, a little bit below last year at 83%, and this is mainly due to the kind of capacity constraints we see in the business as we speak. If I look more closely at the sales, it was mainly organic, very limited impact of acquisitions, some negative headwind from FX. That explains the top-line performance. In terms of geographic split, it's the comeback of Europe after last year, which was heavily impacted by lockdowns. This first half of the year, the situation was much improved. A stellar performance with close to 40% increase in sales in Europe. Follows the rest of the world with 30%, and the North America, still very strong performance, close to 24% sales increase.
The volumes recovered, as I mentioned, a little bit more than 20% volume recovery compared to last year, which was mainly skewed to the second quarter of the year, which saw close to 44% volume increase compared to last year's second quarter. The value of our average job has increased quite significantly during the first half compared to last year, with mainly its model impact. It's also partially a mix impact. There's also a higher contribution from recalibration fees and from value-added product services. In terms of recalibration, strong growth again. There you see the impressive penetration rate, a little bit more than what we had expected or what we had guided for. This is not exceptional. It's really an acceleration of a trend that we see currently with the average penetration rate on the first half of the year of 22% compared to 14.8% last year.
Quite more than what we had guided for, where we saw generally you can expect 4% increase in the penetration rate. We are at a much higher level now. Also improvement in the attachment rate for VAPS with an increase from 17%- 21.6%. The trend that we see and that we've explained to you already since a few years, are being confirmed by the performance in the first half of the year and some negative headwind from U.S. depreciation compared to last year, in fact. In terms of operating profit, well, you see here the results. Record result, as I've mentioned, with nearly doubling of the operating profit. Once again, stable finance cost despite the higher net leverage and net debt, but this is mainly due to some FX movement, and so a lower base for the interest rates.
You must know that even if we have reported that in the adjusted items, we face some increased costs linked to transformation program, which includes EUR 13.5 million in the operating profit, EUR 13.5 million of cost, and I will come back on that later on. On the operating level, which are the adjusting elements items, positive impact of the fuel hedges that we've in place of a little bit more than EUR 4 million. Some amortization of brands and customer contracts at the level essentially of Safelite were following the acquisition of TruRoad in 2019, and some other adjusting items linked essentially to the sale of activities, to the discontinued activities. You know that we've been selling activities in Belgium and in Italy and in the U.K. in body shop for cars, and we sold the mezzanine activity in France, with, unfortunately, a loss.
For the adjusted free cash flow, as I mentioned, still very strong. Free cash flow generation increasing, in fact, compared to last year, which was already at record level. Once again, explained by the higher EBITDA, by the fact that we had not this time any impact of the legacy ESP plan that ended in 2019. What played negatively against us was the swing of working capital, close to EUR 200 million negative swing. Notwithstanding that, we are able to improve marginally the free cash flow generation, which remains really at a high level. Thanks to that, we've been able to diminish the leverage. Well, not diminish, but mitigate the impact of the capital distribution that we've done with recourse to debt during the first quarter of the year. As I mentioned before, remaining at very satisfactory levels of 3. 23x EBITDA. I've mentioned the transformation plan.
You know that we committed, we announced in 2018, a quite ambitious plan in terms of Fit for Growth. Fit for Growth has two legs. The first one is the acceleration one, which has yielded impressive results in terms of top line, in terms of bottom line improvement, and this program is continuing. You can expect continuous improvement on that one for the future years. On top of that, now we have put in place after a long maturation of the plan, but everything for that kind of plan is in the preparation and making sure that we've identified all the right levers and the right software in order to better perform. Now we are ready to announce a transformation plan, which will be quite sizable. We've quantified it.
We have defined a period of investment, which I will qualify later. It's an impressive program between EUR 230 million and EUR 250 million on the period 2021, 2025. Okay. It's essentially on improving the IT infrastructure of the organization and improving the IT robustness of our systems. There are a few areas where we want to make a big difference. It's in terms of customer experience, in terms of supply chain in the U.S., supply chain in Europe, in terms of finance, in terms of Human Resource, in terms of data-led decisions, in terms of IT infrastructure. Very well-identified work streams. We're working on that. We have quantified the cost of implementing those software. What you see here is the total cost of the program, and the program will be impacting us negatively because all those costs historically were capitalized and then depreciated.
Now with the new IFRS norm, new IFRS directive, we are not allowed anymore to capitalize those costs as those investments are essentially implementation costs for software, which will be based on the cloud, which will be Software as a Service. We are not allowed anymore to capitalize those costs, so we need to take them directly in the P&L. We have decided to qualify those costs as recurrent, so adjusted costs. You won't see that in a separate line in terms of adjusting costs. We could have decided to do that, but we'll give you, in the future, a lot of clarity on those costs so you will be able to identify, isolate if you wish, and see also later on the impact on the P&L, positive and negative.
As I mentioned, EUR 13.5 million of those implementation costs were already in the first half of the year. We are expecting an acceleration of that spend in the second half of the year. An acceleration in 2022. Starting in 2023, we'll see a positive impact of the benefit of the plan compared to the cost of the plan. At the end of the plan in 2025, we can expect on top of the margin increase that we're expecting for the acceleration program, we're expecting at least a 2% margin increase thanks to the transformation plan. I think it's a significant investment, significant decision. It is a little bit a game changer that we're expecting in terms of technology and usage of the technology for Belron. It positions us at a very distinctive level compared to competition. As I mentioned, we'll provide regular updates on that.
