Accell Group N.V., the cycling giant based in the Netherlands, recorded a year-on-year sales growth of 53.1 percent in June, bringing first-half net sales to €676.9 million, up 4.0 percent versus last year, despite the impact of the lockdowns in March and April due to COVID-19.
Sales were down 26.7 percent on a combined basis in March and April.
First-half EBIT came in at €45.1 million (excluding one-offs: €47.5 million), trailing H1 2019 levels by 19.0 percent (excluding one-offs: 14.7 percent) with added value margin down 359 bps at 27.6 percent, mainly due to mix effects and higher costs caused by COVID-19 related disruptions in the global supply chain.
Working capital improved by 243 bps to 29.7 percent of net sales vs June-end 2019, primarily due to reduced inventories. Operating cash flow came in at €129.1 million as a result of the above and as part of our precautionary cash management measures taken in response to the virus outbreak.
Ton Anbeek, CEO Accell Group, said in a statement, “The strong demand for bikes and P&A across Europe continues. With all countries and shops fully reopened in May and June, we have been able to offset the decline of March and April leading to increased net sales in H1. In response to the virus outbreak, our focus has been to manage for cash, reduce working capital and mitigate disruptions in the supply chain. While this led to some pressure on margins, we are pleased that the overall result of focusing on cost and cash in combination with a rebound in sales has led to strong positive cash flow.
“While dealing with the impact of the pandemic on our business, we have also continued our strategic journey with various improvements made in innovation planning and omnichannel. We have seen excellent progress capturing the online opportunity in bike parts & accessories, but also in bikes such as Raleigh in the UK. We managed to continue our strong growth in cargo bikes amongst others with the successful launch of the next generation Carqon e-cargo bike. Our ‘fit to compete’ program showed good progress as well with further complexity reductions, albeit we foresee the associated bottom-line savings not to come through this year due to the current disruptions in the global supply chain.
“The pandemic has boosted interest from consumers and governments in cycling across Europe as an alternative means of healthy, safe and green mobility. We expect this to positively benefit our business in the mid- to long-term. In the short term, it remains uncertain which direction the pandemic will take. While our first priority remains the health of our people, we are working actively to enhance product availability in H2 and secure a strong supply base in early 2021 for a good start of the next bicycle season. We will do so while maintaining our focus on strict cost and cash control.”
Among categories, bicycles ended at negative 1.6 percent were in France and Germany the impact of lockdowns was not fully recovered in May and June. Parts & Accessories showed excellent growth in H1 of 27.3 percent.
Among regions, growth in the Benelux (excluding Velosophy) was 5.0 percent driven by strong post lockdown Batavus sales on the back of an attractive brand portfolio and fueled by a new campaign. Sales in Germany rebounded strongly in May and June, but still lagged YTD 2019 sales levels due to the severe impact of the German lockdown regime on our sales in March and April. In other markets, the Nordics and the UK recorded very strong growth fueled by a steep post lockdown consumer demand rebound, while France also showed strong post lockdown sales. Our cargo bike business Velosophy continued to perform well. Growth came in at 22.3 percent despite lockdowns hampering sales in various regions. Our Parts & Accessories business had an excellent H1 with sales up 27.3 percent driven by the expansion of online sales partners and surging demand for bike parts from repair shops.
The 359 basis-point declines in value margin reflected:
- a change in product mix due among others to delayed introductions of new bicycle models caused by COVID-19 induced supply chain disruptions;
- a change in customer mix in bikes and P&A due to higher sales from online partners;
- higher discounts due to arrangements made with major customers during the lockdown as part of its focus on cash management and working capital reduction; and
- cost price increases among others due to lower production volumes and adverse forex.
Opex decreased from €147.3 to €141.8 million, down €5.5 million. Excluding one-offs, Opex decreased by €7.9 million. As a percentage of net sales, Opex decreased with 170 bps (from 22.6 percent to 20.9 percent), and decreased with 204 bps corrected for one-offs.
In 2020, the North American business does not include operational activities only costs associated with the dissolution of the legal companies. The total cost of €0.2 million has been absorbed in continuing operations.
EBIT came in at €45.1 million (excluding one-offs: €47.5 million), trailing H1 2019 levels by 19.0 percent (excluding one-offs: 14.7 percent), reflecting an EBIT margin of 6.7 percent (7.0 percent excluding one-offs).
Management Agenda And Outlook
Anbeek said, “Looking further ahead, the future of our markets, brands and business is very bright. We expect the pandemic to help encourage more people to discover and adopt cycling as a form of mobility long after the threat of the virus has receded. More than ever we are committed to accelerate our work on innovation performance, to improve our sales and operational planning and ultimately deliver on our promise of creating the best cycling experience for everyone who uses our bikes.
“We cannot predict what the course of the pandemic will be, but we have taken precautions which enable us to respond rapidly and decisively to either up or down scenario. In the short term, disruptions in the global supply chain caused by COVID-19 will continue. While we are taking appropriate action to mitigate the effects of the supply chain distortions and to secure additional supply, we do expect these to continue to hamper product availability and margins in H2. Given the seasonality in our business, with H1 typically a much stronger contributor to our full-year results than H2 and taking into account the disruptions in the supply chain, we expect EBIT for the full-year 2020 to be lower than 2019.
“Driven by electrification, infrastructure investments and government incentives, demand for bicycles continues to gain momentum. These long term and sustainable trends have only been further propelled due to the pandemic which has led to a broad-based reflection on the way we live, work and move and on the profound benefits bicycles can offer in this respect.”
The company’s bike brands include Haibike, Winora, Ghost, Batavus, Koga, Lapierre, Raleigh, Sparta, Babboe, and Carqon. XLC is its brand for bicycle parts and accessories. Accell Group employs approximately 3,400 people across 18 countries.
Photo courtesy Accell Group