D'ieteren Group's Crown Jewel: Belron?
D’Ieteren is a Belgian family holding company which is mainly active in the distribution of vehicles, spare parts and the fixing of broken windshields. While not that well known outside of Benelux, it is nonetheless big with c. 30,000 staff and 2022 ‘combined’ sales of c. €12bn. D’Ieteren is more a conglomerate with control of its assets than a holding company with biggish minority stakes. Of late the stock has underperformed both the Stoxx600 and its peers for no obvious reasons.
D’Ieteren Group Stock Price Momentum
A key feature of D’Ieteren is its ownership of 50.01% of its main asset Belron, which it controls but equity accounts. AlphaValue’s modelling relies on a 100% integration of Belron in D’Ieteren's consolidated accounts (with 50% of Belron's earnings going to minorities).
D’Ieteren assets
Belron/Carglass in effect
D’Ieteren bought Belron - by far the world’s largest player in vehicle glass repair and replacement with 18.2 million customers in 39 countries on six continents - in 1999 and managed to grow it into the massive cash generator it is today, thanks to strong brands like Carglass, Safelite (market leader in the US), Autoglass (UK), O’Brien (Australia) and Lebeau to name five of the seven.
In 2017, the holding sold 40% of its stake to private equity player CD&R. In 2021, CD&R sold a part of its stake (13%) to two private equity players (Hellman & Friedman en Blackrock) and the Singapore State fund GIC at a staggering EBITDA multiple of x25 FY 2020, revealing a lot of hidden value. In fact, in the year of Covid-19, Belron accounted, with €838m, for 90% of D’Ieteren's EBITDA, assuming all subsidiaries were owned at 100%. Between 2020 and 2022, the EBITDA of Belron rose by another +45% or about 20% per year to €1.3bn.
Belron as a cash cow
Massive cash is entering D’Ieteren thanks to dividends from Belron. In 2021 the bulk of that this cash was used to acquire 40% of TVH Parts and, at the end of 2022, 100% of PHE, both being active in the market for auto spare parts. This added another €600m of EBITDA to the combined figures or 30% of the EBITDA of all of D’Ieteren’s subsidiaries (assuming full ownership).
The conclusion really is that the cash generation is in Belron, while PHE and TVH are nice additional subsidiaries but the once core-activity of D’Ieteren Auto can almost be completely ignored. Even with its 23.5% market share in the Belgium auto market as exclusive distributor for Volkswagen, the EBITDA of €167m matters somewhat less next to Belron’s.
Time for deleveraging and/or an IPO of Belron
Belron's rapid growth has been the main driver of the positive historic trend in the ROCE which now stands at above 15% and has been above its WACC for many years. Belron’s growth will not stop as the market is maintaining a very attractive dynamic, with very positive mix effects owed to the complexity of new windscreens (e.g. ADAS ).Anticipating this growth and cash generation, Belron raised €800m through a bond offering (maturity of six years) at the beginning of 2023, which was immediately paid out as a super dividend to shareholders. Half of this goes to the D’Ieteren Holding, which has a rich man issue of whether to pay it out to its own shareholders or go for external growth. D’Ieteren has always said that five to six key businesses would be the max so a dividend seems more likely.
However Belron's leverage has now increased to a high level. In fact, again assuming all subsidiaries of the holding are owned at 100%, the net debt to EBITDA multiple increased from 2.3x in 2020 to 3.5x in 2022, the highest level ever. We are not worried however…
…as Q1 proves
With a combined revenue increase of +45.1% to €3.8bn or +20.3% organic (PHE has only been consolidated since November 2022). Belron’s growth stands at +12%. The holding however did not change its outlook for a 2023 adjusted profit before tax Group share of €900m, substantially above the €733m of 2022 and the €486m of 2021.
For valuations or questions, do not hesitate to contact us.
D’Ieteren Group Stock Price Momentum
A key feature of D’Ieteren is its ownership of 50.01% of its main asset Belron, which it controls but equity accounts. AlphaValue’s modelling relies on a 100% integration of Belron in D’Ieteren's consolidated accounts (with 50% of Belron's earnings going to minorities).
D’Ieteren assets
Belron/Carglass in effect
D’Ieteren bought Belron - by far the world’s largest player in vehicle glass repair and replacement with 18.2 million customers in 39 countries on six continents - in 1999 and managed to grow it into the massive cash generator it is today, thanks to strong brands like Carglass, Safelite (market leader in the US), Autoglass (UK), O’Brien (Australia) and Lebeau to name five of the seven.
In 2017, the holding sold 40% of its stake to private equity player CD&R. In 2021, CD&R sold a part of its stake (13%) to two private equity players (Hellman & Friedman en Blackrock) and the Singapore State fund GIC at a staggering EBITDA multiple of x25 FY 2020, revealing a lot of hidden value. In fact, in the year of Covid-19, Belron accounted, with €838m, for 90% of D’Ieteren's EBITDA, assuming all subsidiaries were owned at 100%. Between 2020 and 2022, the EBITDA of Belron rose by another +45% or about 20% per year to €1.3bn.
Belron as a cash cow
Massive cash is entering D’Ieteren thanks to dividends from Belron. In 2021 the bulk of that this cash was used to acquire 40% of TVH Parts and, at the end of 2022, 100% of PHE, both being active in the market for auto spare parts. This added another €600m of EBITDA to the combined figures or 30% of the EBITDA of all of D’Ieteren’s subsidiaries (assuming full ownership).
The conclusion really is that the cash generation is in Belron, while PHE and TVH are nice additional subsidiaries but the once core-activity of D’Ieteren Auto can almost be completely ignored. Even with its 23.5% market share in the Belgium auto market as exclusive distributor for Volkswagen, the EBITDA of €167m matters somewhat less next to Belron’s.
Time for deleveraging and/or an IPO of Belron
Belron's rapid growth has been the main driver of the positive historic trend in the ROCE which now stands at above 15% and has been above its WACC for many years. Belron’s growth will not stop as the market is maintaining a very attractive dynamic, with very positive mix effects owed to the complexity of new windscreens (e.g. ADAS ).Anticipating this growth and cash generation, Belron raised €800m through a bond offering (maturity of six years) at the beginning of 2023, which was immediately paid out as a super dividend to shareholders. Half of this goes to the D’Ieteren Holding, which has a rich man issue of whether to pay it out to its own shareholders or go for external growth. D’Ieteren has always said that five to six key businesses would be the max so a dividend seems more likely.
However Belron's leverage has now increased to a high level. In fact, again assuming all subsidiaries of the holding are owned at 100%, the net debt to EBITDA multiple increased from 2.3x in 2020 to 3.5x in 2022, the highest level ever. We are not worried however…
…as Q1 proves
With a combined revenue increase of +45.1% to €3.8bn or +20.3% organic (PHE has only been consolidated since November 2022). Belron’s growth stands at +12%. The holding however did not change its outlook for a 2023 adjusted profit before tax Group share of €900m, substantially above the €733m of 2022 and the €486m of 2021.
For valuations or questions, do not hesitate to contact us.
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