When I say regular, it's during a full year and half-year results, regular update on that plan. Last comment on Belron. We see volumes recovering. During the first half of the year, we were, as I told you, massively up compared to 2020. We were slightly down still compared to 2019, so - 3% in volume. In terms of value, we're much higher. As I mentioned, the transformation program has been approved and is already now in full swing. We have exited the service extension activities with the exception of Canada, but that should be done in a few months. Also important management change with the announcements of the nomination of Renee Cacchillo. Renee with a double E, she's a lady, will be succeeding Tom Feeney from the 1st of December this year.
In terms of outlook, we see still very solid and very robust trading conditions. The margins for the second half of the year should be lower and partially due to the transformation program that I've just mentioned. Also an important point that we had already disclosed a few weeks ago is that for the future, we'll be consolidating Belron at 50.01% after the dilution of the conversion of preferred shares and the full dilution of the incentive plan of the management. Thank you.
Thank you, Arnaud. On D'Ieteren Automotive, maybe jumping immediately to page 19, which talks about the market. Yes, we saw a slightly better car market in the first half of 2021 versus last year, plus 6% or 7%, if you correct for the less than 30-day de-registrations. This is, of course, only a partial recovery. This is not a surprise to us. We did not anticipate a full recovery at all. We are at a lower level, and we don't expect to get back to pre-COVID levels any soon either. This has remained a relatively depressed level in terms of overall market, and this has, by the way, not been helped by the supply chain issues related to the shortage of semiconductors and other components. This will, by the way, continue to play a role in the months ahead.
In this difficult market environment, D'Ieteren Automotive managed to increase its market share, actually quite substantially, 0.5 percentage point to 23.5%. Quite a satisfactory market share. That has allowed us to deliver more cars because we still have orders from the year before, about 23% more deliveries and registrations than the year before. You can see in the typical picture that the 232,000 vehicles of the Belgian market in H1 is clearly below what was usual in the years 2015- 2019. Our market share is at its peak or close to its peak as we speak. In terms of the mix of cars in the market, again, fuel mix is continuing its trend, where, of course, new energy-sourced cars increase their share from 15%- 21%. In the 21%, about 19% are full electric.
Full electric is still a niche, of course, but it's now at 3.9% of the total car market. The buyer mix is relatively stable, B2B being a bit bigger than B2C. The fleet people have been back into the market, really. The private markets have been a little bit more cautious still. In the SUV share, we're actually doing the continued increase of SUV, meaning that it's at 47% in the overall market by now. Really almost half of the cars in Belgium sold are SUVs of all types and shapes and forms. Our position within that mix, you can see on page 21. You see that Audi in particular has done a great performance, jumping from 5.8% share- 7% share. That's good news because Audi actually comes as a bit more premium than some of the other brands.
Very good news. Škoda, a very nice sustained development thanks to the Kamiq, the Karoq, the Kodiaq to 4.3%. Fiat quite stable, even if you include Cupra. Porsche, nice, back in the market at 0.7%. It's the Volkswagen brand who actually have suffered the most, if you like, in this difficult market environment because they cannot rely as much anymore on the older models like Polo and even the Golf, et cetera. The newer models like ID.3 and ID.4, who work quite well, are not of the same volumes as the other models, the classical models. Overall, Volkswagen has been declining a bit in its overall position. Still number one in the kind of mass market brands. In the overall brands, in that sense, not number one during H1 of the market.
What is particularly satisfactory for us is that if you just zoom into the niche of the full electric cars, our market share is 30.6%. This is significantly above the average of our overall market share, which bodes well for this growth segment in the market, of course. We don't only have the ID.3s and ID.4s of Volkswagen, we also have the Enyaqs of Škoda, the e-trons of Audi, and this is a good mix of vehicles to have in your catalog. In SUVs, we're always underrepresented compared to the rest of the market. We have continued to increase a bit our share there to 20.5%, we're still not at the average of the overall market there. Bottom line for D'Ieteren Automotive. Of course, the comparison is to a very tough 2020 H1. We have reached a 4% return on sales as the adjusted operating margin.
Quite a satisfactory number, and it's the result of a couple of things. Of course, a bit more vehicles compared to last year, but a lot less than what we used to have in 2019. If, however, you compare the profitability of 2019 to the profitability of H1 2021, well, with 13,000, 14,000 less vehicles sold, we're delivering about the same amount of absolute profit. This is a very good result really, if you think about it. That's partially because we have a great mix of models. Audi and Porsche, of course, are good vehicles to have in the mix. It's also the result of our cost initiatives and efficiency initiatives of last year. As you recall, we had a social plan that was finalized at the end of December last year. Well, we're reaping the benefits of that this year in 2021.
A couple of other things where we have been quite cautious in marketing spend and things like that. A good margin overall. By the way, the retail footprint, especially the Porsche one and the one in the Antwerp region, have contributed positively as well to the profitability of D'Ieteren Automotive overall. Translation to free cash flow, as I already said at the beginning, less, let's say, abundant as last year, because that was really an exceptional free cash flow for D'Ieteren Auto, but still a nice positive one at EUR 80 million. We need more working capital given that we're back in business and we have more vehicles going through our system. We did have the payout of the transformation plan early this year, which of course was a cash out. The higher EBITDA, of course, compensated for that.
