Helly Hansen Group reported sales grew 22 percent in its year ended December 31 to NOK2,57 billion ($305 mm) and advanced 12 percent on currency-neutral basis.

New growth strategy

The new long-term growth strategy is based on the ethos that, “Helly Hansen makes professional grade gear to help people stay and feel alive”, tapping into Helly Hansen’s deep 139 year Norwegian heritage.

Identified initiatives to deliver sustainable growth, improve productivity and re-focus the business:
• Develop a strong brand with a focus on core categories, countries and channels
• Strengthen recognition as the brand that professionals use, trust and recommend to their peers and clients
• Secure position as the leader in providing technical performance products in the mountains and on the sea – led by Skiing and Sailing while also building a premium position in Mountain, Base-layer, Urban and Work-wear.
• Build a consumer-centric organisation investing in brand development and innovation funded by improved financial performance and a leaner supply chain.

Key Highlights:
• Appointment of new chief executive and wider management changes to build key capabilities
• Successful financial and operational reorganisation
• Operating revenue of NOK 2,567 million, an increase of +22 percent (2014: NOK 2,097 million)
• Organic growth in operating revenue1 of +12 percent (2014: +5 percent)
• Gross profit of NOK 1,084 million, +16 percent on prior year
• Record EBITDA2 of NOK 165.4 million, +63 percent on prior year (2014: NOK 101.8 million)
• EBITDA margin increase to 6.5 percent of sales (2014: 4.9 percent of sales)
• Gross margin of 42.2 percent, a -2.3 percent point decrease (2014: 44.5 percent) resulting from an inventory clearance initiative and strength of the USD
• Reduced net working capital to 31 percent of sales (2014: 52 percent of sales)
• Significantly improved operating cash flow of NOK +591 million to NOK +117 million (2014: NOK -474 million)
• Repaid public bond of NOK 388 million in full
• In 2016, projected growth in net sales and EBITDA supported by strong order book

Paul Stoneham, chief executive officer, comments, “Helly Hansen is committed to providing its customers with high quality, technical performance products that will allow them to enjoy the outdoors whether it be on the mountains, oceans, work-sites or street. Following a period of sales led expansion, we are now building a more consumer centric company with a new growth strategy that focuses the business on six categories, core geographies and the right channels to present our brand. This will enable us to deliver sustainable growth well ahead of the market, building Helly Hansen’s position as a leading global technical outdoor brand. Our 2015 results, and early 2016 performance, provide some early evidence that the new focus on the core will allow the team to deliver sustainable healthy growth.”

Helly Hansen has undergone a period of significant geographical growth and product expansion over the last decade. In February 2015, Paul Stoneham was appointed as chief executive, and laid down a short-term plan to re-focus the business, and brand while improving the financial structure and launching a new long-term sustainable growth strategy.

Following his appointment and working with the Board, an operational and financial review was undertaken, which resulted in the exit of non-profitable businesses, clearance of obsolete inventory, clean up of legacy financial issues, the revoking of brand licences, accelerated store closures and the introduction of a new senior management team. During this period Ontario Teachers’ Pension Plan, Helly Hansen’s largest shareholder, increased its equity position by acquiring the equity of the minority institutional shareholder, while also supporting Helly Hansen in the repurchase of its public bond in full.

With an improved financial and operational structure, Helly Hansen was able to successfully launch a new long-term strategy, re-focusing the company on core categories, countries and channels. In-line with this focus, investment was made in both a global category and in-house R&D teams to accelerate technical fabric and garment production development, innovation, and increase Helly Hansen’s ability to collaborate with external partners.

As a result of these changes Helly Hansen delivered a record year of growth in operating revenue3 to NOK 2,567 (+22 percent), and EBITDA of NOK 165.4 million (+63 percent). Organic growth in operating revenue improved to +12 percent, versus the prior year of +5 percent. Despite a difficult trading environment, particularly in Europe, Helly Hansen grew its position in its core channels, regions and categories on a full year basis, delivering gross profit of NOK 1,084 million, an increase of +16 percent from the prior year.

EBITDA, the company’s preferred method of measuring performance, increased to NOK 165.4 million, up +63 percent from 2014, growing EBITDA margin from 4.9 percent to 6.5 percent. The -2.3 percent point gross margin decline to 42.2 percent in 2015, from 44.5 percent in 2014, traces to a sportswear inventory clearance initiative and the strength of the USD, which is the main currency for product purchases.

The core-category focus and financial discipline allowed the company to reduce net working capital to 31 percent of sales in 2015, from 52 percent year ago. The business grew operating cash flow by NOK +591 million to NOK +117 million in 2015, compared to NOK -474 million in 2014. This focus also enabled the company to reduce SG&A by -3.9 percent points to 35.8 percent of sales from 39.7 percent in 2014, while maintaining marketing investment at all time high time levels to build brand health.

The Group recorded an impairment charge of NOK 18 million (2014: NOK 364 million), resulting in an operational income of NOK 16 million up NOK +356 million versus a 2014 operational loss of NOK -340 million. Restructuring and non-recurring charges of NOK 95 million in 2015, versus NOK 22 million in 2014, allowed the company to rapidly transition to the new growth strategy. The Group improved its net loss4 from NOK -614 million in 2014 to NOK -298 million in 2015, demonstrating the value created by the financial and operational changes.

Helly Hansen is expected to continue its positive momentum in 2016 with growth in net sales and EBITDA across sport and workwear, supported by a strong order book, which has increased on 2015. Due to the decision to focus on core categories, including the reduction of the product line by -25 percent over the next 18 months, a slowdown in organic revenue growth to mid-single digits is anticipated, but growth is estimated to be well ahead of the market by late 2017.

For more information about Helly Hansen, please visit: www.hellyhansen.com.

1 Excluding foreign exchange and mergers and acquisitions
2 Earnings Before Interest, Taxes, Depreciation, Impairment and Amortization excluding restructuring and non-recurring charges
3 Including foreign exchange of +10 percent points
4 Net financial expense comprised of net interest expense, amortisation of debt issuance cost, foreign exchange, settlement of suppliers and market-to-market valuation of derivative financial instruments

Based on Helly Hansen’s private equity ownership financial structure, the industry standard method of measuring performance is EBITDA (Earnings before interest, tax, depreciation and amortization), which is driven by operating revenue: