D'Ieteren Group NV

XBRU:DIE

Ladies and gentlemen, welcome to D'Ieteren 2018 Full Year Results Conference Call.I now hand over to Mr. Axel Miller, CEO. Sir, please go ahead.

Thank you. Good evening to all of you. I am sitting here, as usual, with my colleagues from the executive committee, Arnaud Laviolette, who is our Finance Director; and Jean-François Bourguignon, our Head of Consolidation; and our responsible for Financial Communication and Investor Relations, Pascale Weber, to comment the results that we have just announced for the year 2018, which as you may have seen, is a good -- a very good year for D'Ieteren group in all of its activities.I will not start without making a small caveat just to present the numbers in the best possible fashion. You will remember that we have, in February of 2018, done the closing of the sale of a 40% interest to our partners in Belron being Clayton, Dubilier & Rice (CD&R), and hence when we look at the numbers, there are 3 things that we need to keep in mind. When we compare a Belron between 2017 and 2018, we need to take into account an equity pickup, which is 57.78% of contribution to the group results. When we will give guidance for 2019 and compare Belron in the step between '18 and '19, it's another percentage that we are -- that we have in mind, which is 54.10%, which is the current holding that D'Ieteren has in Belron. And we have a third concept, which is when we talk about the evolution of Belron on a standalone basis, we look at the 100% of Belron at that request under the term combined results, or combined sales or combined profits. And then we look at 100% of Belron, but bearing in mind that we at D'Ieteren have only a remaining stake left of 54.10% into that particular company.Going back to the essentials, 2018 was, I think a very good year for D'Ieteren and its activities. And I am actually quite satisfied with the set of results that our activities have produced because as well in Belron as in D'Ieteren Auto and Moleskine, we have a set of results, which show growth of the top line of the turnover of the revenues, and also an increase significant, in all cases, was higher increase of the profits than the increase we had in turnover, which was really a reflection of all the good work that is being done by all 3 management teams.If we turn to Page 3, you will see that the combined group sales increases by 7%. That's a combination of an increase in D'Ieteren Auto of 3.2%. Belron's revenues increased by more than 10% and Moleskine signs a very healthy growth of 12% of the top line.If we look at the adjusted operating result on the next page, Slide 4, it's an increase combined of almost 19% -- almost 19% for D'Ieteren Auto, that's an absolute value of EUR 80 million; almost 19% growth for Belron, that's an absolute gross of EUR 36 million when we look at the 100% of Belron, and Moleskine increases its profit by 13.5%.So as I said, this is a very satisfactory evolution for all 3 activities. We had started the year with a certain number of uncertainties and question marks. You will remember that, at the end of the first semester, when we published the results for the first half of 2018, end of August, we had increased our guidance, which was a little bit more cautious at the beginning of the year. And we had given a guidance that our KPI, being the adjusted profit before tax group share, would be increasing between 10% and 15%. All things being taken together, and I will go into more details in a second, we signed an increase of the PBT of 15.8% at comparable parameters, so it's just above the guidance that we have given, and it's actually very satisfactory to see that we have been able to achieve those results in markets that were not always particularly helpful, but with the efforts of having demonstrated we were able to give those performances.I would propose that we now take in turn, D'Ieteren, Belron and Moleskine to wrap up at the end and take some time for your questions and answers.