We also had a bit of a different mix in credit note support from the factory. These are all the components that have contributed to the difference between EUR 79.5 million versus EUR 237.6 million of last year. Maybe on a different note, we have, and there will be more news on that in about 10 days from now or 15 days from now. In Belgium, we have something called European Mobility Week in the middle of September. D'Ieteren Automotive will use this to publish a report that we have done on the Belgian market about expected trends and behavior changes from consumers around mobility in Belgium. We have interviewed 3,800 consumers, 300 business participants in the market.
What we've learned from that, and all the details will be found for free on our website as of September 8th, is that actually post-COVID will not be the same as pre-COVID. We do not anticipate, given the increasing share of e-commerce, given a sustained percentage of home working or teleworking, we do anticipate less commuting trips overall in the country or less shopping trips and recreational trips overall. About 6%, you may say not that much, but still that's an impact. The mix of those trips about what mode of transportation to use, that's the good news for us. We will still expect over 50%, 56% to be precise, of those trips to be by car. Cars will remain the absolute main mode of transportation.
Whether you own the car or you lease the car or you get the car somewhere else is a different question. Cars are still the main mobility mode of transportation for Belgians in 2030. Bikes will increase in importance to about 15%, and other forms of multimodal transport, so combination of public transportation, maybe car sharing, et cetera, about 12%. The real change in the market, so the precursors, the early adopters, the drivers of innovation are less the general public, but are more the B2B, the business sides. They are the customers that will drive a change, that are pushing employees to switch to electric vehicles, that are pushing employees to commute not only by car, but also using multimodal alternatives. This is good for us to know.
We will use the result of the survey to tweak the strategy of D'Ieteren Automotive to those modes of transportation that Belgians will be using, and to, of course, also align our CO₂ reduction plans with that and our investment in Lab Box and the like. In terms of latest developments in auto, we're continuing to make good progress on all our initiatives, both the core business initiatives on cost and efficiency, the adjacencies, the innovation, the ESG components. Our outlook is we are actually reducing our overall market outlook for Belgium new car sales from 450,000, which we announced in March, to 430,000 car sales. This is really primarily driven by the continued difficulties in delivery and production of vehicles.
I mean, all brands, not only Volkswagen Group, but all brands have been announcing in the last couple of weeks. Continued deceleration in production numbers of cars, given semiconductors and the like being lacking. We will therefore anticipate, even though we have a record order book, we do not think that what we thought we would be able to all deliver and therefore invoice before the end of the year. Part of that will only happen at the beginning of next year. The shift from H1- H2 is there, and there will be more delivery in H2, but some of that will also shift into 2022. It's not lost business. It's more of a shift in time that we anticipate to see. We continue to invest in things like Lab Box, of course.
As you can see some pictures, some ideas of the new models and model replacement and refreshes, facelifts that will happen in the coming months. Volkswagen Taigo is maybe a word not every one of you have heard before. It's a small SUV that will be brought into market and that people who used to buy Polos and so on might be quite appealing to that. Let's move to Moleskine.
Thank you, Francis.
Again, Arnaud, maybe you can take over on Moleskine.
Thank you, Francis. Good performance of Moleskine during the first half. It is a EUR 6 million increase in sales, translating into close to 15% growth for the sales, for the revenues. It is mainly a strong catch-up after the COVID crisis of last year, but retail remains under pressure as you know that kind of travel location like rail stations and airport are still suffering from very low traffic. The cost has been extraordinarily well-contained during the first half, and so the EUR 6 million sales increase translates into an increase of profit of EUR 15.5 million, sorry, which is showing the good effort, the strong control on cost the company is generating now. The adjusted PBT is still in negative territory, which is normal for the first half of the year because we generate the highest portion of our profit in the second half of the year.
The adjusted free cash flow turned positive, close to EUR 4 million, which has allowed us to lower our bank debt and the net debt declines just below EUR 300 million, but that comprises a very important shareholder loan, which is considered an equity. In terms of sales evolution by segment, B2B was increasing the most during the first half, but once again, it was from a very low level of activity in 2020. Customers are progressively starting to reorder for the gifting activity. Wholesale is increasing quite nicely. What is positive there is that with the large retailers, we are really playing with the winners there, and also with a very strong growth in the digital channel of our most important retail clients.
Retail, our own retail activity, as I mentioned, is still under severe pressure because of where we have our retail locations, mainly in Europe and also in travel locations. E-commerce, a little bit disappointing growth for the first half of the year. We changed the e-commerce site. I think that we've lost a few customers in the journey. We're hoping to recover them in the second half of the year. In terms of geography, same consequences for the other activities. Europe getting out stronger from the lockdowns of the first half of last year with a 25% growth. Americas and APAC following. In terms of profitability, we are on track compared to budget. We are even a little bit above budget in terms of bottom line. Once again, as I mentioned, strong operating leverage with improved gross margin, which is positive for the brand.
