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Company Name: D'Ieteren
Company Ticker: DIE BB
Date: 2015-02-26
Event Description: Q4 2014 Earnings Call
Market Cap: 1,871.99
Current PX: 33.85
YTD Change($): +4.555
YTD Change(%): +15.549
Bloomberg Estimates - EPS
Current Quarter: N.A.
Current Year: 2.480
Bloomberg Estimates - Sales
Current Year: 5710.833
Page 1 of 14
Q4 2014 Earnings Call
Company Participants
• Axel Miller
• Benoit Ghiot
Other Participants
• David Vagman
• Emmanuel Carlier
• Wim Hoste
MANAGEMENT DISCUSSION SECTION
Axel Miller
Ladies and gentlemen, thank you very much for being present on the occasion of our comments on the release of the
full year 2014 results for D'Ieteren Group. The results have just been made public a couple of minutes ago, and we are
here, myself, Axel Miller, CEO of D'Ieteren, together with Benoit Ghiot, CFO of D'Ieteren, to give you some
comments and highlights on the full year results.
We plan to have first a short presentation of the numbers because the bottom line is there shouldn't be much surprise
compared to what has been previously published and commented, and to reserve some time for questions and answers
as from 6:20 to 6:50 and then just [indiscernible] (00:51). I will give you the number of the slides that we are
commenting as we progress and you would be able to follow the presentation on the webcast.
The main messages for 2014, I think, is that we are finishing the year totally in line with our guidance. We will
remember that we had said last year that we should end the year with our current consolidated result before tax group's
share, which is our performance indicator that we use as a key measuring point, that we would end the year 2014 with a
current result before tax that would be 11% less than – 10% less than 2015. And we actually ended the year at minus
11.5%, so essentially in the line of the guidance that we had given.
The sales for last year, if you turn to slide three, are increasing in our two main activities by 1.3%. It's the same
percentage point of our recommendation of increase as well for Belron as for D'Ieteren Auto. As you will derive from
the comments that I will be giving and that Benoit will be giving in a more detailed manner, it's a sort of normal flow of
activity at D'Ieteren Auto, and this increase translates into the bottom line in a sort of very contrasted way at the level
of Belron for reasons that we have been explaining all during the course of last year, i.e., a very contrasted picture
between essentially America, North America, on the one hand and the European countries on the other hand.
And this is illustrated by the evolution of the current operating result if you look on slide four where you see that at
D'Ieteren Auto the current operating result increases by 14%. There is a decrease of 16% at Belron, which is essentially
– but there are also other factors which come into play which is essentially the result of the fact that on the background
of markets which remained challenging, I would say, in all the market, the 35 countries where Belron is present, each
and every of these countries has its own challenges. It's not an easy world out there, but on top of that, 2014 was
characterized by some significant weather fluctuations which did have an important impact on our activity.
To express it summarily, we have experienced a winter 2013/2014, in particular in North America, which was
extremely severe and which was comparing to previous winters which were of another nature. That has had a positive

Date: 2015-02-26
Current PX: 33.85
Current Year: 2.480
Page 2 of 14
effect on sales, but it has had a translation to the bottom line which was less positive than the impact we had on the top
line for operational reasons which we explained last year and on which Benoit will come back later on.
In Europe, by contrast, we had an extremely mild winter, especially in certain countries, no winter at all, and that's had
a very significant influence on the volumes of jobs that we were in a position to serve with certain markets which
dropped relatively dramatically. We have seen decreases in some markets of 5%, in other markets of 10%, and in some
other markets of close to 20%. I think you can imagine that with this decrease in volumes, the name of the game in
those markets was potentially to increase the efficiency to try and reduce the cost and debt capacity and that was done
with more success in certain countries than in others. But that clearly had an impact on the bottom line as well.
So that's essentially the one image that we will keep in mind from 2014, a very challenging year with a very contrasted
situation on the back of challenging market circumstances. And so, if you see the segment contribution to the evolution
of the current company's net result before tax, which is the indicator we mainly follow, you see on slide five that there
is an increase of €5 million versus 2013 for the auto and corporate activities taken as a whole, but there is a decrease of
€25.8 million to €26 million for Belron ending with a result of €157.2 million compared to €177.6 million last year.
For the rest, we have been publishing and releasing in December, and Benoit will come back on that later, the other
significant element for 2014 which were a number of relatively radical actions that we have taken in a number of
countries to restructure the business where we thought it was appropriate. We did that in Germany, we did that in the
UK, we did that in China, and we also did that for a portion in Brazil.
And the second element of these exceptional items was the impairment of goodwill that we had recognized at the time
of the acquisition of Belron or subsequent acquisitions in certain countries, which especially did not have the same
revenue-generating capacity that they had at the time. And that ended in a significant element of non-recurring items
and exceptional items. This would be, in a nutshell, the view that we have on what has been going on in 2014.
If we look down in 2015, and we will come back on that later, if we look today at all the elements that we have in our
possession at the beginning of this year, and we sort of mix them together to sort of give you a guidance as to where we
think the current consolidated result before tax group's share will be next year, we believe that we should maintain the
guidance that has been given in December when we announced the exceptionals, i.e., that we would have the 2015
result, which would be up in excess of 10% versus 2014.
That is a combination of market evolutions, also an impact of the currency fluctuations. Clearly, we will be benefiting
next year from the strengthening of the dollar versus the euro and also of market evolutions as we can look at them
these days. There is a certain level of conservatism in this built into the maintaining of this guidance, especially
because we are facing, like any other businesses, challenging market conditions and volatile market condition.
So that would be, in a nutshell, what I would give as an executive summary of 2014. I hand it over to Benoit to bring to
more details for Belron and D'Ieteren Auto and then we'll take questions.