In opening, some preliminary comments, we have kind of the current automotive activity, the D'Ieteren Auto activity from the group, and you will see that we have reported under a new sector, which is the other sector, which encompasses the corporate activity, the gallery we have and the real estate activities.So turning now to D'Ieteren Auto. A really good year where we reinforced our leadership position on Belgian markets, whereby we increased slightly our market share in the new car markets. We have had a contrasted second half of the year because of WLTP, which caused some headaches in terms of deliveries of cars. And you will see that this has had also an impact on our inventory level. Notwithstanding that, we have had a relatively good growth. Thanks to a very good mix of our models and price increase in our models too, leading to a sales growth of 3.2% and with a strong pickup in the SUV penetration within our brands. We are still lagging behind the Belgian market in terms of SUV penetration. So there is good hope for the future as we're lining up new models in SUV, which bodes well for the future.Stronger leverage on the operating result, good control of staff costs, diminution of marketing costs, which has had a positive impact at the end of the day on our bottom line, and also some reversal of provision, which also helps the bottom line at the end of the year.The guidance for 2019. Even if the market is probably not that strong, we anticipate a higher -- slightly higher profit for 2019.When we look at the markets, those are the Febiac numbers. You see that the Belgian market was slightly up, but when you take into account the registration within 30 days, it was little bit down. And you have 2 sides of the coins in 2018 with a very strong market in the first half of the year and the declining market in the second half of the year. And it is essentially due to the WLTP, which has really affect all brands, and especially, the Volkswagen Group brands.As mentioned, we've been able to increase our position in the market. And you'll see on the next slide, the evolution brands by brands where we have had a strong increase of volumes with SEAT. Thanks to new models introduced and great success of [indiscernible], the small SUV models, increase in Škoda, increase in Volkswagen. All these still struggling a little bit. We had probably not the best year in terms of a lot of models last year that we suffered last year, but 2019 is -- will be a much better year as we are developing or launching new models on the market. And Porsche is relatively stable at a very high level.I mentioned the important increase, the last years of SUV penetration in our sales. And you'll see, year-after-year, that segment of the market is really in full blast. It still represents only 28% of all sales compared to 38% for the Belgian market. So once again, this gives us good hope that we'll be catching up. And it's important in our model mix but also in our price mix. And these -- those models have a better profitability than the normal sedan or small cars.Big trend also still -- well, big trend, it's a trend, not yet that big in the market. Big trend is the shift from gasoline -- from diesel to gasoline. You see the steady increase of gasoline, which represents now 57% of the new car registrations in Belgium. Diesel down to 36% for the D'Ieteren distributed brands. And you see that the new energy models being CNG, being hybrid and electric representing 7% of our new car volumes. And you see the split. The good news is that all brands have a higher market share in that segment and in the rest of the market, and we are expecting a very strong lineup and load of new product in the coming 5 years. As you know, the ambition of the Volkswagen Group is to launch -- to have 25% of the sales of new cars in electric vehicles by 2025.You see on the next slide, the beautiful new Taycan model, which will be launched at the end of the year of 2019. We are already registering strong interest for the car, and preorders or orders are quite important. It's going up and it's really a very exciting model.In terms of profits, the sale growth was positively impacted by also the acquisitions we've done in our retail segments. You know that we are consolidating the market area in Brussels, in Mechelen and in Antwerp. So we've made a few acquisitions last year there. We have also higher contribution of spare parts, which has a good year last year. And we were positively impacted by WLTP first half of the year, but negatively impacted second half of the year.We delivered 2.7% less cars than last year, but as mentioned, we had very good price and model mix in 2018.Strong rise of close to 90% of the operating profit, and is explained by good cost control, as we mentioned, also lower provisions for inventory write-downs, reversal of provision. The net impact of that is net EUR 4.5 million, but reversal of provision of EUR 2.2 million on the whole year and lower -- importantly, lower contribution from retail activity. And also, we as you know investing quite a bit for the future for Lab Box innovative platform, which is loss-making.Summary of the results. What is important there, you know already the operating -- the adjusted operating results. We have also had a higher fiscal charge in 2018 with EUR 40 million for the tax charge, leading to an adjusted net profit of EUR 77 million, which is still growing by a little bit more than 12% versus last year -- versus 2017.Some adjusting items for D'Ieteren Auto, but relatively compensating each other. The first one is provisions we take in order to prove an organized market area. That's a provision of EUR 6.2 million, but also we have had, again, on the sale of the dealership and also in VDFin or subsidiary, financing subsidiary, we have additional revenue. Thanks to a change in accounting estimates for all Wecare contracts.In terms of cash flow and net debt, there, the situation is less positives. We've had a good year in terms of profitability, but the working capital suffered from higher inventory levels. Once again, WLTP had as a consequence that we were delivered very, very late cars. That was done in December. December is not the best month for delivering those cars to the end customers. So our inventory was overburdened at the end of the year. We hope to be -- to get back to normal levels by 2019, but that has had an impact of close to EUR 74 million in our inventory levels, and also higher trade receivables. That essentially, the credit note that we've received from the factory, which have increased by EUR 49 million. And there also, we put in place systems in order to recover those receivables from the factory much quicker.We also increased CapEx essentially in IT, where we are launching new platforms. And this is why you will -- you see the net free cash flow for this year, but this should reverse into very positive territory for 2019. We'll come back on that.Axel, over to you, developments?