We are at record level for the gross margin of that activity and decline of all the cost line in the P&L, being operating cost and personal costs. In terms of free cash flow, as I mentioned, it was a positive free cash flow generation with a good trading cash flow and with a limited amount of taxes paid and an interest charge which is lower than in the first half of last year. The interest on the shareholder loan is not paid in cash, so it is accrued, and so you do not see it here in the free cash flow generation. In terms of recent developments, we are very happy about the progress we are making with the strategy put in place by the new Chief Executive Officer, Daniela, with a fewer, bigger and better motto.
We are making big progress there in terms of simplification of structure, in terms of rationalization. Less is more of the products, and improved or increased people ownership of the issue that Moleskine. The master plan, which had been put in place one year ago, is progressing according to plan. The new e-commerce platform, as I mentioned, was successfully launched in May 2021. We are accelerating innovation. You will see at the end of the year a few launch of new digital products. Also we make big progress in terms of sustainability with clear targets in terms of suppliers, ESG criteria, in terms of carbon footprint, in terms of reduction of waste.
The outlook is that we are seeing Moleskine performing according to the plan. We see some, and it is as mentioned by Francis for D'Ieteren Auto, as not yet mentioned by me for Belron, we see some tension in the supply chain, and Moleskine is, of course, not an exception to that. In terms of corporate and allocated, nothing really special to report except that the provision that we had booked in the first half of 2020 for the solidarity funds was not recurring. We have had a good performance in terms of cost at the level of the corporate, good performance of the real estate, which has improved its performance, which is leading to just above zero profit for the corporate and allocated segment for the first half of the year. Francis.
Before opening up for questions, the closing remarks. Very strong results in H1 2021 across the board, thanks to a balanced mix of top-line development and cost containment. Reiteration of our outlook for the remainder of the year. Planning to land for the full year on at least 45%, which basically implies that in H2, we continue to see some car delivery issues in auto and the Belron transformation costs will thicken a bit more than in H1. These are the two main drivers why that leads to us not changing the guidance at this point in time. Thirdly, projects put in place are making good progress. ESG projects, transformation projects with a real acceleration, and the new strategy at Belron Moleskine. Of course, as a last note, the two big announcements we have made in the beginning of July.
We'll of course continue to work them and finalize them. For TVH, we are between signing and closing. We anticipate the closing, as said before, to happen somewhere around Q4. That is still the timing we have in mind. Also the arrival of three new sets of investors alongside CD&R at Belron is also something that will close around the fourth quarter. In that sense, those two eventful things will definitely be more prominent, I guess, when we see each other, talk to each other again in six months from now. This is maybe a good time to open up for questions from your side.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press zero one on your telephone keypad. The first question comes from Emmanuel Carlier from Kempen & Co. Sir, please go ahead.
Yes, hello. Good evening, all. It's Emmanuel Carlier from Kempen & Co. A few questions. I will give them one by one. On Belron, the ADAS penetration rate was up, I think, 500 basis points in the first half of the year. You used to guide for 400 basis points per annum. What do you expect going forward as a kind of annual run rate?
Probably above the guidance we gave before, which was 4%. It depends on the countries where you're operating and on the average age of the car park. If you take the U.S. where the car park is approximately 12 years, 13 years of age, then you can expect a kind of renewal by 8% of the car park, and you can expect to know that nearly all the new cars, but that's the assumption which needs to be checked and followed. Nearly all the new cars are now equipped with ADAS. That increase, that penetration is higher than what we had expected. Probably we can expect that it would increase by 6%-7% a year for the coming years. That trend is very clear, Emmanuel, because for safety reasons, for regulatory reasons.
As you know, by 2022, all new models in the U.S. and in Europe will have to be equipped with ADAS.
That's one factor which we have probably seen come a bit faster than anticipated, that the cameras are actually installed more than we thought in new vehicles and in new models a bit faster.
We are gaining market share.
The second one is that we are better equipped. We are upgrading our equipment. We're covering almost all requests on recalibration that we can do, technically speaking. We are losing less recalibration jobs than we may have lost before, and that's probably a bit of a catch-up effect that we have seen in the last six to nine months that was maybe underestimated. It's true, we have already seen about 1.5% per quarter increase since about six months. This has continued now. This will probably continue for a bit, but I think if you project it out three, four years from now, we'll probably go back to the 1% per quarter at some point in time. For the moment, we're going a bit faster.
Is pricing unchanged and hence the economics as well?
No, the price has been moving in the right direction, Emmanuel. The average price per recalibration has been increasing during the first half compared to last year.
The price changed for positively for the moment. Plan anticipate massive changes up nor down for the future. For the moment, yeah, it's more by the geographical mix that we have seen a change than by anything else.
Yeah. Okay. Thank you. The second question is about the transformation plan. I'm not sure if I fully understood how it works. The EUR 230 million-EUR 250 million is the annual cost-
It's an investment amount, so it's not a cost. It's an investment amount, first of all.
Yeah. Okay.
We will, of course, book it accounting-wise as a cost or as an expense. It's the cumulative amount over five years. On average, it's EUR 50 million a year, if you like. We've done EUR 13.5 million in H1 of this year. It will probably be a bit more than EUR 50 million overall for the total year, because you do a bit of upfront loading in 2021 and 2022 of the EUR 250 million, and a bit less towards the end of the time period. That's really the amount over the years that will be invested and expensed in the P&L, accounting-wise.
Yeah.
That is, of course, an investment in the future because that's what's going to allow us to structurally increase the margin with 2 percentage points once this thing is at full speed.
