Head NV reported sales were up 2.5 percent in the first quarter ended June 30, thanks largely to the January acquisition of SSI, which offers diving certification courses and materials globally.
The Dutch company reported total sales reached €66.2 million ($90.8 mm) compared with €64.6 million in the second quarter a year earlier. Still, Head’s adjusted operating loss grew 19.7 percent to €4.88 million ($6.7 mm) from €4.08 million in the second quarter of 2013. Reported operating loss grew 27.9 percent to €4.8 million ($6.6 million), from €3.8 million, resulting in a net loss of €5.57 million ($7.6 mm), up from €3.57 million a year earlier.
Sales of Diving gear increased €1.2 million, or 8.1 percent, to €16.6 million ($22.8 mm) thanks to the addition of SSI Group. Excluding SSI, equipment sales declined due to adverse weather, the continued economic slump in Southern Europe and political turmoil in the Middle East.
Sales at Racquet sports reached €39.4 million ($54.1 mm), up €300,000, or 0.7 percent from the second quarter of 2013, but were down 1.1 percent to €80.5 million ($110 mm) for the six-months ended June 30. Head attributed the decline to the strong euro and lower sales of racquets. A decline in tennis ball sales seen in the first quarter reversed in the second quarter resulting in flat performance for the six months.
Sportswear sales increased €100,000, or 6.3 percent, to €1.5 million ($2.1 mm) as higher sales of apparel partly offset lower sales of bags in the United Kingdom.
Winter Sports revenues were up €100,000, or 1.7 percent, to €9.2 million ($12.6 mm) and are running 6.5 percent ahead on a year-to-date basis compared with a year ago. Head said pre-season orders had improved compared to a year ago, but it anticipates winter sports sales in its core markets of Central and Northern Europe will be lower due to unseasonably warm weather in those regions last winter.
Revenues from Licensing sales declined by €200,000, or 15.1 percent to €1.2 million ($1.6 mm).
For the six months ended June 30, Head’s sales were €136.9 million, up 2.0 percent, or 4.2 percent in currency-neutral terms. Gross margin grew 340 basis points to 44.3 percent of sales. The increase was driven by higher licensing revenues and lower cost of sales in the bindings, tennis ball and diving businesses. Adjusted operating loss for the six months narrowed to €8.1 million from €8.8 million as €5.1 million in costs at SSI Group, higher Winter Sport advertising and higher departmental selling expenses offset much of the €5.8 million increase in gross profit. Reported operating loss for the period narrowed to €7.71 million compared with €9.25 million in the six months ended June 30, 2013.
Net cash provided by operating activities increased by €800,000 in the first six months mirroring the reduction in the net loss for the period. The company ended the quarter with cash of €48.1 million, or $65 million at current exchange rates, up from €14.9 million a year earlier. Net debt increased by €33.4 million due largely to €23.8 million spent buying back Head shares during the second quarter and payments for the acquisitions in the period.
Head anticipates improved Winter Sports sales and acquisitions will result in modest growth this year, but said negative exchange rates and higher marketing and investment costs will result in flat operating results compared with 2013.