So as you may gather, 2018 was a full year for the auto team. Two important things took place and are now behind us. The first one is that, as you may know, the Volkswagen Group asked all of its importers to sign new importers' contracts. The idea there is really to take into account new developments in digitalization, the rise of Internet, Internet sales, how do you deal with the data from customers and all that sort of things. So that was an interesting set of discussions, which ended very well, I think, and where all the new import contracts were signed with the various brands of the Volkswagen Group.Similarly, we had the same thing to be done to reflect the new importers' contracts in new dealers -- contract with our dealers, corporately-owned and the others. So all of that have been negotiated and signed in 2018. It was a great piece of work. The next thing, which is still ongoing is that we decided to look and have a full review of all our activities within the group since many, many years. The contribution of the import activities is by and large the most important in the results of D'Ieteren Auto. And at the same time, we do have significant -- a significant portfolio of other activities, the retail activities in which we have relatively heavily invested in recent times. We have also the bodywork activities currently, where we have an interesting position combined with our network of about 10% of the market in Belgium, what are the possibilities and opportunities there. We have a -- an activity in the sale of used cars, which traditionally within D'Ieteren is less important than in corresponding brands.Our ratio of secondhand cars to new cars sold is, in certain instances, significantly lower than others. What can we do with that? There are a number of options in terms of spare parts and accessories that we want to examine. And last but not least, we want to review the full array of options, which may make the organization more flexible, more agile and more efficient from an operational point of view. All of that is something that we do in a very coordinated fashion under a project that we call Magellan. The conclusions will be reached and discussed in the second quarter of this year, and hopefully, implementation will start soon thereafter. And we believe that, that is going to entail quite some interesting potential for the group.On retail, more specifically, you know that 5 years ago, we embarked on a program aimed at reducing the losses that we were having in the Brussels area with our corporately-owned garages. We are almost there, although we had some setbacks in 2018 because of the market environment and what Arnaud just told you about WLTP. Now we are looking to the future about how we -- can we integrate to the acquisitions that have been done? How can we reinforce our presence in Brussels? And we have decided to take certain decisions to put the commercial activities in terms of sales and aftersales in the periphery of Brussels around 3 main sites: Anderlecht in the Southwest, Drogenbos in the South and Zaventem in the East. And we have developed and completed our project for a new bodywork shop in the South of Brussels, in Drogenbos, which now is up and running and going in the -- into full speed.We have acquired a number of dealerships in Antwerp, Brussels and Mechelen. And that's going to be one of the focus of 2019 is to integrate them and to get them to the right level of efficiency. So all of that is -- has been going on and is for a certain portion still ongoing.An interesting evolution that we have announced at the Motor Show in Brussels in January is the investment that we've done in everything and anything, which is related to the electric car. It's still a relatively confidential phenomenon at this point in time, but the movement which has been launched by Tesla and where the Volkswagen Group has really embarked on quite -- in a quite determined fashion means that there will be lots of opportunities to provide solutions to our private and lead customers under the form of battery chargers and in the form of integrated solutions to provide the electricity needed to charge those cars, and so that has been an important piece of work which has been announced in January of this year. And there are a number of other options and alternatives that we have been working on with a view to positioning ourselves as leader on the new mobility solutions for our customers, both private and professional. We have announced, very recently, an initiatives to launch a digital leasing platform for secondhand cars under the name Lease. That's a joint initiative taken by Lab Box, which is our innovation lab, and D'Ieteren Auto. And as you know, we have launched, last year, a car sharing system in Antwerp under the brand name Poppy, which is coming along quite nicely and having a high level of success in the Antwerp city and region.Recently, AVIS has announced that they were going to stop their activities of car sharing in Brussels, which they were performing under the name Zipcar. And we have announced that we were in exclusive negotiations with them to take over the teamand their contracts in the Brussels region, not the cars, with a view to extending the Poppy presence in the Brussels city. This is something that we had not planned, but which is a nice opportunity to be able to try and extend our activities in a second large Belgian city after Antwerp.So if we look at all of these elements and we look into 2019, I think the professions' forecast is that we are bound to have a market in 2019, which is bound to be lower than what we have seen in 2018. And in that market, in particular, given the pipeline in new products that we see coming from the various brands of the Volkswagen Group, we think that we are well positioned commercially and product-wise to be aiming for an increase of our market share as we have done this year. There are, of course, some interesting models coming, in particular for Audi, which is supporting us in our efforts to be able to reposition the brand and to increase our market share on the Belgian market. But also at Škoda, SEAT, Porsche and Volkswagen, there are a number of new models which are coming, and I think, will be well met by the market. Given all of that, our guidance for D'Ieteren Auto at this point is that we expect the adjusted PBT group share to increase slightly and on the back of an improved sales mix essentially, but there are other lever that we can action to get to that result as well.Importantly, we have held an Investor Day end of December 2017, where we had given a guidance about the medium-term targets that we were having for all of our 3 activities. For D'Ieteren Auto, we are above our medium-term targets this year in terms of sales growth with 3% sales growth compared to the guidance we had given. We are well on our way to achieving our targets in terms of profitability, which we had set at 3.5%. And we are, this year, way above our target in terms of return on capital employed for the reasons that Arnaud has explained, the cash flow generated by D'Ieteren Auto this year has been lower than our expectations, but that doesn't change the structure and the shape of the business. So we are confident that we'll be able to regain that level in coming years.Turning to Belron, Arnaud?