Benoit Ghiot
So to come back on the sales of Belron, although we see some relatively stable sales in 2013 – 2014, so basically 1.3%
growth despite a very compressed situation between the U.S. and Europe. In U.S., we had a market growth of roughly
7%. This market growth is throughout the year and for the totality of the country. Now, you know that, in fact, this
growth has been driven mainly due to extreme weather condition coming from the polar vortex that was experienced
during the first quarter of the year and especially concentrated in the East Coast.
So if you just try to translate this market growth for the first quarter or first four months of the year, in those regions,
we have seen a spike of up to 25% growth during the period that have been quite difficult to manage at that moment. In
contrast, if we look at the European countries, we have seen some underlying market declines about the same – that
have been the same for the recent years due to a reduction in speed – number of miles driven.

Date: 2015-02-26
Current PX: 33.85
Current Year: 2.480
Page 3 of 14
But at the same time, we have had a, what I would qualify as an awful weather for Belron, i.e. there was absolutely no
frost at the beginning of the year, no snow. And so, we have seen market declining on average close to 10%, but with
some specific markets that have been down close to minus 20% and even in excess of more than minus 20% in the case
of the Netherlands for instance, where, in fact, this effect was compounded by the renewal of the road surfaces
technology that has had a huge impact on the glass breakage rate during the period.
To compensate for those market effects, Belron has managed to gain some market share, especially in the United
Kingdom and also in Germany. Now, the reason why our market share was gained in the UK is essentially through the
winning of some new insurance contract, but to some extent that were done at the expense of average price.
In Germany, the reason is different. We have expanded the footprint amongst others through the use of the new concept
of mobile branches that are basically branches that look a little bit like container and it can be deployed very quickly,
for instance, in – on [ph] few (10:27) stations in order to expand the footprint at a low cost for Carglass Germany.
Price and mix contributed also for 44%, so basically about 1.5% of the growth of sales. Essentially, price came from
the United States. As at the beginning of the year, it was difficult to serve demand. The decision was made to increase
the prices on the non-insured segment because it was pointless to try to have lower price on those segments while we
were not able to serve the insurance segment.
On top of that, we have also benefited from the weather condition in two companion business of the main business that
is the fitting business, i.e., the third party administration business that we do specifically in the United States, and also
the wholesales business that has grown also due to the weather condition.
Then acquisition contributed to about 2% in the sales growth, essentially one big acquisition that is the Guardian
operation in the United States and also in Spain. Now, with the growth of sales in the United States, we are at the end
of the year roughly half and half between Europe and the rest of the world.
Now, to explain the phenomenon and the translation of this sales evolution into the trading profit, they are illustrated on
this chart. So you see globally, the U.S. including the market effect, the share growth and the acquisition – no, sorry,
not the acquisition, but the share growth contributed €107 million of additional sales. The market and the market share
effect in Europe contributed minus €121 million. So basically, we were roughly stable. This is what appears when you
look at the top line.
Now, when you look at what those volumes evolution, those volume differences and how they translate into the bottom
line, the situation is totally different in the U.S. than in Europe. In the U.S., firstly structurally, you have a lower
variable contribution margin. One of the key reasons for that is that, for instance, the labor is paid – partly paid based
on the volume. So this means that it has the advantage when you have a decline in volume that the effect on the bottom
line is lower. But to the contrary, when the volumes increase, the contribution – the marginal contribution to the bottom
line is also structurally lower.
On top of that, I've talked about the spikes that we have experienced during the beginning of the years; they created real
inefficiencies in the business. At some point in time, we were not able to serve the customers mobile because of the
snow, or some customers were not able to drive to the branches. But at some other points, when they were able to drive
then we had concentration of demand during certain days where we had, in fact, to use extra labor hours at a higher
cost.
The second consequences of those spikes, it created a certain number of glass shortages during the period. So we had to
buy the glass from other sources than our normal sources. And so, this means that the average cost of glass purchased
increased as well.
So those elements explain a relatively, say, relatively low fall through of the additional sales in the U.S., so due to
structural reason, but also due to the management of the spikes that were quite difficult at the beginning of the year.
In Europe, totally different situation; beginning of the year, the volumes that were expected did not come. And so the
time that is required in order to flex the cost base, let's say on the medium term, the cost base is very flexible. On a
shorter period, it takes time before you can adjust the capacity. And therefore, the fall through was a bit closer from the

Date: 2015-02-26
Current PX: 33.85
Current Year: 2.480
Page 4 of 14
variable margin, i.e., it went up to 56%. So this means that when you look at the top line that is relatively stable, you
see that the effects on the bottom line are totally different in the two parts of the world. That explain in fact the total
decline of organic profit while sales was stable.
If we move on to the current operating results, so the organic effect was about €41 million negative. The acquisition, so
essentially Guardian, I alluded to earlier contributed for a positive €13 million. And so, we ended up with a current
operating result of €145 million for 2014.
Concerning the results, I won't dive into the table that is shown at this moment. Just two comments and I'm going to
come back on those two comments immediately. Concerning the net finance costs, a little bit lower than last year due to
the refinancing of one U.S. private placement at the beginning of the year and better condition than the previous one.
And secondly, we see a bottom line that is negative, minus €60 million, essentially due to a significant amount of
unusual charges and especially of re-measurement. I'm going to come to that immediately.
So to come back on what was announced at the beginning of December, there has been a certain number of unusual
charges in the results of the year due to some changes in – of the operating model or some restructuring charges in
some countries.
In the United Kingdom, you know – and it is absolutely no new news, you know that this is a country that has
experienced a constant erosion of its profitability over the last seven to eight years. Certain number of explanation, the
competitive environment, the insurance environment in the United Kingdom and also the evolution of volume explain
the decline of the market.
