Business news : Accell Group Reports Disappointing North American Sales

Accell Group N.V. reported bike sales to specialty retailers in North America fell 15 percent in the first half of 2013 due to unfavorable weather and consumers’ continued reluctance to make major purchases. Sales rose 13 percent worldwide, however, thanks to the aquisition of Raleigh and continued strong sales of e-bikes in Germany and the Netherlands.

Total sales reached €503.8 million ($658.1 mm), up 13 percent compared with the €445.6 million recorded in the first half of 2012. Acquisitions accounted for 97 percent of the growth. Operating profit was 19 percent higher at €35.5 million ($46.4 mm), from € 29.8 million in the first half of 2012. Sales of electric bicycles were up 28 percent, mostly in Germany and the Netherlands, where the company is based.

Absolute added value (net sales less material costs and inbound transport costs) was up 14 percent at €159 million ($207.9 mm), from €140 million in the first half of 2012. Excluding the effect of acquisitions, added value was up around 4 percent. Added value as a percentage of sales - which approximates gross margin -  stood at 31.6 percent in the first half of 2013, compared with 31.4 percent in the first half of 2012. Accell attribted the decline to a shift in the margin mix, reduced discounts, currency exchange results and synergies due to the acquisition of Raleigh.

 

Operating costs reached 24.5 percent of sales, down 20 basis points. Organically, operating costs as a percentage of sales dropped to 24.3 percent. Operating profit came in at €35.5 million ($46.4 mm) in the first half of 2013, up from €29.8 million in the first half of 2012, which resulted in an operating margin (EBIT) of 7.0 percent, up from 6.7 percent in the first half of 2012. The operating result of the acquired Raleigh companies remained on the same level compared to the same period in 2012, despite decreased sales.

The financing costs showed a considerable increase due to the acquisition of Raleigh, increased use of credit facilities, costs of factoring and an increase in interest rates as a result of the new financing agreement.

Accell Group First Half Sales 

Geography	€ '000s	Change from Year Ago	Product Group	€ '000s	Change from Year Ago
Netherlands	126	+2%	Bicycles	385	+16%
Germany	125	+16%	Parts & Accessories	109	+5%
North America	76	+35%	Fitness	10	-6%
Rest of Europe	151	+22%
Other Countries	26	-9%
Total	504			504

Raleigh, e-bikes buoy results

Sales in the segment Bicycles/bicycle parts & accessories increased 14 percent in the first half of 2013 to € 494.6 million, compared with €435.5 million in the first half of 2012. The total number of bicycles sold rose to 1,115,000 in the first half, from 942,000 in the same period of 2012, on the back of the acquisition of Raleigh in April 2012. The number of bicycles sold was down 2 percent in organic terms.

 

“All the countries in which Accell Group sells its bicycles and bicycle parts had to deal with the consequences of an unfavorable (cold) spring and a further decline in consumer confidence,” said CEO Rene Takens. “This put bicycle sales below the levels we expected, but the overall level was still above that of 2012. This is a clear sign the bicycle sector is performing quite well compared with other consumer product segments. For the remainder of the year we expect a continuation of the trends and revenue growth. We expect to report a higher year-on-year operating profit compared to 2012.”

The average sales price fell to €345 ($451), compared with €352 in the first half of 2012, due to a greater contribution to sales from Raleigh. Organically the average price rose by 11 percent to more than €390 ($510) due to a change in the product mix and price increases.

 

The profit for the segment rose to €43.1 million ($56.4 mm), from €37.0 million in the first half of 2012.

 

Sales of electric bicycles came in 28 percent higher, mainly in Germany, the Netherlands, Switzerland and Denmark. The average sales price rose to €1,277 ($1,670), from €1,153 in the first half of 2012. Sales of sports bicycles increased by 12 percent and sales of traditional bikes were up 8 percent as a result of the addition of Raleigh. In organic terms, sales of sports bikes remained stable, while sales of traditional bicycles dropped by 4 percent.

Poor weather conditions  resulted in a 15 percent decline in sales of bikes to specialty retailes in North America compared with the first half of 2012. Still, the company said its bicycle brands outperformed the market in terms of deliveries.

Overall sales of the Accell Group bicycle brands and bicycle parts increased due to the acquisition of Raleigh. The decline in organic sales was slightly less than the overall market decline. Accell Group announced in the first half that its companies in the US will cooperate more closely and Accell Group will continue with the integration process in the second half of the year.

 
Heavier discounting predicted in back half

The company said ongoing macro-economic developments and the weather remain difficult to predict for the second half of 2013, but that it anticipates having to increase discounts over year ago levels to clear inventory. For the full year, Accell Group expects to record a year-on-year increase in operating profit. The net operating profit is expected to come in at approximately the same level as in 2012, barring unforeseen circumstances, whereby the financing costs and taxes will be higher compared to 2012. Accell Group expects continued growth in sales and profit in the longer term.


By press release