Yes, Belron, very strong year. As you can see, strong sales growth across all the 3 regions. You know that we have registered FIDU to the countries at the level of the executive committee of Belron. And so now we are reporting numbers -- sales numbers across 3 regions, North America, regrouping the U.S. and Canada, Europe and rest of the world. You see there the organic and acquisition related to growth. Strong growth in North America, essentially in the U.S. Even Canada was also growing last year. Europe, a little bit more contrasted. And rest of the world, strong organic growth above the 10%. All in all, more than 10% organic growth, contribution of acquisitions of 2% and negative effects of 2.1%.We mainly gained market share everywhere. The market was supportive, thanks to winter, which was harsh in 2017, 2018, but we gained market share in nearly all the markets we are present. We have also enjoyed higher prices, thanks essentially to higher windscreen complexity. And you see also that ADAS calibration represented more -- EBIT more than EUR 400,000 last year, more than doubling versus 2017. We see that as a very important trend in our industry, which is also increasing the level of complexity of the jobs we are performing, so increasing the barrier to entry for our competitors because this needs high investment in terms of equipments, but also in terms of information to the data of the car. We have also enjoyed high value-added product sales, and we were confronted with headwind in terms of FX with lower USD, Australian dollar and Turkish lira.In terms of profits, [indiscernible] sales group had good, fruitful last year. And what you see at the level of the operating profit is a strong increase of close to 20%. And this is after also having taken into consideration a much higher incentive charge for the ELTIP for the management where we have had a level of EUR 34 million booked in 2018. That's an increase of EUR 14 million versus 2017, and notwithstanding that we have been able to strongly increase the adjusted operating results. We have encountered higher financial charges. You know that we have relevered the company at the end of '17, so lower impact on '17, but total impact, full impact on '18. And also at the end of last year, we issued a new EUR 400 million TLB. That has had limited impact on the financial charges because we have only got the money at the end of the year, but this will have an impact, more important impact in 2019. So all in all, strong increase in profitability, even after higher ELTIP charge and much higher French charge, but then we are able to show a double-digit increase at just the PBT group share. Some important adjusting items at the level of the PBT, important to notice. You are probably used to the movement in fuel hedges. It can go up or down, and this year, it was down. We still amortize a few brands and consumer -- customer contracts as usually. We have had a relatively high number of impairments with EUR 50 million, but this was mainly concentrated in 2 countries, being the Netherlands for EUR 40 million and New Zealand for EUR 6 million. And we have also decided to franchise 2 countries, which is Hungary and Greece, where we have fully amortized the intangibles we had in those countries. We have also booked some provisions. We have stopped the claims management activity in Canada. So we booked a provision for that. Also, we have restructured the U.S. field sales teams -- our brand is so strong that we do not need those people on the ground, and so we have made them redundant. We have closed a legal dispute in U.S. for which we had already booked a provision a little bit higher than EUR 4 million last year, and we added EUR 4 million this year to close the disputes. We are embarking through a transformation program and we have here booked the cost of the adviser for that program and also some provisions taken for the disposal and franchising of Greece and Hungary, you see the number then. And also the costs related to TLB issue in November '18, the cost has been considered as one-off item. So you see the level of adjusting items. Of course, I should mention the big consolidation gain on our disposal of the 40% stake through CD&R, which is a big number as you see, of EUR 987 million. In terms of cash flow and net debt, you see here the increase in EBITDA, which is quite steep. We have higher interest charges, higher taxes also across the group. Good control in working capital for the whole year, in CapEx, which are much lower than last year. Last year, we invested quite a lot in order to prepare the growth in the U.S., and we are able to harvest that growth last year. And we had a very strict control in CapEx, and we hope to continue on that track. So some free cash flow generation. And you see the evolution of net debt, which is not a reflection of the generation of free cash flow, but as I mentioned, we have relevered the company for the refinancing and for the distribution of cash to shareholders at the end of last year. We have leverage, which is at 4.23x, if I just take the reported EBITDA that you have there. We have also put in place, that was a very important part of the Blossom transaction, we have put in place a new Management Reward Plan. You'll remember that we had a kind of 3-year rolling plan for the management incentive plan at Belron, and this is creating quite a lot of volatility in our numbers, where 2019 will be the last year of this 3-year plan. So you will still have an impact in 2019 of the previous management incentive plan, but we have put in place now, a very exciting plan, I think, for the management. It's 250 key employers within the group -- employees within the group. They have all invested an amount close to EUR 22 million last year. And we have constructed the product whereby we create ratchet shares, which, if certain conditions are met, the management can make more than proportionate return on their investments and you see the composition of the capital after having taken into account the new MRP. Axel, recent development?

Thank you, Arnaud. It has been a full year as well. I think it's important to know that, in that context, customer satisfaction remained at very high level, measured by NPS. We have NPS scores, which in most countries are still in the high 80s. So that's a big element, and it's a cornerstone of the strategy of Belron. We have people engagement and motivation scores, which also remain at a high level, witnessing the energy that all team members put into what is really an ongoing transformation of the group. In parallel, what's happening is that there really has been a realization from all stakeholders around Belron that the EBITDA margin overall is something that we wanted to get to the best level of the business services industry. Now it's overall around 10%, and the ambition is really to crank it up through a number of initiatives, both on the revenue side, but also on the cost and operational efficiency side. And a number of programs have been launched, which importantly are already giving results in '18 and will certainly in '19. And also, importantly, is going to redefine, a little bit, the relationship between the center in AGAM, and the various country teams in the countries. So a lot of action going on. We call that faithful growth, and we believe that the alignment through all levels of the management, both at the center and the region, is going to be an important part of the evolution of Belron going forward. As Arnaud mentioned, there were -- there was also a first review of the portfolio of countries in which we are active. Russia, Turkey, Greece, Hungary were countries where we have had a presence, which upon further review, given the market circumstances locally, was probably not going to be representing a lot of potential in the future and was going to require quite some time of management and efforts to be sustained, hence, we have taken the decision to sell and/or franchise those operations out to be really able to focus on those countries that matter. In parallel, we continue with our test and trial on service extension. Today, Belron is mostly active in the sector of Vehicle Glass Repair and Replacement. We have identified, 2 years ago, 2 additional spaces where we believe that the specific Belron business model is also capable of developing. It's the bodywork space on the one hand, take more generally the automotive services space and the home space. Initiatives has been taken in Canada, in France, in Belgium, in Italy and also in Australia and New Zealand. We have since a number of years, a smart repair service proposal in the U.K., which goes under the name, which -- when used to go under the name Autorestore. Now it's rebranded Autoglass. All of the initiatives are being worked on. The first results are positive, and we are still continuing to work on the formula that would allow us, over time, to consider whether we want to significantly develop and invest into new spaces. It's not yet something that we are going to see in considerable amounts in 2019, but the strategic view is that there are things to be done in spaces beyond vehicle glass repair and replacement, and that is something we continue to work on. Given all of that, the outlook for 2018 -- '19 sorry, we don't know what the markets are going to do. We don't know what the weather is going to look like, but we feel confident that, whatever the shape of the market, we will be able to not only adapt and thrive, we are geared to win additional market shares in a number of countries. We are still seeing a market where added value can be reaped out of additional product and services. ADAS, ADAS calibration, which require more work and is something that we can do and others can't, so that is going to drive the business. Plus, the benefits of the transformation programs, which are ongoing, make that we guide for a double-digit improvement of the adjusted results at the level of Belron.So what's good in an uncertain world is that you got the levers on the things that you can do to improve your position and that's really the feeling that we have within all of Belron.Again, taking a step back and reviewing the medium-term targets that we had given in December 2017. We are today, in terms of sales growth, above our medium-term objectives as well as on result growth with a particularly satisfying year 2018. We are still below our return-on-equity target 6 -- 7.6% versus 15%, and that's something that we continue to have in our visionary, if I may say. And as Arnaud has mentioned, on the back of a screening of our capital expenditures and a good level of EBITDA generation, we have made significantly, this year, in our target of having more than EUR 200 million of free cash flow generated year in and year out by this particular activity. So I think a good level of comfort in our capacity to reach our medium-term targets. Now we can turn to Moleskine.

