D’Ieteren’s 1H11 results will be released on Thursday 25 August at 6.00pm Brussels time, followed by an analyst meeting the next day at 9.30am.
Avis Europe will be classified under discontinued operations. Group sales are expected to rise by 5.7% to € 3,181m thanks to the solid performance of D’Ieteren Auto. The group’s REBIT margin should decline however by 50bp to 6.6% due to tough comparables faced by Belron. REBIT is set to fall from € 214.8m in 1H10 to € 208.7m in 1H11. We arrive at current pretax profits (group share) of € 174.2m (-1.8%) and current net profits from continuing operations of € 148.9m (+3.2%).
Comparables were tough in 1H11 because of harsh winter conditions in 1H10 when organic sales growth reached 11%. Moreover in the US the number of miles driven fell by 1% during 5M11. We therefore count on flat reported sales (€ 1,484m) on the back of stable like-for-like sales, a negative currency impact of 1% and +1% from acquisitions. In 1Q11 reported sales were up 3% thanks to acquisitions (+1%) and currency fluctuations (+2%). We anticipate that the REBIT margin will have returned to a normal level of 8.8% in 1H10 after an exceptionally strong 1H10 when a margin of 10.0%was achieved. REBIT is therefore set to decline from € 148.6m to € 130.6m. We’ve pencilled in a flat net financial charge of € 14.0m for 1H11 to arrive at current pretax profits of € 116.6m (-13.4%) or € 108.7m group share (-13.7%).
Belgian new car registrations rose by 2% in 1H11. The brands that are sold by D’Ieteren recorded 10% growth however thanks to the success of VW’s new models and Skoda’s low CO2 emission models. We are forecasting 11% sales growth (€ 1,697.2m) and a 30bp REBIT margin (4.6%) improvement. REBIT is expected to rise from € 66.2m to € 78.1m. Net financial charges should decline from € 14.8m in 1H11 and € 13.2m in 2H10 to € 12.7m. Current pretax profits (group share) should therefore rise by € 14.2m to € 65.6m.
On 14 June management reiterated the guidance: current pretax profits (group share) should rise by at least 5% in 2011. We count on 5.7% growth.
Our target price is based on the disposal price of Avis Europe, a P/E11 of 12.0 for Belron and a P/E11 of 10.0 for D’Ieteren Auto.