The largest part of the revenue growth came from the acquisitions of Raleigh Cycle in the second quarter of the year and of Currie Technologies in the United States and Van Nicholas in the Netherlands both in the beginning of 2012. Lower revenue in the Netherlands and France was offset by higher revenue in Germany and Asia. Reduced consumer spending due to the uncertain economic conditions combined with very poor spring weather conditions with a lot of rain meant bicycle sales were substantially lower – especially in May and June – than expected in many European countries.
Segment Bicycles/Parts & accessories
Bicycles/bicycle parts and accessories sales were up by 20 percent in the first half of 2012 at €436 million ($566 mm), from €363 million ($509 mm) in the first half of 2011.
Sales of electrical bicycles increased by 15 percent (organic: 15 percent). Sales in Germany in particular showed substantial growth. Sales of sports bikes increased 25 percent, with 5 percent of this growth organic. Sales of traditional bikes were up 3 percent, while organically sales were down 16 percent.
Strong e-bike sales in Germany partially offset dour outlook in the Netherlands
Provisional market figures show that overall revenue from bicycle sales in the Netherlands was down by more than 20 percent in the first half of 2012. Sales of Accell Group brands in the Netherlands was down approximately 13 percent. Consumer confidence in the Netherlands has reached an historic low. The resultant limited consumer spending, combined with extreme amounts of rain in the second quarter, were the main reasons for the drop in bicycle sales in the Netherlands. Revenue from bicycle parts and accessories was up by approximately 6 percent.
The German bicycle market saw estimated growth of around 5 percent. In Germany, sales in Accell Group bicycle brands were up 11 percent. Sales of electrical bicycles in Germany were up by approximately 50 percent, due to the strong consumer interest in these products. The sales of the innovative sports bikes of Ghost, Haibike and Winora also increased. Revenue from bicycle parts and accessories in Germany remained stable.
Accell Group’s revenue from bicycles in France was down 11 percent in line with the market, as a result of lower consumer spending and delayed deliveries by suppliers. Revenues from bicycle parts and accessories in France was up more than 15 percent.
Sales
were up in other countries, both in Europe and beyond, as a result of
the acquisition of Raleigh Cycle. The acquisition of Raleigh has given
Accell Group a key market position in the United Kingdom and another
strong boost to its position in the United States, after the earlier
acquisitions of SBS and Currie Technologies. (Currie IZIP Express Hybrid
e-bike shown at left.) Sales increased in Austria and Switzerland,
while in Italy revenue was stable. In Scandinavia revenue was up due to
the acquisition of Vartex. In Turkey revenue was up as well. Fitness is flat
Sales in this segment came in at €10.1 million ($13 mm) in the first half of 2012, unchanged from the €10.1 million ($14 mm) reported in the first half of 2011, and accounting for 2.3 percent of group revenue. The segment result improved to €-/- 0.9 million, compared with €-/- 1.8 million in the first half of 2011. This was largely due to a higher margin and cost-saving measures. In January of this year, Tunturi presented its new fitness line, which will be delivered from September.
Key financial developments in the first half of 2012
Total revenue was up 19 percent at €445.6 million in the first half of 2012, with 2 percent of this realized organically.
The absolute added value, which equates roughly to gross profit, rose by 7 percent to €140 million, from €130 million in the first half of 2011. Excluding the effect of acquisitions, added value was down by approximately 6 percent. Added value (net revenue minus cost of materials and inbound transport costs) as a percentage of revenue came in at 31.4 percent, down 350 basis points from the first half of 2011. In addition to the impact of around 1 percent from acquisitions, this drop was due in part to the lack of revenue growth in the second quarter and in part to the impact of exchange rate differences and higher discounts.
While currency hedging led to benefits in the first half of 2011, it had negative effects in the first half of 2012; on a six-month comparative basis, this led to a difference of approximately € 5 million.
In addition, Accell Group granted more discounts in the first months of this year than in the comparable period of 2011. The fact that the expected revenue growth in the second quarter did not materialize means that the discounts granted could not be compensated. Excluding these effects, the percentage of added value remained reasonably stable on an organic basis.
Operating margins plunge by 31 percent
Operating costs as a percentage of revenue were down at 24.7
percent, compared with 25.1 percent in the first half of 2011. This drop
was largely due to the acquisition of Raleigh. On an organic basis,
operating costs remained stable as a percentage of revenue. The
operating result came in at €29.8 million ($39 mm), compared with €36.5
million ($51 mm) in the first half of 2011. This translates into an
operating margin (EBIT) of 6.7 percent, compared with 9.8 percent in the
first half of 2011.
Interest expenses were up 33 percent due to the Raleigh Cycle
acquisition and the ensuing increased use of credit facilities. Taxes
fell to €3 million compared with the same period of last year. Acquisition costs, which were largely related to the acquisition of Raleigh Cycle, came in at €2.8 million in the first half of 2012. In line with IFRS-3 these non-tax deductible costs can no longer be capitalised upon acquisition, as was common practice in the past. Net profit after deduction of these one-off expenses came in at €20.5 million in the first half of 2012.
Inventories to sales margin down despite Raleigh acquisition
The balance sheet total was higher as of June 30, 2012, largely due
to acquisitions. The working capital (inventories and accounts
receivable minus accounts payable) stood at €295 million, up from €257
million a year earlier. Inventories were higher as per June 30, 2012, as
a result of the addition of acquisitions. The impact of acquisitions on
this item was approximately €40 million. On an organic basis,
inventories were down slightly.
Receivables,
which stood at €156 million, also increased, by approximately €44
million due to acquisitions, while receivables fell slightly on an
organic basis, due to the lagging revenue in the last months. Trade
accounts payable increased by €40 million as a result of the Raleigh
acquisition. This item increased by around €3 million on an organic
basis. Total bank debt stood at €176 million as per June 30, 2012, up
from € 144 million a year earlier, with around € 55 million of this due
to acquisitions. Accell Group issued a total of two million new shares to finance acquisitions. The share issue yielded €30.8 million after deduction of the issuance costs. The company also arranged a new loan of €32.0 million with a remaining maturity of around 1.5 years. The solvency ratio at end June 2012 was 43 percent, compared with 44 percent at the end of June 2011.
There are no material changes to report in terms of the risks and uncertainties described in the 2011 annual report.
Flat earnings outlook for full yearMacro-economic conditions and the weather remain difficult to predict for the second half of 2012. Based on the current market outlook, Accell Group expects an increase in net operating result in the second half of the year when compared to the second half of 2011. Whether this will be sufficient to offset the lagging results in the first half will depend among others on economic developments and the weather this autumn. Based on the current state of affairs, the company anticipates that net operating result for the full year 2012 will not exceed that of 2011. In the longer term, Accell Group expects a continuation of growth in revenue and net operating result.
Accell Group’s best known brands are Atala, Batavus, Diamondback,
Ghost, Haibike, Hercules, Koga, Lapierre, Loekie, Raleigh, Redline,
Sparta, Tunturi, Winora and XLC. The company operates close to the
market and taking into account the high added value and numerous
innovations offered, sales primarily takes place via the specialist
retail trade. The company has production facilities in the Netherlands,
Germany, France, Hungary, Turkey and Canada.
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