Yes. Solid year, indeed, for Moleskine, with organic growth above 10% at constant exchange rates. It's close to 15% organic growth for the company with a very, very strong year, strong end of the year with sales increasing close to 30% in December alone. All the regions contributed to the growth, with a special tribute to APAC with close to 20%; India, which is the cradle of the company, increasing close to 14%; and America still growing by 13%. All the channels are growing, too, with a special salute to B2B, which you know that the brand is so strong that it is appealing for all the strong brands, and we see a continuous interest in Moleskine from large organizations. But also the historical channel, wholesale growing close to 7% last year; retail, even if we have pruned the network by diminishing the number of stores to 80 from 87, is increasing by 3.2%; and e-commerce, again, double-digit growth, with a very strong end of year because we grew in the fourth quarter by close to 20% only in that channel. We are launching new products, new -- we are launching new initiatives. In nonpaper category, nonpaper category is growing. But also for leather goods, bags and the Moleskine+ collection is growing and contributing close to 40% of the top line growth of the company. In terms of results, there are also strong improvements at nearly all lines of the P&L with close to, well, 13.5% increase in operating results. Much lower taxes because we enjoyed a very favorable tax regime with the Patent Box, where in fact, we have the positive impact of tax on our total P&L. And as you see, we have more than doubled net profit essentially thanks to the increase in operating profit. And also, the fact that we have, an add-back in terms of Texas. We have also a good cash flow contribution increase in EBITDA. Lower interest paid last year, much lower taxes, as I mentioned. Slight increase in the working capital. That's something we will probably better control next year. And in total, you see a free cash flow generation of EUR 13 million. Important to mention in the increase of the working capital that we have decided to go direct in Japan. And there, we have acquired the inventory of the distributors, so this is, partially, an explanation for the higher working capital increase. In terms of product innovation, we have a new lineup of products in old packs collection. You see there an illustration of the backpack, which is enjoying strong success. And we continuously invest in the continuum between analog product and the digital world. You will see here an example of one of our applications and we see still a lot of opportunities in that continuum. Axel?