Now, there was – first consequence to that is simply an accounting entry, I would say. You know that under the
accounting – the international accounting rules, you have to test your goodwill and your intangible asset for impairment
every year. Now, at the acquisition – at the moment of the acquisition of Belron in 1999, the biggest part of the
goodwill resulting from the acquisition of the group was allocated for – to one of the most profitable country at that
time, that was the UK. The total amount of intangible was a little bit in excess of €160 million.
Now, when you look at the plans and you try to make a valuation of these plans, you realize that the value of the plan
does not support the value of the intangible and the value of the total assets. And therefore, you need under the rules to
make an impairment on those intangible asset which is basically [ph] not – (18:07) a non-cash charge and simply an
accounting entry. But it represents a big amount, it's close to €90 million.
Now, if I speak more about the business itself, we have also accounted for restructuring charges for about €16 million.
And then I need to say a word about the changes in the business model in the UK. UK, one of the specific cities – one
out of the many specific cities of the UK market is that the UK consumers have a high propension to use mobile
services. When you see in countries like France, you have about 30% of the demand for mobile. In the United Kingdom
we stand at about 95% to close to 100% of demand for mobile.
Now in the recent past, we have, as a consequence of that, decided to reduce the footprint of branches from about 250
to 73. Now, the decision has been to go one step further and to go for a fully mobile business and also to remove, of
course, as a consequence, a part of the administrative functions that are currently in the branches and to centralize them
through the use of new IT technologies. So the total cost was about €16 million and we estimate that the savings will be
around €15 million on a run rate basis.
Different situation in Germany, in Germany, like in some other counties, we serve also not only cars but also heavy
trucks. So this is what we call the special business. And the difference in Germany, it is run as a separate – as a totally
separate business. If you take countries like the UK for instance, those segments are served by the normal events, the
normal branches. In Germany, this business was served by a separate entity. That also is profitability eroding in the
recent past.
Simply the kind of key value proposition for the client – for the business client in that segment is very different from
what is expected from the normal customer for light vehicles. This business lost about €3.5 million in 2014 with really
no expectation to turn it around. So the decision was made to shut down that business at an expense of €10 million

Date: 2015-02-26
Current PX: 33.85
Current Year: 2.480
Page 5 of 14
because I say there will be a direct positive impact in the bottom line right from this year for €3.5 million.
Italy, different situation, we have seen a declining market. But also on top of that, we have lost one major customer
that's represented about 25% of sales. This customer has decided, given its size, to set up its own VGRR network. And
so, as a response to that, we have decided also to reduce, to try to implement some measure to reduce a little the
footprint but also to improve the efficiency in the center and in the branches. In the center, we have decided to
consolidate the back offices of our two brands in Italy i.e., Carglass and Doctor Glass. Doctor Glass addresses mostly a
cash segment, so with lower services than Carglass, so the back offices were, in fact, consolidated.
And in the branches, we have implemented a new system that some of you may have seen if they had the opportunity to
come to the Best of Belron in Rome during the spring, which is basically a system that allows a customer in the branch
to have – to face the screen where with an operator that is located in another branch or in the center. So that this allows
us to remove some head count and some administrative functions in the branches, only keep the technicians and have
the admin totally consolidated in the center. So the cost associated to that will be €3 million but, of course, the savings
will be offset and more than offset by the loss of this customer.
Netherlands, we have just alluded to it that, in fact the road surfaces have changed dramatically in the recent – in the
last five years. There has been a big investment in the road network in order to change the previous surfaces that was
excellent at draining water. But unfortunately or fortunately for Carglass was deteriorating very rapidly.
It has been changed by a new surface and whilst in the past we had an average breakage rates far above what we had in
the rest of Europe, simply, this reverted now to the median of Europe, but with a strong consequence on the market –
on the Dutch market that has lost roughly 50% over the last five years. So there again, that was a decision to try to close
some branches, to downsize some of them, to reduce some headcounts in the center, about 90 roles where we moved
from the business during the period.
Last one is China. China, we entered into the country around 2009 by a certain number of acquisitions. In those
acquisitions in general, the main business was wholesale with a fitting business. We are essentially fitters, but we
acquired businesses with wholesales. And with hindsight, we have discovered some practices that were absolutely not
compatible with the standard that you would expect from a company like Belron in the wholesale business, some
briberies, some infringements of intellectual property, and so we have seen that it was not possible to run a profitable
business under such type of competition.
So the decision was made to turn down the wholesale business in nearly all the locations. But as a result of that, the
profitability of those branches was insufficient to justify the existence. So the decision was made to reduce – to sell
some branches, to close other ones and to reduce the total footprint from 36 branches to eight branches, essentially
concentrated in the region of Hangzhou and in the southern region of Shenzhen and Guangzhou.
Unusual restructuring cost of about €7 million, so that's – effectively most of them cash exceptionals. At the same time,
we had to do the same exercise as we have done in the UK. So we've reviewed the value of the intangible asset. And
this led to an impairment charge of €9 million that is non-cash. The savings from this normally should remove a loss of
around €3 million on a run rate basis.
So as a summary, concerning the exceptionals or the unusual items and the re-measurements, so the restructuring cost
amount to a total €42 million. I would say most of it but not the totality of it is cash. There is a bunch of integration cost
from the acquisition of Guardian, amortization of intangible asset, this is what we usually – how we treat usually the
goodwill – not the goodwill, but the intangible that result from acquisitions. And the last part and the big part is the
non-cash impairment charge of €98.4 million.