Yeah. Okay, it's a two-year to three-year payback, basically.
Sorry?
It's a two-year to three- year payback.
Yes, starting in 2023, we'll have a positive impact on the P&L because the benefit of the program will be higher than the cost.
Yeah.
As I mentioned, by 2025, the kind of evolution of the margin, operating margin of Belron of more than 2%.
Yeah. Okay. On Belron, I was a bit surprised. Private equity, they paid a lot for Belron. It's, of course, a very nice asset. I understand it based on the five-year plan, which is something that is not really available for the analysts, also not for the minority shareholder of that D'Ieteren. I hope you could provide a little bit more color on where the profitability level of Belron could end up to. I'm glad that you shared the transformation plan based on the ADAS stuff you mentioned, it looks like on top of that, there will be more margin expansion from mix effects. Happy to hear, yeah, if you could share maybe the five-year plan or at least give a bit more color on that.
Emmanuel, we don't do that.
We don't need to share even the five-year plan because you can really do your own calculations. If you take the acceleration work streams where you can more or less model what happens automatically with ADAS and VAPS, then, of course, you can have certain levels of ambitions that are more cautious or less cautious. You add on top the transformation for which we have given the big numbers. You can do the calculations just as they have done, and they have done those calculations. Maybe what has played in that as well is that they really have seen and are seeing a best-in-class company within Belron, in its industry or in its sector. You compare it to what other similar champion league business services companies are doing. Yeah, that's the type of calculation they have done, and that's where they came out on.
There's no miracle in that.
Yeah. All right.
The multiples play a huge role. When we look at the analyst consensus on the numbers and then the multiples that you apply, you sometimes are far off the mark compared to the benchmark of the best-in-class services company.
Yeah. All right. The final question is on, if you look at the sum of the parts, I think based on the Belron valuation, I think, yeah, you quite easily arrive at around EUR 200 or even more. The discount to the sum of the parts is, despite all the good news, unchanged, which is a bit surprising. How do you look at it, and what steps do you intend to take to close that gap? Related to that, would you consider, for example, to do a buyback?
No, the buyback is frozen until further notice. The first part of the answer, the second part, I think that we are very transparent in our communication. It's up to the investors and the analysts to make up their mind. We are not managing the discount. We just communicate on what we do, what we see, and then the market decides.
Yeah. All right. Thank you.
The next question comes from David Vagman from ING . Sir, please go ahead.
Yes. Good evening, everyone, and congrats for the strong result. Thanks for taking my question. First on Belron, I am struggling a bit to understand why the guidance, maybe overall for D'Ieteren, but in particular, I guess for Belron, why the guidance is not increased. Could you quantify, in this respect, the negative that you expect in H2? I think you've answered part of my question already on the transformation program expense, but then maybe on the price mix evolution that you expect in H2. If I do quickly the math, I think in H1, if I look at the volume, +20%, and then the organic growth, +30%, so you had around 10% price mix impact. Should we expect quite a slowdown in H2? That's my first question. Maybe I let you answer that one, and then come with the next one after that.
Maybe one part on the volume side. I think 2021, we anticipated to be a bit more normal year for Belron. Like we used to know in 2016, 2017, 2018, and so on, in terms of seasonality. 2020 was probably an exception on the seasonality where H2 had catch up, given that we had an H1, which of course was depressed, et cetera. Having a slower H2 is not uncommon for Belron, this is what we of course use in our general planning, that we have a seasonality which is more in line with the norm. You still have July, which is typically a great month, and October, but many of the other months are a bit lesser volume months. This is what one driver of this.
Therefore the typical margins you have in H2 are not necessarily always the same as the ones of H1. If you add on that the transformation costs and so on, which we do think are now in an acceleration phase, they are really picking up. These are actually the main two drivers behind that. We are not anticipating any changes in the pricing logic or drivers of the pricing, if you compare H2 to H1, neither in what's happening around recalibration or VAPs and so on, therefore it's not a price effect.
David, as mentioned by Francis, those elements play, and once again, it's again a very strong H2 in 2020. Business remains extremely robust. We still see progress in terms of volumes. As I mentioned during the first half of the year, the volumes were -3% compared to 2019, and now we are above 2019 on a monthly basis for the second half of the year. We cannot really complain about the volumes. We see some capacity constraints in terms of labor force, in terms of logistics, which is also a little bit impacting, and the time to serve has been increasing due to that. We see some inflation, a little bit on raw materials, but not that much, but more on labor, especially in the U.S., which is impacting marginally the margin.
As mentioned by Francis, transformation costs, which again, would have qualified as being capitalized according to former accounting rules, is now expensed, and that has a big impact.
As you also say that we haven't increased our guidance. Well, we have increased it in, when was it? In May or whenever it was. In that sense, that's something that we have somehow anticipated. We don't see a reason today to suddenly change that view that we had then.
Thank you. Is it correct to think on the transformation program expenses, you're sort of guiding to, let's say, in H1, you had something like EUR 30 million, if I'm correct. Yes. Yeah. In H2, we should expect a similar amount?
No, much higher.
Much higher.
Much higher. Okay.
