Accell Group full year net profit up 37% in 2014
René Takens, Chairman of the Accell Group Board of Directors: "Accell Group had a good year in 2014, with favourable weather conditions and a slight improvement in the overall economic climate. The Dutch and German brands performed particularly well. While most markets remained stable or improved slightly, we were able to improve our turnover in virtually all the countries in which we are active, partly thanks to the popularity of our electric and sports bikes and the expansion of our parts & accessories business. North America was the only region in which turnover and profit lagged expectations. The group booked organic turnover growth of 8%, and this was the main driver of the improvement in operating result and net profit by 20% and 37% respectively.
In the past year, we have focused on consolidation, integration and improved use of scale and efficiency benefits. The reorganisations in North America and the Netherlands are progressing as planned and will be completed in 2015. In addition, last year we also increased the emphasis on further development of our parts & accessories business. Our initial goal on this front is to create a comprehensive European network within the foreseeable future. The acquisition of Comet in Spain and the acquisition of Cycle Service Nordic (CSN) in Denmark, which we completed in early 2015, are very much in line with this strategy.
Many long-term trends indicate that bicycles will remain highly popular in the years ahead, for mobility, recreational and sports purposes. We expect to remain a leader in this market thanks to our high-quality products and additional innovations to make cycling even more attractive for a range of purposes. On the basis of the underlying positive trends combined with the slightly improved macro- economic indicators driving consumer spending, and barring unforeseen circumstances, we expect a continued increase in turnover and result in 2015.”
Following the sale of the fitness activities in mid-2014 and in accordance with IFRS, Accell Group has adjusted its primary segmentation. As from the 2014 annual results, Accell Group will report annual and interim results for the segment bicycles and the segment parts & accessories. The 2014 results also include the fitness segment. The new segmentation is entirely in line with Accell Group’s strategic priorities and provides insight into the company’s underlying performance.
Turnover in the bicycles segment was up 5% at € 658.1 million in 2014 (2013: € 626.0 million). Organic turnover growth in the segment amounted to 10%. The largest increase was seen in the Netherlands (+12%). The average price per bicycle increased to € 377 (2013: € 336) due to the fact that electric bike sales accounted for a greater proportion of overall turnover. Sales of electric bikes came in 23% higher and these now account for 41% (2013: 35%) of Accell Group’s overall turnover in the bicycle segment. Turnover in sports bikes declined by 6%, due to the termination of deliveries to the mass market in the United States. Turnover in traditional bikes remained stable. The number of bicycles sold amounted to 1,725,000 (2013: 1,835,000). The segment result was up 16% at € 46.0 million (2013: € 39.8 million).
Accell Group recorded a 12% rise in turnover bicycle sales in the Netherlands in 2014, on the back of a 6% increase in sales volume. Market sales volume increased by around 7% in the same period. The increase in turnover from the Accell Group brands was largely due to the increase in electric bike sales up 14% as a result of which the Accell Group’s brands (Batavus, Sparta and Koga) increased their market share. Turnover was also boosted by the sale of so-called company bicycles in the fourth quarter. As from 1 January 2015, the government changed the tax benefits on bicycles purchased for commuter traffic as a result of which company bicycles fall under the general expense allowance scheme as of this year. Many people decided to buy a bicycle under the old scheme before the end of the year.
In Germany, Accell Group sold Hercules in early 2014, which led to lower turnover in the year under review. Organically, bicycle turnover was up 12%, on the back of a 5% increase in sales volumes, largely driven by the increase in sales of electric bikes, which are highly popular in the German market. The overall German market grew by around 4% in terms of numbers of bicycles sold. This means Accell Group outperformed the market in Germany. The number of electric bikes sold in the overall German market is estimated to have increased to around 450,000 a year in 2014 (2013: around 410,000).
Accell Group’s turnover from bicycles in North America increased in the multi-sports channel, which is an important segment for the company. Sales via traditional bicycle retailers (IBD) lagged expectations and declined. Total bicycle turnover was up 4%. Turnover from electric bikes only saw a modest increase, because the market for electric bikes in North America remains fairly small. A positive impulse came from Haibike E-mountain bike, winning the E-Bike of the Year Award at the Interbike international bicycle trade fair, held in September 2014 in the United States. In the United States the full integration of the Accell brands will be completed in 2015. In Canada, Accell Group completed the closure of the production facility, but the sell-off of the existing old inventory in the warehouse proved more expensive than expected. As from 2014, the operations in Canada are focused on sales of Raleigh and Lapierre bicycles to bicycle retailers (IBD).