Net debt, if we look at the evolution of debt, in April- at the beginning of the year, we have refinanced a U.S. private
placement for – sorry, we have repaid a U.S. private placement of $200 million that had been refinanced in advance in
2013, so at this moment we don't need any refinancing before the end of this year. In the reality, the next maturity will
be at the beginning of 2016, but just as a principle of, let's say, safety, we always try to refinance in advance in order to
not to have any problem, not to have any problem with auditing standards and especially the going concern review.

Date: 2015-02-26
Current PX: 33.85
Current Year: 2.480
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We have made about €40 million of acquisition in 2014, so essentially Guardian. And we had unfortunately an adverse
FX impact on the debt of €60 million. Now, the problem is due firstly to the amount of debt that is denominated in
dollar. So for hedging purposes, we bear a high level of U.S. dollar debt in order to naturally hedge the value of the
dollar cash flow into euro. So we have about 70% of the debt that is denominated in dollar. Unfortunately, the dollar
went up at the end of the year, so we had the full impact of the increase of the dollar at the end of the year on the debt,
so about $60 million. But unfortunately, we didn't have it on the EBIT or the EBITDA. It is simply because it happened
in December. So, going into 2015 we should benefit if the dollar stabilize from its higher level versus what it was in
2013.
Outlook for 2015, moderate sales growth. So we see the market – we don't make any hypothesis of market increasing
or underlying market increasing. The winter weather, as we said, was relatively strong in the U.S., and we returned to
more normal weather condition in Europe. Developing markets continuing to grow. We will benefit from the
implementation of the restructuring initiatives that were taken and announced in December.
So D'Ieteren Auto, there, much different situation. I could say that D'Ieteren Auto in 2014 was very comparable to 2013
with a market that was – well, facially or growth that was down 0.6%. But you know that every year, you have some
manufacturers that tend to register some cars and de-register them within the same month. And so, if you clean up the
stats, if you clean up the datas from these less than one month of this short-time registration, in the reality, the market
was a little bit up by 0.7%.
In terms of market share, third best market share of all time at 21.78%. If we remove the effects of these one month
registration, the market share goes up at 22.75%. It is higher simply because we don't do or do to a very little extent
those tricks of registering the cars for less than one month.
VW, so, its market share slightly declining but is still the first brand in Belgium with more than 10% of market share.
Audi went up a little bit; thanks to the success of the A3 and the Q3. But, I would say that the two big winners this year
were Škoda, I have to remind you that 2013 was a difficult year for Škoda, and 2014, all the measures were taken, and
this translated in a market share that went up from 325 to 372 with – especially with the success of the Fabia.
And of course, Porsche, these are very little figures in terms of volume or market share. In terms of value, it's much,
much higher. But it's quite interesting to see that the market share has increased by 50% so going from 30 basis points
to 46 basis points. And the only reason for that is the introduction of a new model which is the Macan that was on the
new segment of small SUV where Porsche was not present in the past. The good news is that it's really a marginal
contribution from the Macan, i.e., the rest of the range remained at the same level as it was in the previous year. So,
good levels at 30 basis points of margin.
How this translate into the sales? So firstly, the new car sales on a comparable basis, so, if we exclude the effect of the
dealerships that we have bought in the region of Mechelen and of Antwerpen, the sales are slightly down by 0.4%. The
effect of the net market was up 0.7%. The effect of the increase of market share has contributed to an additional sales of
about 0.8%. But as you know, there is always a difference between what is registered by the end customer and what
D'Ieteren, as a wholesaler, sells to its network of independent dealership. The main reason is simply the adjustment of
inventories of stocks at the level of the dealers, and this had – this evolution of stock had a negative effect of about €48
million simply because the network has reduced its level of inventories between the end of 2013 and the end of 2014.
If we look at the rest of the sales, so new vehicle sales minus [ph] 4.3%, (33:34) a little increase in the used cars and, of
course, the effect of the acquisition. So initially, I spoke about the acquisition for the new car sales. But when you add
those to the figures, the sales of used cars, the sales of the workshops and of spare parts, you end up with an effect of
€38 million, i.e., 1.3% explanation of the growth of sales.
In terms of operating results, so basically, nearly no effect from the variation of the volumes and the margin of the new
car sales. A significant increase of the other activities, essentially, the sales of spare parts. We have also some service
that we offer to our customer which is called Wecare, i.e., these are contracts that we sell to our customer where we
guarantee a free maintenance and also all the service for the car for a certain period, let's say, around five years. And
we have continued to push those contracts during the year. So, it also contributed positively.

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Current PX: 33.85
Current Year: 2.480
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The Porsche garages, we own some retail outlets in Porsche, also contributed more due to the success of the Macan.
And we have also some effect of the improvement of the profitability of our own dealership network.
Some savings on the marketing cost, and in the others we have some additional write-off on receivables, and also some
additional subsidies that we have provided to our network in order for them to invest in the dealership.
Maybe I'll skip the summary of the full-year results. So, in terms of net financial debt, at the end of – or in terms of
debt, we have repaid at the end of December, one bond that was issued in 2009, a five-year bond that was issued in
2009 for €150 million.
We still have one bond that is due in July 2015 that was issued in 2005. And so, this will help the net financial charge
when we have repaid that bond. Otherwise, a slight decrease of the net cash position of the automobile distribution
business firstly because we have made a certain number of acquisition during the period for about €31 million. These
are the outlets that we – the car dealerships that we have bought in the north of Brussels, so in Mechelen and Antwerp;
also, some additional inventories. We were at a low point in 2013 and of course the payment of the dividend, Belron
has not paid dividend this year.
So, the outlook for 2015, basically, a Belgian market that will be flat at a level of 485,000 new car registration. We
have an objective of stable annual market share, and we have provided the list of the new models that will be
introduced next year. One that I would mention is the Audi A4, but that will come more later in the year and should not
have a huge impact on the volume for the year.