There was a time in 1996 where Moleskine was a Milan-based mono-product, mono-distribution channel company. We are, fast forward a little bit more than 20 years later, and Moleskine is an organization that has, in 2018, really made an important step towards developing strong regions in the Americas, in APAC and also in the EMEA region, that's a very significant step, which was also marked by considerable investments into systems to support the increasing complexity linked to the development of different distribution channels and to different brands of products both in the paper and nonpaper category. We have, in particular, last year, and I'm actually proud of the realizations of the team there, we have successfully installed SAP in less than a year. We have a new business intelligence system, which really is important for all people to be aligned on the objectives and the measures that can be used to improve sales and efficiencies. And I think we have demonstrated that with a launch, in particular, of new categories in recent times, bags and accessories, we have products which can support the further development of the retail channel, of the wholesale channel and of the B2B channel. And this goes hand-in-hand with an increased level of complexity. I'm actually quite satisfied with the work that has been done by the teams in 2018. So in the future, we will continue to strengthen our regional organizations. We'll continue to invest in innovation. We now have, next to the iconic black notebook, a number of bags, which can be revealing in terms of iconicity, if I may say so. And the idea really is to continue to innovate, to be there. We are convinced that the brand, without dilution, can there more -- and can increase its bandwidth and can continue its nice progression in the future. And Arnaud has alluded to the digital aspect of it, which we believe is an important one. If we look at 2019, we are not going to be original there. Moleskine views itself and we view Moleskine as a growth company, and we aim for a double-digit growth of the top line and of the bottom line, and we expect to be doing particular work on the wholesale distribution channel, which still today accounts for most of the volumes of the company and where we believe that we have still interesting optionalities for the future in all 3 regions. B2B had a great year in 2018. It's, by definition, a business which is a bit cyclical because it depends on the contracts we have. So we want to consolidate the results of 2018 and 2019, but we will not see the same level of growth compared to last year in this particular distribution channel. Retail growth, we will continue to adapt our network. We had 80 stores at the end of 2018. We still have a limited number of new openings in high-traffic and touristic locations. We believe that those are sound moves and where we can, we will also continue to adapt our footprint given the profitability of the shops. And e-commerce hasn't seen a nice progression at the end of 2018, but we believe can still be an important pillar to support the growth of the business, in particular, in Asia, and in particular, in Asia, in China. Before I begin and we do same exercise, what did we have in mind in December 2017 for a medium-term target? Double-digit sales and profit. We had that. It's a check in 2018. We have consciously allowed the EBITDA margin to drop because of the investments we wanted to make, both in systems and in people, to support the transformation that is ongoing and we have objective, which we still need to be working on in terms of return on capital employed and in terms of free cash flow, but it's only the beginning of the journey. We still have some way to go there. In the segment, Others, which includes the corporate and D'Ieteren Immo, essentially not much to report there, a broadly flat adjusted operating result, and some are other items, which are linked to the other topics that we have examined together. We have given you also, on Slide 40, some information about D'Ieteren Immo. D'Ieteren Immo is no longer part of the D'Ieteren Auto reporting segment. It's under the group level or the other level. And D'Ieteren Immo is really the sort of captive real estate company of the group, which serves essentially its D'Ieteren Auto customer with arm's length's relationships established between the 2, so that we can really make the difference between the profitability of the business and the return on the real estate. And you see that we had a stable level of CapEx, slight increase of the net rental income and a number of projects ongoing to support the network and to optimize and take the best out of some locations, which either are already freed or will be freed in the future by the business. We will do that alone or with others, but that's something, which is probably on the medium term as opposed to an immediate 2019 possibility. Debt structure on Page 41. I think what's noteworthy there is to see the level of cash that we have at the group level. It's a result of the sale of the 40% stake in Belron that happened and was opposed in February of 2018. It's the dividend recap that we've done at the end of last year, offset again due to changes in working cap and in the dividend extraordinary that we have paid on addition of the ordinary dividend in June of last year. All in all, this set of numbers made us recommend to the Board of Directors to pay a dividend of EUR 1 per share versus EUR 0.95 per share last year, in line with our stated dividend policy, which is to have stable and a recurring dividend stream and increasing, if results allow, and we believe that those conditions are clearly met this year. On top of that, before you ask me, we continue to carry on our search for new possible investments. We have reviewed a number of interesting opportunities in 2018, but nothing that really fit our criteria. We have a robust process in place and a team that devotes energy and time to this search and the reality that we observe in the market is also that valuations are at an inspirational high, that there is a lot of money at play, which looks at different investments, lots of competitive processes. So we exercise the necessary discipline in that respect, and we'll continue to do that in the same manner in 2019. There is nothing special to report on that front at this point in time. So if I'm stepping back, I think we've got a good year 2018. We are embarking on a good year for 2019, and we actually happy campers. So thank you for your attention, and we'll take now questions and we'll try to address them in the best possible manner.

[Operator Instructions] We have a first question from David Vagman from ING.

So first, a question on Belron and simply the weather. So we've kind of all seen and benefited from the very nice kind of, let's say sunny weather outside. Yes, I would say what always you you model this? I know it's -- I completely understand it, very complicated to model for this, but have you -- or if you modeled, basically this, into Belron guidance. So that's my first question. And then secondly, so when you talk about the levers, that you have to increase the EBITDA margin a little bit further, can you come back to this? Or do you see, yes -- or do you see that evolving if you could clarify and give us some explanation on this? And then maybe also on the free cash flow guidance for whole 2019 in Belron, how do you see the free cash flow evolving?

Rapidly, and I know we'll complement weather. We don't model weather. We make assumptions, and those assumptions in recent years have always been relatively conservative. What's important to us is that whatever the evolution of the volumes, there is an even more important evolution in the value of the market; and the values expressed by price, by number of ADAS jobs, which as you have seen, increases rapidly across most countries where Belron is active; and the level of additional products and services that we can offer. We also have an influence of our claims management activity, which is thriving, in particular, in the United States, so all of that makes that. And the way we organize our footprint and our delivery to customers is really a year after year fine-tune to be able to be more flexible and to respond better to the conditions of the market. Two examples of that, we are, in a number of countries, looking at the proportion between services done in fixed sides versus mobile jobs. And in some countries, we are reducing a little bit the capacity to provide jobs by mobile services. And we are also having a number of actions, which are taken to make our cost base flexible with respect to the number of jobs being done, in particular, in some of the remuneration systems, for example, in the United States.So if I'm citing all of that it's not to confuse you, David, but just to show you that the volume and evolution, which is linked to the weather is something we can't predict, we don't predict, we won't predict, but we feel confident we are able to adapt the platform in sufficient manner to be able to achieve our targets. That's the first point. When I say increase the EBITDA margin, you'll recall in following us for a number of years, we have no EBITDA margin target at Belron level because we don't manage the business to produce margin. We manage the business to be able to increase the revenues and to be efficient with our cost base and we just check -- as a sanity check, what the EBITDA margin is. And the various programs that I have discussed with you are really meant to do that. What can we do to provide other products, to provide other services, how can we be more efficient in doing that? And that, we believe, is going to have an impact on the EBITDA margin ultimately. Just wait because we think the draws are going to be favorably evolving in the future. But we don't have an EBITDA margin target as such. We are really trying to build on our revenue platform and to be efficient on our cost platform.