In the Rest of Europe, Accell Group’s main markets are France, Great Britain, Belgium, Scandinavia and Switzerland. Turnover in this region was up 11% last year. In France, bicycle turnover was up at
both Lapierre and through exports by the German and Dutch companies. In Belgium, Accell Group is primarily active via its Dutch bicycle brands. Turnover in Belgium declined due to a drop in bicycle turnover at Brasseur, which is increasingly focused on the sale of parts & accessories. In the United Kingdom, bicycle turnover was up 10% largely due to Raleigh. Accell Group also booked higher turnover in Switzerland, largely due to higher sales of electric bikes under the German and French bicycle brands, both via traditional dealers and in the multi sports channel. Accell Group’s German and French brands are also well positioned in Austria, especially in the sports bike segment, and turnover was also higher there. The group’s own organisations in Finland, Sweden and Denmark sell the Finnish brands Tunturi and Nishiki (Finland only), as well as the Dutch, German and French brands right across Scandinavia. Bicycle turnover was up in all Scandinavian countries. In southern Europe, sales to Spain were also higher, which mainly concerned sales of Lapierre, Ghost and Haibike sports bikes. In Italy, Accell Group is active via Atala (not consolidated), as well as with the French and German brands.
In Other Countries, Turkey and the Far East are the group’s key markets. In Turkey, Accell Bisiklet is the main seller in the market. Turnover is still relatively limited in the other Asian countries and in 2014 was roughly the same as in 2013 in these countries. The licensing income from the Raleigh and Diamondback brands increased slightly worldwide, in line with expectations.
Parts & accessories
Turnover in the parts & accessories segment rose by 5% to € 211.5 million in 2014 (2013: € 201.5 million), with turnover in Accell Group’s own brands (largely XLC) recording an increase of 17%. XLC is growing rapidly and is sold worldwide via the existing dealer network of bicycle and sports shops in more than 45 countries. In particular, Accell Group has strong markets positions in parts & accessories in the Netherlands, Belgium, Germany, France, Spain, Italy, the United Kingdom and Scandinavia. Accell Group booked higher turnover in virtually all the European countries in which it operates. The company is now a step closer to achieving its ambition of a comprehensive European network, following the recent acquisition of Comet and the acquisition of CSN, completed in early 2015. The segment result came in 11% higher at € 11.3 million (2013: € 10.2 million).
Turnover in the Netherlands and Germany was up 28% and 1% respectively, and these increases were entirely organic. In the Netherlands, Accell Group invested in a new automated distribution centre for parts & accessories in the course of 2014. The organisation is moving from Veenendaal to Apeldoorn, where space has fallen vacant following the relocation of the Sparta production activities to Heerenveen and the integration of the Sparta and Batavus production activities. In North America, turnover in parts & accessories dropped by 40%. The market declined slightly and a larger number of parts suppliers are now distributing their products directly to dealers. The integration of SBS and Raleigh in the country organisation Accell North America has also led to delivery problems and has not yet resulted in the envisioned improvements. In the Rest of Europe and Other countries, turnover was up 11% and 94% respectively. Comet has been consolidated in the Rest of Europe as of 1 November 2014. CSN in Denmark will be consolidated as of 1 January 2015.
Accell Group sold its fitness activities as of 1 August 2014. Turnover to the moment of sale was at a comparable level to the previous year’s figures. On balance, the sale of the activities resulted in a one-off charge of around € 1.0 million related to the buy-out from several operational commitments.
Group turnover and profit
In 2014, group turnover came in 4% higher at € 882.4 million. Turnover increased by 8% organically. Currency exchange effects had a negative impact of € 7.6 million in 2014, mainly due to currency translation effects of the Turkish Lira.
Added value (net turnover less material costs and inbound transport costs) as a percentage of turnover came in at 30.4% (2013: 30.6%). Absolute added value rose by more than 3% to € 268.3 million (2013: € 259.5 million). In 2014, the sales mix is more favourable due to the increase in sales of electric bikes and substantial lower discounts in the second half of the year compared to 2013. Guarantee costs are higher than previous year.