And so, I hand over to Axel to comment on the reshaping of the distribution network.
Axel Miller
Yes. We had announced last year that 2013 had been the year of trying to plan three major projects, one which was to
return our retail activities in the Brussels area to profitability by – or to breakeven by 2018. The second was to
reconfigure our dealership network of independent owners. We have essentially a concentration and aggregation of
these dealerships to reduce their global number to be able to capture synergies of scale. And the third one was to work
on a number of efficiencies at the level of D'Ieteren SA, and the way it was dealing with the various brands it
distributes in Belgium.
Essentially, the message here is if 2013 was the year of the planning, 2014 has been the year of the execution. And
frankly, all of these major projects are well underway, well on track in terms of timings and in terms of deliverables.
On what we called [ph] pole (38:24) position which is the restructuring of our retail activities in Brussels, we have
closed locations faster than we thought. And we have been able to move on our cost efficiency program also faster than
we thought. So, we are ahead of schedule there. And I remind the goal remains to breakeven by 2018 and beyond to be
able to turn a decent level of profitability.
On what we call the project market area, which is the restructuring of our independent dealers, communications have
been made to the network, extensive discussions have taken place. We have now identified that we would have at the
end of the project – at the end of the journey, about 27 market areas where we would have one majority owner, so that
was an important piece of news for all dealers' concern, because they need to think about how they're going to join
these market areas, and what is going to be their future role in there.
Second, we have identified the majority owner in each of these market areas. It was also a very significant step
forward. And we continue to have in mind that the average profitability of our dealerships at the end of that journey
should be around 2% return on sales, where we had in 2014 a much lower level, which is essentially not sustainable for
the long-term future. So, there again progress in the right direction, and steps have been effectively taken to be able to
complete this program. And I think we are on track and on schedule there.
We also have a number of initiatives, but we don't have the time to comment them here to be able to get a higher level
of efficiency at the import structure for D'Ieteren. Not cost cutting in the sort of normal sense of the world – the words,

Date: 2015-02-26
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Current Year: 2.480
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but essentially new ways of working to be able to plan on existing competencies and leverage on existing competencies
and avoid [ph] that there will be undue (40:22) duplication of efforts given the fact that our brands have, over the years,
each developed their own platform and we can sort of streamline and make that more efficient in a number of respect.
So that's in a nutshell what happened at D'Ieteren Auto. The outlook for the full-year 2015, I told you if we look out in
2015, we think that, overall, the current consolidated result before tax, group shares, should be up in excess of 10%
compared to 2014.
This concludes the presentation of the results. I'm not going to stop there and hand over to you before saying a word
about the other piece of news that we are communicating today. Benoit Ghiot has recently told me that after 12 years of
outstanding services to the group and at the tender age of 45 that he was essentially looking for new challenges. I can't
talk about his personal life, but certainly in his professional life, and that he wanted to pursue new endeavors in the
future. And so, we have discussed that together and we are all happy that Benoit is actually happy with what he wants
to do in the next step, in the next leg of his life.
He leaves us, I think, a very important legacy at D'Ieteren. We have discussed that this morning in the board and I think
it's fair to say, Benoit, that there was a huge convergence on the fact that you've done a tremendous amount of work in
sometimes very challenging conditions when you're working on the group. We will all remember a time where we were
probably much more leveraged than we are today and had less cash on our hands. That was the period previous Avis
Europe.
You've also been very instrumental with Jean-Pierre Bizet to create the joint venture with Volkswagen, VDFin. And
selling at the right time, under the right conditions, Avis Europe has put us in the conditions where today we have the
luxury of not only investing further in our businesses, but also looking forward to new investments in potentially new
activities.
So, Benoit, in a nutshell, I'm not going to make it long because you've heard this already a number of times, but thank
you for all the contribution you've made over these years. And I think I can wish you in the name of everybody, a very
successful future in whatever you choose as your next challenge and your next adventure.
Benoit Ghiot
Thank you.
Axel Miller
Thank you very much for listening. I will now turn over to the people in the audience here. I think there is also a
possibility to ask questions by webcast, which also going to be projected on our screen. If you want to ask questions in
the room, I would ask you to be so kind as to give your name, the institution you come from before asking your
question. Thank you very much.
Q&A
<Q - David Vagman>: Yes. Good evening. David Vagman from Exane BNP Paribas. Two question. First, on Belron
for 2015; if you could kind of guide to a certain level of EBIT or EBIT margin improvement versus 2014, because I
guess that is explained in the guidance, the profit increase guidance for 2015. And are you seeing basically that this
margin will progressively, gradually evolve towards your 8% target by 2019?
And second question on the organic growth guidance for 2015 of Belron. If you could break that down or give a rough
indication by region and break it down between market share and market trend. Thank you.
<A - Benoit Ghiot>: Well, concerning your first question, you know that we usually don't guide on the specific profit
business by business. This year, the operating margin was around 5% which is historically low. When we have taken –

Date: 2015-02-26
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Page 9 of 14
we have learned the lessons of this year, so I've tried to plan for a more difficult winter. So, all in all we could expect
margin going up and I would say between 0.75% to 1% would be reasonable. And so, I'm trying to not to overshoot on
that one, but this would be something that I believe would be a reasonable...
<Q - David Vagman>: That's quite precise.
<A>: [indiscernible] (45:12)?
<Q - David Vagman>: That's quite precise.
<A - Benoit Ghiot>: That's quite?
<Q - David Vagman>: Quite...
<A - Benoit Ghiot>: Precise.
<Q - David Vagman>: Yeah. Yeah.
<A - Benoit Ghiot>: Thank you.