As I said, it's not 5x EUR 50 million a year. It will be probably a bit more than EUR 50 million for the full year.
already the EUR 13 million. Well, in H2, it's probably going to be
Okay. It was EUR 13 million, not EUR 30 million. Okay, EUR 13 million. Okay. That was good. Okay. It was getting like, let's say, okay, EUR 50 million or EUR 60 million in H2, basically. Okay. My second question on auto, could you give us a feel of how you see pricing evolving in H2? When I'm saying pricing, I mean this mix thing with the SUV, the EV, also potentially, I'm thinking about not just the premiumization, but also the discount. I think if you read the press, et cetera, you can read quite a few articles saying that dealers don't have to give discount anymore because there is such a scarcity in the market.
I'm curious about how you see that evolving in H2, and how it could impact the margin of the auto business in H2, given that we all need to be more prudent, I guess, in volume for H2, given the scarcity in chip and so on.
Well, in terms of mix, we don't anticipate major changes in H2 versus H1. I think the brand that have momentum and the models within the brand that have momentum will remain more or less the same. This is not something that suddenly changes drastically in the course of the year. Some of the new models that are up and coming, yeah, they are across the board, so they go from premium to smaller models. That's not going to fundamentally change. We have already, since a couple of years, never pushed market share to the max. We've always said market share, but not if we have to start giving massive discounts. We have increased market share despite not giving massive discounts, so in that sense, you're right. We remain, let's say, disciplined. The team of Multimoto remains quite disciplined on that.
Also there, we do not plan to change anything drastically, so we will stay on that. There is some raw material costs here and there, which of course, the OEMs have started to calculate into their catalog prices, and therefore they pass this along in the way we do that. There you have the natural rhythm, which has been a bit faster and may continue to be a bit faster. Overall, for the moment, price increases, if you like, are to a large degree being passed along into the market.
David, as mentioned by Francis about the consumer survey, where additional services are expected by the consumers. We are increasing the pace there. The Lab Box initiative will wait because it is not yet profitable. We are investing massively there. That will weigh a little bit on the margin in the second half.
Yeah. That's also planned, if you like.
Okay. Yeah. Thanks. Last question from my side. I'm sorry to come back on Belron. On the transformation plan, is it correct to understand that the 2% additional margin, so in four years' time, are mostly to come from the SG&A, let's say the indirect cost, rather than the gross margin, basically?
No, it's a combination, because once again, there are a few work streams there. Part of it will be improvement in the overhead, the efficiency of the organization, okay, and productivity of the people. Part of it will be also commercial initiatives, whereby we'll be able to generate more leads, we'll be able to convert more customers, so conversion ratio will increase, so increased volume. It's really a combination of cost efficiency and also volume increase thanks to new.
There's some indirect procurement still in there as well.
Exactly.
That's not even in transformation.
Right.
It means that the non-transformational cost efficiency, of course, also continues, as we have already done during the COVID crisis and so on. I think the major difference with the past has been that in transformation, we're now really investing, and we expect this 2 percentage point uplift directly linked to that specific investment.
To be clear, it's at least 2% margin uplift on sales number of 2025, okay, which will, as we've guided for a year, which is increasing by the year. That's important to mention also.
Absolutely.
Investments will also have an impact a bit on working capital efficiency.
Yes.
That's more a balance sheet discussion.
Okay. Thank you very much, both.
The next question comes from Kris Kippers from Degroof Petercam. Sir, please go ahead.
Yes, good evening. Kris Kippers, Degroof Petercam. Can you hear me?
Yes. Hi, Kris.
Perfect. Good evening. A lot of questions been asked already, a couple of one remaining. First one, you talked about already some hiccups left and right, not too much in Belron. To what extent is it at risk for the company with this volume growth? The supply chain, that's not an issue for the second half or H1 2022?
The volume or capacity constraints have played at two levels. One has been labor. We're of course, ramping up already since the latter part of last year, the capacity of technicians. Knowing that volumes would go back up to make sure people are there or trained, et cetera. What we have seen, and I think we've talked maybe a bit about that in the Q1 numbers, is that, let's say the labor market overall in the U.S. has been a bit tense. Some players like Amazon and Walmart and McDonald's and so on, have increased minimum wages. To be attractive as an employer, you have to follow that a little bit. There has been some constraints around how fast can we hire/retain all our technicians and call center people, et cetera.
That has been a bit of a constraint on our ability to have all capacity really there when we wanted it. That effect is a bit gone, but what's not gone is the COVID impact in the U.S. in several states, not across the board, but in some states, the fourth wave of COVID is reducing a little bit the presence of some of our people. Not just only way of ourselves, but also of some of our suppliers. When you talk about supply chain issues, the ones that we have within the U.S. is driven by COVID potentially related issues, for instance, of our glass suppliers and other people suppliers inside the U.S.
There, where we actually import stuff from China, we have the usual effect, where that everybody has, is that the cost of transportation from China have gone up, and that the capacity of transportation from China is a bit more constrained. We don't have an immediate issue because our inventories can normally deal with that. Of course, not unlimited. If this were to drag on for six months or so, then we might start seeing some of effects of that. If it's more of a matter of a couple of months, then we normally have enough inventory to deal with that. This is some of the supply chain constraints that I think many businesses are living through these days.
Yeah. Okay. Thank you. A follow-up on Belron. If you look at the relative market share and the margins that you can realize, are there still countries today which are materially lagging due to not that sustained volumes that should be the case or due to operational issues still, or what's the potential still coming from that side?
