NPM portfolio company Stern Groep N.V., the listed Dutch market leader in automotive retail, has had an excellent first six months. Its net revenue was marginally higher than for the first six months of 2016 (+5.6%), while EBIT was down slightly by € -0.6 million. Profit after tax has remained virtually level at € 0.2 million. Stern Mobility Solutions, Stern Car Services and the other businesses, including Mango Mobility Services, all achieved profit growth.
The increase in net revenue was driven mainly by SternLease (+6.3%) and Dealergroup Stern (+7.1%). The other operating income was also up significantly, due partly to higher profits from the company’s stake in financial services provider Bovemij.
The slightly lower operating profit is due mainly to the significant rise in employee expenses (+7.3%). This increase is the result of higher wages under the Collective Agreement, the fact that Stern Group is required to pay a larger share of its employees’ pension contributions, an increase in the number of FTEs (there are more mechanics as a result of growing employment in the workshops), and other factors.
Dealergroup Stern also saw a fall in profit margins on the sale of new and used passenger cars and various changes in the range of makes and models available. All this caused Dealergroup Stern’s overall operating profit to fall below that for the same period last year (H1-2016). Additionally, the recently opened car body repair facilities that form part of Stern Car Services still operated at a loss during the first half of 2017 on account of start-up costs and underutilisation.
Alternatives to car travel
As CEO Henk van der Kwast explains, Stern operates in a rapidly changing market: ‘Demand for mobility is definitely changing. In urban areas, in particular, we are seeing a growing number of alternatives to cars, and owning one is no longer really necessary the way it used to be. In 2016, Stern therefore shifted its primary focus away from sales and toward leasing, rental and other mobility services. This has turned out to be a smart move, as Stern Mobility Solutions has been growing steadily ever since. We’re right on schedule in the process of transitioning from a traditional car dealership holding company into a highly profitable mobility group.’
Strong outlook
With a solvency rate of 25.3%, Stern is undeniably in robust financial health. In order to achieve its growth objectives over the next few years, the company recently completed a refinancing process for both its leasing and retail businesses. Van der Kwast: ‘SternLease’s organic growth and the termination of various financial facilities in mid-2017 have motivated us to design a financing plan – in line with our growth strategy – for the lease portfolio based on securitisation. Interest rates will be a lot lower, particularly for lease finance, than the current rates.’
Stern expects margin pressure at Dealergroup Stern to abate in H2-2017 through improved profit margins on used vehicles and the delayed introduction of various bonus schemes. Stern Mobility Solutions is on track to continue its excellence performance in H1-2017 into the second half of the year, based on strong results at SternLease and higher profits at SternRent. The first results of the new strategic plan are expected to materialise in the second half of 2017, with the main changes becoming visible in 2018 and 2019.