<Q - David Vagman>: Okay. And for the coming years, how basically things are moving forward and...
<A - Axel Miller>: We had communicated during December that the long-term projections led to an operating margin.
That would be in the region of 8%, which is not very far from or below what we have done in the past. Now, of course,
all things are not comparable because the country mix is much different from what it was five years – just five years
ago. And we still stick to this guidance for 2018-2019. Now, these are our plans of course, but this is the aim that we
are pursuing.
<Q - David Vagman>: A very quick follow-up on Brazil. You – I mean, [indiscernible] (46:09) have you – are we
closer to obtain the strategic decision there?
<A - Benoit Ghiot>: We are looking very closely at the situation in Brazil, which, as you know, is one of the market
where we have seen some radical shift not only in the structure of the market, but also in the shape of the competition.
At this point in time, it's too early to tell you what is going to be the end game of these reflections, of this thinking aside
that is ongoing. There are a number of options.
One thing which is certain in Brazil is that we are facing a combination of various elements where we need to make
sure that we have the adequate supply chain for glass. We have some competitors, which have distinct differences in
their supply chain, and Brazil is one of the countries where we have to look very closely into that.
We also have a discussion around the network of affiliates with which we work. We have a number of branch which
are privately-owned. We also have a network of affiliates. Brazil is a very large country with certain places which are
sometimes difficult to access. And yet, when you have a commitment towards the insurance companies to do their jobs,
you need to be able to provide a service overall in – everywhere in Brazil. It's good for us we have an own branch,
where we can't access, we need to work with affiliates. Clearly, we need to improve the way we are managing our
network of affiliates. That could be the second challenge, I would say.
And three, we need to also look at the way we manage our platform and essentially our cost structure in that country
given the level of revenues we have been seeing.
So, all of these elements play out in different directions, there are solutions for all of that. What we need to make sure is
that we are very precise as to the level of investment that we would be required to make in each and every one of these
things and to look at essentially the competitive position that it will give us once the investments are being made. So it's
a very – I wouldn't say complex analysis, but it's a thing on which we need to take time.
We have taken restructuring actions last year. As you have seen, in the exceptional costs, the good bit of news is that
these actions have so far allowed us to deliver against the plan. So we're not deteriorating the situation at this point in
time. The situation is stable versus what we had anticipated last year. But, what the next step is going to be is going to

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be further thought upon during the course of 2015.
<Q - David Vagman>: And concerning to my second question on organic growth for Belron. I'm just a little bit
surprised given that you are exiting some businesses [indiscernible] (49:02) in Germany or that you're losing the clients
in Italy. Winter might not be as strong in U.S., et cetera, et cetera. So, if you could just clarify from where the organic
growth is going to come from, let's say market trend versus market share gains.
<A - Benoit Ghiot>: Well, you shouldn't correlate points which are not correlated. It's not because we tried to explain
certain variations year-on-year, quarter-on-quarter, half-year-on-half-year that you can necessarily extrapolate a sort of
underlying trend. Winning clients and losing clients in any business in the world is something that happens regularly.
Markets that are changing, it happens also all the place, and some of our competitors which now are underbidding to
get additional volumes because the markets are tough, a phenomenon that we also see in a number of industries. So,
this is what's happening. And again, it's – Belron is, as we said, is a company active in 35 countries. We really need to
look country by country what's going on.
Fundamentally, the strategic cause remains exactly the same. This is a business which is excellent at delivering
outstanding service to customers which is a clear value proposal for insurance companies and other types of paying
clients who doesn't want to be that active in the cash market in general terms. And we've got a number of geographies
where we essentially continue to deliver growth consistently on the back of this very thoughtful and very precisely
executed strategy.
I can name one country as an example which is the United States. We do have, I think, significant growth ahead of us
remaining in that particular country. We have defended ourselves very well against all the elements that you mentioned
in other countries like France. We had – we still have, I think, good ambitions and high ambitions in a country like
Germany for example. In other countries, we are facing sort of temporarily adverse movements. But we'll deal with that
as we have for many times over the last years.
It is an uncertain environment in many industries and I think it is for a certain aspect challenging and in certain
countries a volatile environment for Belron. But essentially, the growth plan remains to have year in year out over time
an organic growth of, say, 2% and continue our acquisition policy which would increase the top line by about 1%,
again, over the cycle, over a number of years. It's not because you would have a slow rhythm in one year that you
wouldn't have that in the next year. We are really looking at sort of medium-term directions here. And we see no reason
why we should change our sort of global guidance. If that were to be the case, we would certainly communicate that
[indiscernible] (51:55).
<Q - Emmanuel Carlier>: Emmanuel Carlier from ING. I have several questions and I will ask them one by one. First
of all, what kind of U.S. dollar/euro rate do you use in the guidance?
<A - Benoit Ghiot>: This was the euro rate that was prevailing at the time of the budgeting exercise at the beginning of
the year. I can give it to you precisely. The guidance? Well, in – we have now – sorry – we have not changed the
guidance. It was updated, so I would say it's – we have not decided to change the guidance since we are even more
comfortable about the guidance that we are making at the moment.
So effectively, the initial guidance was based on the U.S. dollar prevailing at December. We have made the calculations
again now for the figures. The figures is higher, but we have not decided to change the guidance based on that. So
simply, the degree of comfort is higher than what we had in the guidance in December.
<Q - Emmanuel Carlier>: And at Belron, do you see more bankruptcies compared to previous years or is that stable?
<A - Benoit Ghiot>: You mean in the competitors?
<Q - Emmanuel Carlier>: Yeah.
<A - Benoit Ghiot>: I wouldn't say that this year there have been any significant one that we are aware of.

