In reporting its financial results for the first half of the 2010 financial year, Germany’s Delticom AG – the company behind mytyres.co.uk – observed a marked difference between the performance of its main e-commerce business and its comparatively small-scale wholesale operation.

Delticom notes the continuation of the global economic recovery during the first half and an improvement in conditions in most European countries, yet has also seen that within the “strong rebound” in its home market Germany, domestic demand has lagged behind the improving consumer sentiment. Therefore, while the Internet is “steadily gaining significance as a sales channel,” Delticom states that the late-cycle retail sector as a whole “has not yet been able to benefit from the upturn to the same extent as other sectors of the economy.”

In the second quarter, revenues at Delticom grew 16.7% year-on-year, to 102.9 million euros. EBIT for the quarter was 10.9 million euros, as opposed to (7.5 million euros a year earlier and equating to an EBIT margin of 10.6%. Group revenues for the first six months of the year totaled 177.3 million euros, up 27.4% on a year earlier.

EBIT for the first half of the current financial year rose 64.2% to 16.7 million, an EBIT margin of 9.4%. Consolidated net income was 11.4 million euros or 96 cents per share (basic), an increase of 62.1% against the result in the first half of 2009.

Delticom’s further expansion in the first half of 2010 occurred due to strong e-commerce growth. First-quarter tire sales were higher than expected, not only due to continued snowfalls across Europe in January, but also thanks to the early start into the summer tire season in March. Easter fell into the first week of April this year, as opposed to late April 2009. Year-on-year, the Easter effect supported this year’s first quarter growth, at the expense of second quarter growth.

E-commerce sales accounted for 95.7% of Delticom’s revenue during the first half of 2010. The company reports that during the six months to June 30, its 108 online shops attracted 436,000 new customers, a year-on-year growth of 15.6%. During this same period, 22,000 existing customers made repeat purchases at Delticom, an increase of 31.1%. Buoyed by these swelling customer numbers, revenues in the company’s e-commerce division rose 29.7% to 169.7 million euros; as in previous years, revenues from B2B customers accounted for “considerably less” than 20% of segment revenues. Delticom’s main focus continues to be on sales to private customers.

Delticom’s wholesale division, which sells tires to wholesalers in Germany and abroad, accounted for only 4.3% of total sales during the first half of the year, down from 6% of the whole in the first six months of 2009. Wholesale revenues declined 8.7% to 7.6 million euros. While Delticom notes that “in the wake of the recession the probability of receivables losses remains high and credit insurance is expensive,” it also admits that the wholesale segment’s decline follows a long-term trend: “Over the last years the share of wholesale revenues in percent of group revenues has decreased steadily,” the company states in its half-year report.

The Delticom product portfolio is now available in 35 countries, including 10 outside of the EU, such as Switzerland, Norway and the U.S. During the six months to June 30, revenues in EU countries totaled 141.8 million euros, an increase of 23.9%, while revenues in areas outside of the EU grew 43.8% to 35.5 million euros.

Delticom believes its revenues in the second half of 2010 will be generally positive due as motorists in Germany who purchased winter tires in the cold 2004 and 2005 winters and those that purchased them following changes to that country’s Highway Code in 2006 replace these with new tires – although the cold winter in 2009/2010 does mean that some motorists will have brought these purchases forward. Motorists may be more affected by economic factors, Delticom suggests. Should this coming winter be milder, many may decide to postpone the purchase of replacement winter tires for a further season.

Nevertheless, the company observes that price-conscious customers are increasingly searching the Internet for low priced alternatives, and is confident its online shops will benefit from this trend. Consequently, Delticom continues to assume a revenue growth of more than 10% year-on-year for the 2010 financial year. Given the strong 2009 comparable, it believes an EBIT margin of 9% is a realistic target for 2010. Over the medium term, Delticom says it expects slow double-digit annual growth rates, both for revenues and earnings. (Tyres & Accessories)