General comment, Kris, is that we are increasing market share in nearly all the geographies we are present. Once again, as mentioned in 2020, and it's the same more or less in 2021, the crisis has led to the behavior of the consumers going to safe haven, to good business partners and of course, Belron is one of them. We've been increasing market share in nearly all the countries who are active, and we see that trend continuing. On top of that, there is the ADAS calibration where a lot of competitors cannot follow. As mentioned by Francis, we've invested massively in training in IT, in technology in order to see that opportunity, and that's something that the others cannot cope with. No big laggards, I would say. I don't remember any country where we are really lagging in terms of market share.
We can make progress in Scandinavia still. We can make progress in Switzerland. We can still make progress in countries like Spain. In all the countries we are making progress, but in terms of lagging behind, yes, in Sweden we are number two. In Switzerland, we are number two. Those are clear countries we want to improve.
Okay, thank you. The last question, following the transaction with TVH, of course, quite some cash has been spent, but could you confirm that you continue to search for a number of transactions? How is the landscape currently with prices, of course, not being easy, but any evolution?
Yes. Even after we will have done the TVH deal closing, we will still have a bit of cash, and our investment origination strategy remains completely unchanged. Means we continue to look at many files and pursue them at different degrees of maturity, with the objective to still continue to add growth platforms in our portfolio. We have now a fourth one up and coming with TVH, but that's not yet a handful. In that sense, we continue to look using the same set of criteria, the same set of fishing ponds, the same set of organization internally. That continues systematically and in a disciplined manner as before. TVH, as such, has not suddenly changed anything with regards to that.
In the short term, would you consider a net debt position also at the holding level, or is that not a target?
No. That we never really considered, and we're not really planning to do that neither.
Okay, these were my questions. Thank you very much.
The next question comes from Michiel Declercq from KBC Securities. Sir, please go ahead.
Yes. Hi. Good. Thank you. Maybe my first question is on Belron as well. Really strong and nice recovery in volumes. We could say that in 2021 we will almost or even reach the number of 2019, let's say. However, I would also assume that there are also some market share gains in there. If you just look at the sector as a whole, how much do you think in level of activity we are still below COVID levels? Not looking at your number, but looking in the sector in general as if COVID never happened and where we should be. Do you have an idea on that?
You're absolutely right. I think as an overall market, and it's always a bit difficult to measure the size of the market, of course, and we only know it typically a couple of months later, we're not yet at pre-COVID levels. If you just look at the mobility trends, they are not necessarily everywhere yet there where they were before, and that will take its time. People have started to come out again and start solving the issue. Again, there you may see some countries that are a bit more cautious than others in doing nothing about a broken or a chip in the windshield. It's difficult to put a percentage on it. I have difficulty saying is it between 5% and 10%, but it's probably around that order of magnitude.
I would say that the market is not yet back at the classical level of activity.
Okay, clear. Thank you. You already discussed it a bit on the inflation and potential constraints that could be seen in the second half of the year. Looking at, for example, the labor inflation and just the product inflation in general, is this something that you believe can be passed on towards the customers and therefore maybe positively impact the top-line growth?
Yes, definitely. The position we are in allows us to pass those costs to the end consumer. With some delay sometimes. You've seen the value increase per job, approximately just below 9% during the first half is a good testimony of that. As I mentioned, all single line of the P&L per activity, being direct material costs, being operations, being the supply chain, except sales and marketing, where we increase the spend quite substantially because it's in those kind of fields that you make the difference. Every single line of the P&L has been going down in percentage of sales, and we hope to continue on that trajectory.
Okay, clear. On D'Ieteren Auto a bit, of course, quite some impact from the chip shortage. You stated that you've seen a record order book at the moment. Let's say that there wouldn't be any chip shortage as is occurring today. How do you see demand from the customers? Do you believe otherwise the 450,000 registrations would have been achievable, just your view on that?
The 450,000 registrations yes. That's really driven by the slower supply of production of cars. Demand has been there. Demand has not been absent, particularly on the B2B side. In the B2C side, as we have seen uncertainty for quite a while. That uncertainty remains. There is some more clarity on fiscal stuff and so on in Belgium, yes. People are still a bit at a loss of, "What should I buy? Should I really go electric already now, or should I wait a bit?" This type of uncertainty in B2C is there, but has been there, I would say, for the last two years. The B2B has been more or less back, but depending a bit on the macroeconomic situation, we'll have to see whether that will continue like this or like that.
For the moment, it's really not at all a demand issue, definitely not for our brands. We didn't have a Salon de l'Auto. I think it typically favors the well-known and stronger brands, which fortunately we have the luxury of having those in-house. That has helped us for sure. Yeah, that's more or less how we look at it. We have always said we anticipate this 450,000-ish for the coming years, every single year. We have not yet done our budget for next year, so we'll see what that leads to.
Michiel, it's quite a sizable order book. It's more than 50% higher than the same period last year. It's more than 50% higher than the same period of 2019.
Part of it is supply-driven.