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Page 11 of 14
<Q - Emmanuel Carlier>: And then another question is on – you are doing a lot of restructurings in Italy, Germany
and so on. Will the margin be positive in each of these regions in 2015?
<A - Benoit Ghiot>: In Italy and...
<Q - Emmanuel Carlier>: Italy, Germany...
<A - Benoit Ghiot>: The margins are positive.
<Q - Emmanuel Carlier>: And they will remain positive?
<A - Benoit Ghiot>: Yes. Sure. Sure.
<Q - Emmanuel Carlier>: Only not in China, I guess.
<A - Benoit Ghiot>: In China, well, it should be close to break-even, but the margins are positive of course in some
portions of the country.
<Q - Emmanuel Carlier>: And then another one, in the slides, you...
<A - Benoit Ghiot>: The only one at this moment, which is loss making in the countries that we have – the big
countries that we have mentioned in the restructuring is the United Kingdom. United Kingdom is loss making and this
was a big contributor [ph] eight years ago (54:30).
<Q - Emmanuel Carlier>: And in the presentation, you showed something like – that acquisitions at 2% to the sales
growth in 2014, but 10% to the EBIT growth. So that would imply that the margin of the asset you acquired in U.S. has
really high margins. So, I'm just wondering if that is an underlying trend or is – if there is kind of one-off included in
that?
<A - Benoit Ghiot>: It's a good question. I couldn't answer to you right – like that. The contribution of the Guardian
acquisition was – well, this was a good acquisition. It contributed – it contributed positively and, of course, every time
we make an acquisition, we also – this is the reason why we have a certain number of integration cost. We always try to
ensure that we create some synergies with the existing business. So once we do an acquisition, for instance, we get –
sometimes we decide to reduce the size of the headquarters, all the call centers or to remove some duplicate locations
and so on and so forth. So those are contributing positively.
Of course, other point you should not necessarily compare the margin of one acquisition with the global margin of
Belron because the margin of an acquisition does not take into account central cost or, for instance, the headquarters in
the UK, the local headquarters, et cetera. If I was taking the example of acquiring one branch, of course, the margin of
a brand is significantly higher than the overall margin of Belron. So, it's also one explanation of the point you
mentioned.
<Q - Emmanuel Carlier>: And then, another question on the restructurings that you have announced.
<A - Benoit Ghiot>: Yeah.
<Q - Emmanuel Carlier>: Are all the cash outs taken in 2014 or...
<A - Benoit Ghiot>: All the? No, no, no...
<Q - Emmanuel Carlier>: The cash – no?
<A - Benoit Ghiot>: About €20 million – about half of the cash. So basically, €20 million to €25 million has been
taken in 2014 and the rest will be taken in 2015.
<Q - Emmanuel Carlier>: And to arrive at the 8% EBIT margin of Belron, should that come from further efficiency
gains, so not necessarily cost cutting, but the improvements in the network or rather from market improvement?

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<A - Benoit Ghiot>: Well, we don't – frankly, we don't bank on any market improvement, but when you look at the
type of countries that we have, this is what we had described at the half of the year, there are countries where there are
clearly growth opportunities and these are major and mature countries where there is still room for growth and
especially in terms of market share. Those one are Germany and U.S., to some extent France as well. Growth in those
countries essentially through market share is going to contribute to the improvement of the overall margin.
To the other end of the spectrum, there are a certain number of countries that are facing at this moment structural
problems like the UK, like Brazil. And those countries, in fact, through the restructurings that are put in place should
also – the improvement should contribute to the increase in the overall margin. In between, you have some more
emerging. And in that basket, we would put emerging that are in more exotic countries like China, but also countries
like Switzerland or Austria where at this moment, the market share in those countries is still very low.
But these are not going to be significant contributor to the increasing margin. The last group of countries are countries
where we already had a high market share, typically one would be Belgium. And those one, in fact, the name of the
game is to protect position, and so protect the profit. But certainly, these are not going to be the contributor and explain
a chunk of the increase between the current situation and the 8%.
So basically, I would say that the big contributor are, one, the large established market where we have low market share
and that we increase, U.S. and Germany. And the other one are the countries where we have, to some extent, to fix
some problems. And we are taking some measures like in the United Kingdom. These are the two big items.
<Q - Emmanuel Carlier>: Last question from my side, in January and February, it looks like market conditions were
better than you guided for, because in December, I remember that you mentioned that you did not anticipate a good
winter. If I look at U.S., it seems pretty good. Europe, its normal winter conditions, so it's better than last year. The
U.S. dollar is positive. So is it fair to assume that it's better than expected? Meaning a combination with the re-comp –
the easy comps, I mean. That in the first half of year, the PBT might be up, yeah, really a lot more than – definitely
more than 10%, but maybe even more than 20%, 25%.
<A - Axel Miller>: Well, thanks for fishing. Pay attention to the words, good, bad. Essentially, what we did in 2014
was reckon with the fact that if we continue – if we were to, say, each year is going to be very optimistic about the next
year in terms of weather, we are bound to build up a capacity that would be there for the volumes that would be
underlying this sort of [ph] optimistic (01:01:12) view, and then you'd have to retro pedal each year to get the capacity
down if the weather isn't there.
What we essentially did and expressed in very simple terms last year was to say we'll plan for a bad or moderate or not
good winter, i.e., we prefer to not invest too much in the increase of the capacity. The risk is that if the market is much
better, you may leave some money on the table, but at least you won't have these constant shocks, if you want, in your
platform, in your capacity platform. So that's essentially what we did last year. So that's the message we wanted to
convey.
Now, what is a good and what is a bad winter, and surely please don't think that I'm taking the weather joker card,
because there are a number of factors which explain the underlying evolution at Belron, which is a bit more
complicated and sophisticated [ph] than pure (01:02:02) weather. But weather plays out in many ways.