Operating costs relative to turnover fell by 1%-point. Staff costs fell to 12.2% of turnover (2013: 12.6%), partly due to the reorganisations in the Netherlands and North America. Other operating costs decreased to 12.2% of turnover (2013: 12.6%), mainly due to lower selling costs. Total operating costs came in at € 224.0 million in 2014, which amounted to 25.4% of turnover (2013: 26.2%).
The operating result (excluding exceptional income and expenses) rose to € 44.3 million in 2014 (2013: € 36.9 million). The result from minority interests came in at € 0.4 million in 2014 (2013: € 0.5 million).
The balance of financial income and expenses amounted to € 8.8 million negative in 2014 (2013: € 11.7 million negative). The lower financial expenses compared with 2013 were due to a lower credit take-up as a result of lower working capital. In addition, Accell Group did not make any use of factoring in 2014.
The tax rate rose to 26.0% in the year under review (2013: 16.4%). The favourable effects on the rate as a result of the legal restructuring of the German activities in 2009 have been fully utilized, which leads to an increase of the effective tax rate in Germany. The tax rate was negatively impacted by no longer recognised capitalised tax assets related to the integration of Currie Tech in Accell North America and not capitalised tax assets as a result of reorganisation losses in Canada.
On balance, exceptional income and expenses came in at € 0.7 million negative in 2014. In addition to the book profit on the disposal of Hercules (€ 2.3 million), Accell group incurred extra reorganisation expenses in the Netherlands and North America (€ 1.6 million), one-off costs for the sale of Tunturi Fitness (€ 1.0 million) and the acquisition costs related to Comet (€ 0.3 million).
Net profit for the 2014 financial year came in at € 26.1 million (2013: € 19.0 million).
Accell Group’s balance sheet total stood at € 622.6 million at year-end 2014 (2013: € 579.6 million). Total working capital amounted to € 269.2 million in 2014 (2013: € 284.1 million); working capital as a percentage of turnover came in at 30.5% (2013: 33.5%). The inventories component of working capital was lower in 2014, while finished products bicycles accounted for the largest drop in inventories. At year-end 2014, the number of bicycles in stock was significantly lower than at year-end 2013, due to the optimisation of the logistics planning. The average cost price of bicycles increased due to a larger share of electric bikes. The total value of inventories stood at € 244.5 million at year-end 2014 (2013: € 251.2 million).
Due to a higher turnover in the fourth quarter, accounts receivable stood at € 133.3 million at year-end 2014 (2013: € 104.7 million). At year-end 2013, € 10.7 million in accounts receivable had been submitted for factoring. Total trade accounts payable stood at € 108.5 million at year-end 2014 (2013: € 71.8 million). The higher balance of accounts payable was due to the use of longer payment terms for suppliers and higher inventories of goods in transit at year-end 2014.
Capital employed rose to € 452.1 million in 2014 (2013: € 446.6 million). The return on capital employed stood at 9.8% as per the end of the financial year (2013: 8.3%), based on the operating result corrected for incidental items.
Shareholders’ equity amounted to € 275.9 million at year-end 2014 (2013: € 240.0 million). In addition to the net profit realised, the shareholders’ equity was also impacted by the payment of a cash dividend of € 7.2 million (2013: € 10.8 million). On top of this, the shareholders’ equity includes the impact of the conversion of foreign operations (€ + 6.5 million) and the impact of changes in the value of financial instruments (€ + 11.4 million).
The solvency rate had risen to 44.3% at year-end 2014 (2013: 41.4%). Net debt (total of loans, bank credit and cash positions) had dropped to € 152.3 million at year-end 2014 (2013: € 183.6 million).
Net cash flow from operating activities came in at a positive € 38.2 million (2013: € 23.2 million negative). The operating cash flow before working capital and provisions came in 23% higher at € 52.8 million in 2014 (2013: € 42.9 million). The cash flow from working capital amounted to € 3.4 million positive (2013: € 53.7 million negative), due to higher accounts receivable and on the other hand higher accounts payable and lower inventories. The free cash flow stood at € 38.3 million positive (2013: € 30.9 million negative).
Earnings per share and dividend
Earnings per share on the basis of the weighted average number of outstanding shares (year-end 24,685,681 shares) came in 34% higher at € 1.06 in 2014 (2013: € 0.79). Due to the issuance of 454,596 shares for the payment of stock dividend for the 2013 financial year, the correction factor for the earnings per share from previous years is 0.9817.