Part of it is supply-driven. Once again, we are quite confident, at least for the coming 12 months. The difficulty is to assess the timing of delivery from the factories. They don't know, we don't know. Probably it will be at the back of the first half of this year, which is not favorable for us because customers are not always willing to receive their cars at the end of the year. There will be maybe some swing effect there between 2021 and 2022. It bodes very well for the future. The question is about the timing, this is why the P&L impact is a bit difficult to assess.
Okay, I understand. Just one final question, a bit on the new shareholder base at Belron, of course. How are you looking at the transaction at the new players? How could they add value to Belron as a whole in terms of their expertise? Just your view on that, maybe.
Well, H&F, so Hellman & Friedman, are not unfamiliar with business services, businesses also related to automotive services. They are owner of AutoScout. Okay, it's a different business, but still in terms of secondhand cars, et cetera. The way that that evolves and how business models are evolving around these things, this can be an interesting contribution in the reflections on Belron on what happens around digitalization and the like. They're also the owner of ABRA Caliber in the U.S., one of the largest body shop players. Again, a very distributed distress services business, where I'm sure they can add value to Belron on that.
The other two players, BlackRock and GIC, I think are more from a type of investor model interesting for Belron and for us D'Ieteren, if you like, even, because they represent a part of the public and the private markets and a part of the U.S. and the Asian markets, which really allows to broaden the reflections for Belron on its role to play around the world and its role to play in terms of setup. We see for us D'Ieteren it adds all kinds of optionality, actually. For Belron, it basically adds expertise, which is either geographical or linked to the type of businesses they're active in.
Those people know the service industry quite well. They have identified in Belron a unique situation, a unique champion. As mentioned by you, the relative market share of Belron is unique. You will never find that in any kind of service industry. The drivers of that industry, the increase in value, the continuous increase in market share, the recalibration opportunity, which is now materializing, and you see it really clearly in the accounts. The impact that it has on the margin, on the operating leverage, the transformation program, which is very well-defined with a clear trajectory, with clear benefits. The free cash flow generation profile of the activity makes it totally unique for them. They've spotted that asset. They are professional investors. They are there for the return, and they totally support the governance, because there is very limited change in the governance.
The only change is that Hellman & Friedman will have a board member at Belron. We keep majority at the board. We keep majority of the shares, and we welcome those people. They will bring something, probably we'll discover that. Maybe more in terms of technology, maybe more in terms of digitalization. It's mainly due to the fact that they've identified a great management team and a great business, and with a lot of opportunities.
Okay, great. Very interesting. Thank you very much. That's it from my end. Thank you again.
The next question comes from Emmanuel Carlier from Kempen & Co. Sir, please go ahead.
Yes. Hi. Just two very quick questions from me left. One is on the CapEx at Belron. I have to say that the CapEx came in much lower than what I expected. Could you give some guidance on 2021 and the midterm? Secondly, also on Belron, what was the kind of wind effect for Belron? I think it was a quite favorable year from a winter perspective. Maybe you could make some comments on that.
The winter probably a positive impact, difficult to quantify as usual, Emmanuel. The last few years, we tend to take some distance from the weather impact, because it's up to us and up to management to manage the right capacity and to fine-tune marketing in order if demand is a bit slow or sluggish, to stimulate sales by increased marketing. On your question on CapEx, indeed, still there's a low level of CapEx, even if we've decided to increase CapEx for recalibration, which is partially done in the first half of the year, but will also be more important second half of the year and in 2022. The fact that this investment in the transformation plan will be expenses rather than CapEx, than activated, will play a role in the future.
You should not expect going back to the previous levels of CapEx for Belron, because in today's world, we have a lot of IT CapEx, and which is here directly in the bottom line in the P&L.
We always talked about 2%-3% CapEx on sales. I think we are now.
Below 2%.
below 2% in our revised numbers, given that this accounting change now confirms, becomes public.
Is that already for 2021 as well? That would mean a quite big step, I think, CapEx in second half of the year.
No.
Is that more the midterm guidance?
We'll still be below 2%, Emmanuel.
Yeah. Just very final on the transformation plan. This was not expected. What is the best guidance you can give in terms of costs for 2021? Is that the EUR 60 million-EUR 70 million?
We spent EUR 13 million, one three already in H1, and so it will probably be around.
60 million
EUR 50 million-EUR 60 million for H2.
No, for the full year.
60 for the full year. You add another EUR 15 million more or less for H2.
60 million for the full year?
No, EUR 60 for the full year. You add another EUR 45 million-EUR 50 million for H1.
Yeah. All right. Thanks.
Once again, Emmanuel, sorry for that. The accounting rules have changed, so we want to be transparent there. We could play tricks and put that below in adjusting items, but we are fully transparent and provide a number like that.
Yeah. No, I think it's very clear. I think it's, for all of us, mainly a switch from CapEx towards the P&L.
Exactly.
Yeah. That's fine.
It's a switch from CapEx to OpEx.
Yeah.
That doesn't change anything to the free cash flow generation of the company.
Absolutely. Yeah. No, very clear. Thank you.
Thank you. We don't have any further questions. We'd like to remind you that. Oh, yes.
Well, in that case, if there's no more questions, I would like to thank all of you for joining this call, and looking forward to any follow-up discussions in the coming days or weeks, or then, of course, at the latest, in our next rendezvous six months from now. Thanks a lot, and have a great day.
Ladies and gentlemen, this concludes the conference call. Thank you all for your participation. You may now disconnect.