Yes, we have today a good winter for us in the United States, which is a positive. We have, I would say, a normal
winter in Europe. It was a long time we haven't seen any snow. So when we see snowflakes, we seem to think we are
back to normal. But it's – if you look at historical average, it's what it is, it's neither extremely good nor extremely bad,
it's a winter.
So how that plays out in motorists' behavior? How that plays out in road conditions? How that plays out in? It's
something that we need a bit more time to be able to look at. The reality is, there's only so much we can predict when
you are in January or February of any year. We need to see a bit larger cycles to be able to really see what's going on
there.

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Page 13 of 14
So, I'm sticking to the guidance we're giving; up in excess was given in December. We continue to say up in excess of
10% at the end of February. Yes, we'll be helped a bit by the – we'll be helped by the dollar. We could have
mathematically adjusted our guidance upwards, but that calculation you can do it as well as we can, and there are
pluses and minuses. So we'll see how that all plays out. We have a degree of confidence, which is higher today on the –
up in excess of than in December of last year, but I don't want to be more precise than that as I would lead to.
But don't bank on sort of huge springs and huge bounces here and there. We are in a steady business with a steady
course and we are trying to predict that as well as we can, but some of the future is not always very predictable.
<Q - Emmanuel Carlier>: But the first half of the year should be better, I guess, because of the easy comps, no?
<A - Axel Miller>: Again, you won't extract one more word on precising the guidance...
<Q - Emmanuel Carlier>: Okay.
<A - Axel Miller>: ...than what we've already said.
<Q - Emmanuel Carlier>: Thank you.
<A - Axel Miller>: I am sorry and I apologize for that. I think one last question.
<Q - Wim Hoste>: Okay. Good evening. Wim Hoste with KBC Securities. If I, again, I would ask two. Maybe first on
Belron, can you shed some lights on the pricing in the various important markets? I heard you say that last year you
took some pricing in the U.S. in the winter. Have you given in on that or can you hold on to that forever? That's the
first one.
And then on D'Ieteren Auto, I think there was a mentioning in the slide that there was a €5 million benefit or lower
marketing cost in 2014. Is that the kind of sustainable level or will you have to increase the marketing spend again in
2015 or beyond?
<A - Axel Miller>: Well, on the first question, as we said we tried to be at the same time determined on price, but not
adamant on price. So we have to respond to market conditions. What we saw last year in the U.S. was as Benoit
mentioned rapidly earlier on, we had a capacity which was under strain in certain regions because of severe weather
conditions. So when you have a capacity which is under strain, you reserve that capacity mostly for the work that you
are committed to do which is what we have towards our insurance companies and the work which, also from your
perspective, is the most profitable work.
In the cash segment, historically, United States was much lower than what we had in the insurance segment. There is an
upwards movement over many, many years. We have just accelerated that a little bit because if cash clients don't come
to us, we prefer to do insurance work. So that's what happened in the United States.
Are we planning to get back on that philosophy? No. I think that's a philosophy which we'd like to maintain in that
particular country. But in other countries, we see that we need to make price adjustments to correspond to market logic,
we'll do that. This is what we were compelled to do in the UK. And if you want to win contracts which give you
volumes to amortize on your cost base, you've got to play the game of the market and that's what we did in the UK.
To an extent, we sometimes refuse to do that. In other country like Brazil, we have refused – well, we have tried to
increase, we have proposed, to some accounts, to increase the prices. They said no. They went to a lower cost
alternative. And so, we lost those contracts. So, it's a balancing act in each and every country which you need to review
in function of the market circumstances. So, that's the answer to the first question. To the second, do you want to take
it?
<A - Benoit Ghiot>: Concerning the marketing cost, it's also – it also depends from the product pipeline that you had.
It may happen that when you have a big model to launch like the new Golf two years ago or the Passat for some bigger
models than you have to invest into additional marketing just to launch the product. So this may be very variable from
one year to the other.

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Now, of course, it's variable but really, at this moment, one of the ways to improve the profitability or to grow the
profitability of the [indiscernible] (01:07:13) Axel mentioned some, let's say, leaning the cost, typically the marketing
and efficiency seen in marketing is clearly something that we are pursuing at this moment, as part of the optimization
of the cost base.
So you should probably not see a repeat of this reduction next year and it's going to be stable or increasing, I think, in
section of line of our products that we have at this point in time.
<A - Axel Miller>: Thank you for your attention. I think we have decided to close by 10 to seven, but it's already 10
minutes past that deadline. Thank you for your attention, we'll – yes, there is – you want to have at least one or two
questions from the webcast. Okay, we'll give that to you, sorry.
So a question from Matthijs Van Leijenhorst, who's working at Kepler, who is asking whether we have any news to
report on acquisitions. The answer is if we had something to report on acquisitions, we would have done it already. We
are pursuing our search and it's interesting. We do have contacts with a number of potential investment opportunities
which go within the philosophy and the policy that we have, I think, discussed with investors a number of times in
sectors, which we believe offer long-term growth potentials and are the kind of investment that have a profile which we
like.
Family companies are privileged discussion partners for us because it corresponds to our own nature and to the
long-term vision that we want to have to build up businesses and be able to profit from profitable growth where you
can reinvest and build up a leading position.
So we are working. We – again, I want to reinforce that we are not feeling under stress to do a deal in a certain timing,
because then that's when you start to make mistakes. But we do have a number of interesting contacts which fit our
profile and we'll see what kind of evolution they will have. We will, of course, report to the market if and when needed.
Any other question from the webcast? Okay. Thank you.
Axel Miller
Again, thank you for your time and attention. And we close the conference now.
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