For the 2014 financial year, Accell Group shareholders will be asked to approve the payment of a dividend of € 0.61 per share (2013: € 0.55), to be paid out in cash or shares. This implies that the pay-out ratio amounts to 58%. Based on the closing price at year-end 2014 (€ 13.60), the dividend return amounts to 4.5%.
Accell Group’s products are extremely popular with consumers, while more and more young people in particular see the bicycle as a lifestyle product. Cycling is fun, easy and healthy. Cycling is also relatively inexpensive. Numerous national and regional government authorities in Europe and elsewhere are now promoting the use of bicycles as an alternative mode of transport, for environmental, mobility and health reasons. Accell Group firmly believes that cycling will only become more popular in the years ahead.
This will have a positive impact on the demand for parts & accessories. Accell Group brands are in a position to present new collections of products every season, with numerous innovations on the design and technology fronts.
Accell Group’s continuous market research guarantees that the group develops the right products. And thanks to ongoing product development, which in turn leads to new (alternative) uses, plus the entry into new markets, sales of electric bikes will continue to grow in the future. Not only are Accell Group’s brands market leaders in the electric bike segment, they are also major players in the market for high-grade sports bikes. Accell Group will expand those market positions in the years ahead, as the current positioning in the middle and higher segments of the market gives the company a solid basis for growth. At the same time, the expansion of complementary activities in the field of parts & accessories will reinforce the Accell Group proposition. This will involve the continued development of a comprehensive European network and growth that will focus primarily on Accell Group’s own international brand XLC. These structural market trends and differentiating factors will together form a strong basis for Accell Group’s revenue model and profit potential in the years ahead.
Further increases in scale and the use of synergy and efficiency benefits in the fields of purchasing, production, development and marketing will also enhance the group’s profit potential. In 2015, Accell Group will also be actively looking for ways to increase its scale, both organically and via acquisitions that fit in the group’s profile and (brand) portfolio. These acquisitions will also have to be complementary and add value to the group in terms of returns and synergies in the short term. At the same time, Accell Group will also be looking to further optimise the cooperation between its country organisations and its brands in 2015.
On the basis of the favourable underlying trends, combined with the slightly better macro-economic indicators driving consumer spending, and barring unforeseen circumstances, Accell Group expects to record a further increase in both turnover and result in 2015.
About Accell Group
Accell Group N.V. (“Accell Group”) focuses internationally on the mid-range and higher segments of the market for bicycles and parts & accessories. The company has leading positions in the Netherlands, Belgium, Germany, Italy, France, Finland, Turkey, the United Kingdom and the United States. In Europe, Accell Group is market leader in the bicycle market in terms of revenue. Accell Group’s best known brands are Batavus (Netherlands), Sparta (Netherlands), Koga (Netherlands), Loekie (Netherlands), Ghost (Germany), Haibike (Germany), Winora (Germany), Raleigh and Diamondback (UK, US, Canada), Lapierre (France), Tunturi (Finland), Atala (Italy), Redline (US) and XLC (international).
Accell Group and its subsidiaries employ approximately 2,800 people worldwide in eighteen countries. The company has production facilities in the Netherlands, Germany, France, Hungary, Turkey and China. Products of Accell Group are sold in more than seventy countries. The headquarters of the company are located in Heerenveen (the Netherlands). The Accell Group shares are traded on the official market of Euronext Amsterdam and included in the Amsterdam Small Cap index (AScX). In 2014, Accell Group realized a profitable revenue of € 882 million.
For further information
Accell Group N.V.
René Takens, Chairman of the Board (CEO) tel: (+31) (0)513-638701
Hielke Sybesma, Member of Board (CFO) tel: (+31) (0)513-638702
Financial agenda 2015
Publication annual report 2014 12 March 2015
Publication trading update 23 April 2015
Annual General Meeting of Shareholders 23 April 2015
Ex-dividend 27 April 2015
Determination of stock dividend exchange rate 28 April 2015
Payment of dividend 20 May 2015
Publication of first-half results 2015 24 July 2015
Publication trading update 17 November 2015
Full Annexes and Financial tables Here
Condensed consolidated profit and loss statement as at 31-12-2014 and data per share
Condensed consolidated balance sheet as at 31-12-2014
Condensed consolidated cash flow statement as at 31-12-2014
Condensed consolidated statement of changes in equity as at 31-12-2014
Condensed consolidated statement of comprehensive income as at 31-12-2014
Source Accell Group N.V©