Dear Stockholders,
2016 was yet another year of Inter Cars's dynamic growth. We recorded a revenue of nearly PLN 6 b, marking our presence in as many as 15 countries across Europe.
In addition, last year saw a lot of changes in the Group's functioning, mainly related to the development of leading product groups (in the segments of passenger cars, trucks, tyres, batteries, body components),both at home and abroad, which are ultimately expected to secure the Group's prosperity in the years tocome. Garages remained the basic distribution channel for our products and this isexactly the strategy we are going to continue in the future.
Our strategic objective is to earn a sales revenue of at least PLN 20 b in 2020. We have been focusing our efforts on customer service. We believe that the key is not a margin level but rather an increase in the market share and a stable net growth in profitability. This objective is attainable even despite the fragmentation of the European spare parts distribution market. Inter Cars continues to move fast, remaining the Central and Eastern Europe's investment leader. We are number one distributor of automotive products on the independent aftermarket in Poland and in Central and Eastern Europe, ranking 5th in Europe and 10th worldwide.
In 2016, we opened 71 new branches, which means thatwe now have a total of 445 branches in Central and Eastern Europe (as at the end of 2016). Poland remains our largest sales market. In 2016, the Group's revenues increased by 24.5% yoy and its profits by 52% yoy, totalling PLN 230 m.
We owe this result to a number of factors, most important of which was the implementation of strategies dedicated to our sales segments and further international expansion.We also optimized our inventories and generated a record-high operating cash flow level. Consequently, our debt ratio to EBITDA dropped from 2.94 to a safe 2.45.
In 2016, we continued our dividend distribution policy, having regard for the Group's growing demand for working capital.
The main investment was the Logistics Centre in Zakroczym and implementation of a new warehouse management system. The new logistics centre launched its operations in January 2017 and is scheduled for official opening on 31 May 2017.
The investment serves as a stepping stone for Inter Cars's further expansion in Poland and across Europe. In addition, our special purpose company ILS, which manages a chain of warehouses, will be able to offer top-level logistic services. The Zakroczym Logistics Centre boasts 50 000 square meters of storage space. The investment cost app. PLN 170 m in total, over 50 per cent of which was spent on whatis to be the most modern warehouse logistics system in the automotive segment in Europe.
Presently, Inter Cars's logistics network is comprised of the new Logistics Centre in Zakroczym, supported by 8 regional distribution centres, three in Poland and one in Latvia, Ukraine, Romania, Hungary and Croatia, each.
In addition, we have been developing the idea of the so-calledmidi HUBS -smaller regional warehouses aimed at reducing the distribution chain for massproducts such as tyres, batteries or oils.
Catering to our customers' needs, we continued developing our ‘One Stop Shop’added value concept aimed at supporting anddeveloping garages.A good example of our activities in this area has been the dynamic development of the 'Rent a Car' project, which allows our business partners, that is garages, to offer substitute cars to their clients while repairing theirs.
Regrettably, we were unable to realize all our plans as originally intended. For example, the Motointegrator project is far behind our ambitious schedule in terms of implementing its new functionalities. Having regard for the growing importance of the Internet, in 2017 we plan to intensity our efforts in all aspects related to the digital era. We are currently modifying our strategy for the B2C market using our advantage on the B2B market.
We have set ambitious goals for 2017. For example, we plan to keep our two-digit sales growth and net profitability at the 2016 level. By the end of 2017 Inter Cars will have developed its distribution network in 17 European countries. We plan to open new branches in Greece and Bosnia and Herzegovina.
Robert Kierzek
President of the Management Board of Inter Cars SA