Indeed, to comment on your -- on the last part of your question about the cash flow generation. We are experiencing an increasing EBITDA for next year. Probably no big change in terms of working capital movements and an increased CapEx for next year and for this year, 2019, and a higher interest charges. All in all, we should have still a growing free cash flow.

Maybe one follow-up question on carglass disrepair in Belgium. Could you just make a quick comment on how it's developing basically, maybe on top line, bottom line?

On what, on?

On carglass disrepair in Belgium.

Are you talking about the Belron's or the D'Ieteren Autos?

Belron.

You mean Carglass Carrosserie?

Carglass Carrosserie. Exactly. Yes, absolutely.

Okay, as you know, it has been rebranded Carglass Carrosserie, and lots of -- a lot of action is taking place there in the sense that we have, as you've seen, worked on the branding. It's no longer CARe, it's Carglass Carrosserie. We are working on the integration of the bodywork activity into the carglass Belgium platform and that's moving along nicely. We have established contact with our insurance partners and most of them are telling us, "Yes, please come to this market." We are very happy to see that. Now what's going on in the field, is to try and be able to build up the necessary capacity that can treat the additional volumes that we can get once, and if we turn the marketing faucet on and once we really leverage our relationship with our insurance companies. And that is something, which is the function of a triple evolution. First, to increase the efficiency of the former care sites. Second, to switch progressively from the current customer base, which is heavily fleet oriented, to a more private customer base. And thirdly, to be able to find additional capacity, either on our own or by striking partnerships or maybe franchise arrangements of some form with third parties. And that work is still ongoing. That's why I'm saying it's going to take a little bit of time before the winning formula can be found and developed, that's the process that is ongoing.

Maybe to come back on your comment -- on my comment on free cash flow. This is before taking into account potentially, relatively high payouts of the incentive plan to the management. Okay?

For the last leg.

For the last leg.

Will do. Okay, for the [indiscernible]

Exactly.

Okay. And can you quantify this cash out or...

No. We are not divulging that. But you've seen that we have increased the provision for in 2018. Reflects all of the increased payout expected in 2020.

Next question from Nathalie Debruyne from Degroof Petercam.

First of all, congrats on the good result. And then, perhaps, the usual boring question that you have every year. Could you update us a bit on your acquisitions pipeline? And can we, perhaps, expect some announcement like around the second half of this year or something? That's the first. And then, secondly, on Auto, so you guide for an adjusted result of ForEx to be slightly up in 2019. That is not even before -- or after correction for that provision reversal, right? Because you have a EUR 4.5 million provision reversal, which was a positive in '18, so including that, I mean, it should still increase.

Yes.

Okay, right. And you mention that expected the higher volumes, is that related to the side that you have now large inventories that you have to sell? Or do you still expect a positive impact on volumes coming from market share gains in the declining market?

Yes, indeed. You know when -- and you've seen that we suffered the last years in OD and we hope to increase quite substantially the volumes in OD this year.

On your first question, Nathalie, a bit on the acquisition pipeline. I've told you all the things that I have to say in my presentation. And I'm sorry if it's not more specific than that, but high level of work, robust process, a number of contacts. We've approached certain possible investments in 2018. We have decided that we didn't want to move forward in a context, which as I said, is a context where lots of hunters are chasing a limited number of preys. It's a very intermediate market with competitive processes and high valuation multiples. So now is the time to be disciplined and that's what we are doing. I can't tell you whether I will be able to announce something in Q1, or Q2, or Q4, but I can tell you it remains one of our priorities. It's not particularly pleasurable to have EUR 1 billion sitting on your balance sheet and not yielding much, but we're not going to be pushed to commit a crime just to get rid of that money. I can guarantee you that.

Okay then, fair enough. But I was just thinking, okay, the market kind of corrected in the second part of '18 on a lot of uncertainty actually, so I'm also seeing valuations coming down. So my reflection is actually rather towards like, yes, valuation came down in general so wouldn't 2019 be a nice moment actually to not risking to overpay for something?

It would. I like the formulation. Wouldn't 2019 be a good -- a nice moment? I concur, it would. I'm not sure it will.

Alright.

We've seen a correction in the listed environments but not yet though in private companies. There is still a lot of money available there within private equity, within corporate. So in that space, we have not yet any correction in terms of valuation. It will -- that's part of our hopes. It will, what you see in the listed environment, will maybe translate into the private one. But at this stage, we have not seen and availability of financing is still there. There is plenty of money looking to be invested and banks or intermediaries ready to finance good transactions.

But if I can give you a bit more color, Nathalie. There have been at least 2 or 3 instances in 2018 where we thought that the investments we were looking at were interesting, as such, because they were in a space which was actually buoyed by interesting long-term trends. Because there was a situation that we were able to position ourselves into and we've done our valuation exercise and we've given an education at the level at which we were willing to come in. Those 2 or 3 transactions went out to other parties at prices which were just significantly higher than what we were ready and willing to pay and we have no regret whatsoever on those.On the other hand, I can tell that in terms of positioning of D'Ieteren, we're never going to be a company holding 10, 12, 15, 20 lines. That's not the way we look at things. When we want to invest somewhere, we really want to be able to make a difference as a shareholder. And I hope that once begins to see, with the evolution of Belron, Moleskine and D'Ieteren Auto that the way we work with them does actually provide benefits and does actually tilt the boat in the right direction. And that requires focus, time, effort and a strong belief on what are the levers that you need to actually create value. And our belief is that value is not just financial value, but it's value of the people, for the customers, which then translates into financial value. And the way we approach the market, we are of interest as an investor, and distinctly different from the market of listed companies or distinctly different from private equity players. And we do actually have a number of connections, which are leading us to interesting conversations because of who we are and the way we work.So just to tell you that we have a very clear idea as to what is our competitive added value as an investor. We are playing it, it's successful and we remain disciplined.

Next question from Matthijs Van Leijenhorst from Kepler Cheuvreux.

First, to follow-up on the -- on M&A. I was just wondering why since -- so your wage and multiples are high, you haven't found the proper target, but you do have EUR 1 billion of cash on your balance sheet or even more than EUR 1 billion. So why haven't you decided to give some of the cash back to the shareholders through a share buyback, for example? The second question is, could you give some more color. We've just discussed the CARe Carrosserie in Belgium, but could you give some more color on your other activities in Belron, because what you basically are doing is in mature markets, you are extending your services to home and for car repairs. Could you give some color on how those activities are doing? And also in terms of profitability, although they are still very small, but what kind of margins should we think about?

Thank you, Matthijs. Why no share buyback? We had a discussion at the Board, and the Board concluded that at this point, it was not the right thing to do. The main thing is we see opportunities in the markets. It's not because there is no action taking place, that there are no opportunities. And we believe that if we have something we want to be able to act and to act in a determined manner. On top of that, we do see a number of opportunities that exist in the spaces, which are currently covered by Belron, D'Ieteren Auto and Moleskine. And as the case may be, we may want to invest either through them or alongside them if we have opportunities there. So it's not like it's an empty screen. It's a live screen out there, and we do see investment possibilities. And we think it's not the right course of action to distract money for share buybacks. But again, I see the reasoning. I can understand why you are asking the question, and it's a continued conversation at the level of the Board. On your second question, which is Carrosserie and Maison, as I said earlier, I mean, it's -- before you invest significant amounts of money, it's important to demonstrate that the car glass magic, if you want, can be applied to new spaces. So at this point in time, we are really tweaking the current models, adapting the current organizational designs of the companies in which we have invested, and testing a number of things. One, what is the added value that we offer to our customers from a service perspective? Can we really be a game changer there? How can we come with an innovative and disruptive approach to offer the equivalent of repair in glass through, for example, smart repair in Carrosserie? Third, how can we be supported by our insurance partners in all of that? And then once we have rolled these things, then how can we roll out the model without embarking onto a 20-year journey? So it's simple to reason in theoretical terms, but then we need to find and to do trial and error. What I can tell you is that the essays we are doing now are actually interesting and are a good sign for the future. If you look for example, at the small acquisition that we have done in France, Maisoning, which has been rebranded Carglass Maison, we do have a very high level of interest and support from some of our insurance partners in France who welcome us to that space, and who are actually taking very specific steps and initiatives to support us by steering clients in those locations where we are. So I mean, that's the work which is being currently done. Bottom line today, it's still negative and we need to be clear on that. And it will remain like that for a little bit of time, pending a larger acquisition, but before doing a large acquisition, we want to be God**** sure that we have the right formula, that we can do what we've done in glass over 10, 15, 20 years, which is to buy and build and grow organically and also where needed, or opportune by acquisitions. So bottom line and short answer, still negative today, not likely to change next year, but good first signs and actually very hopeful signs that the idea can be translated into reality, and we are working very strongly on the how.

I've got also another question. It's related to CD&R. How sure your corporation developing so far? Can you also shed some light on that?

It's a good question, Matthijs, and it's an outstanding relationship. I mean, we have now a full year of partnership with CD&R behind us. And both in the relationship between D'Ieteren and CD&R, as importantly in the relationship between their shareholders and management, there is a huge degree of alignment and a huge trust to do what we are doing. It's a big source of pleasure. And I'm reminding myself of the discussions we had internally before concluding the deal with CD&R and the conditions that we had set to find a partner and to deal with 1 partner as opposed to another. We had said price was one of the elements. We had clearly said that the contractual terms were another. But the quality of the persons representing that partner were equally important because it's a people's business. And frankly, whether it's the daily, the weekly, the monthly or the Board interaction that we have with them at all levels, and I think they will probably say the same if you ask them on their side, there is a level of trust, alignment, openness and transparency, which is just a big source of joy.

[Operator Instructions] We don't have any more questions. Back to you for the conclusion.

Thank you, and thanks to all of you for having listened on this conference call and for those of you who have asked questions to have done so, it has been a pleasure as always, and we look forward to seeing you soon. Thank you. Good evening.

Bye-bye.

Thank you, this concludes today's conference call. Ladies and gentlemen, thank you all for your participation. You may now disconnect.