Accell Group N.V. recorded net profit of €27.5 million in the first half of 2014, a rise of 13 percent compared with the €24.5 million reported in the year earlier period. The higher profit was largely due to the improved sales mix, realized costs-savings and a profit on the sale of the German bicycle brand Hercules, which Accell Group divested early this year.

 


Accell Group booked an organic increase in sales of 4 percent, taking total sales to €506.2 million, compared with €503.8 million in the first half of 2013. The operating profit rose by 7 percent to €38.2 million, from € 35.6 million in the year-earlier period.

 

The Amsterdam-based company said total sales were essentially flat due to the sale of its Hercules brand in Germany, unfavorable exchange rates and the decision to no longer serve the mass market in North America. Accell sells Raleigh, Diamondback, Lapierre and Redline bikes in the United States and Canada and owns Currie Technologies, a California-based provider of e-bikes.

 

Accell ended the quarter with inventories of €227.4 million, down 16.4 percent, due largely to better logistics planning, which reduced the the number of bicycles in stock significantly. Corrected for the effect of factoring in 2013 (€26 million), trade receivables declined 5.9 percent to  €183.1 million. An improvement in accounts outstanding as a result of targeted action in receivables management and the deconsolidation of Hercules were the main contributors to this reduction. Trade payables increased due to the utilization of longer payment terms and an increase of goods in transit.

 

Total net bank debt stood at €134.4 million as of June 30, 2014, compared with €200.6 million a year earlier. The solvency ratio increased 400 basis points to 44 percent compared with June 30, 2013.

 

Bicycle segment
In the bicycles/bicycle parts & accessories segment, sales rose slightly in the first half of 2014 to €497.4 million, from €494.6 million in the first half of 2013. The number of bicycles sold came in at 1,018,000, compared with 1,115,000 bicycles sold in the first half of 2013. Organic unit sales fell 6 percent. The average sales price rose by 10 percent and came in at €380, up from €345 in the year-earlier period, thanks to the greater share of electric bikes and higher-end sports bikes in total sales. On an organic basis, the average price of the bikes sold came in 12 percent higher. The segment profit rose to €45.4 million, from €43.2 million in the first half of 2013.

 

Sales of electric bikes were 14 percent higher, largely due to strong growth in the Netherlands and Germany. Sales from electric bikes also benefitted from the launch of electric bikes in the United States, the United Kingdom, Italy and France. The growth in the sales of electric bikes partly offset the sales of traditional and sports bikes, which fell. Sales of traditional bikes fell 1 percent, while organically sales in this segment came in 4 percent higher. Sales of sports bikes were down 14 percent, partly due to the sale of Hercules and the decision to no longer serve the mass market in North America.

 

According to provisional market figures, the Dutch bicycle market increased by 3 percent in the first months of 2014, compared with the same period in 2013. Boosted by the healthy sales of electrical bikes, Accell Group’s sales in the Netherlands came in 11 percent higher. Sales of traditional bikes remained virtually unchanged and were in line with market developments. Sales from BP&A were also higher.

 

Sales in Germany came in 3 percent higher organically than in the first half of 2013, due to the healthy sales of particularly high-performance electric bikes of Haibike. Accell Group has started a new trend in the market with these high-performance electric bikes and as a result is market leader in Europe. Sales from BP&A increased by 6 percent in the first half of 2014. The 7 percent drop in sales was due to the sale of the Hercules brand.

 

In North America, sales fell by 14 percent. The main reason for this was the termination of deliveries to the mass market in Canada and the USA. Sales of the Diamondback brand bicycles increased due to deliveries to the multi-sports sales channel. Sales in the Raleigh brand to specialist stores fell partly due to the long severe winter on the east coast of the United States. Sales in parts and accessories dropped as a result of the decline in the market in the first half and the termination of a part of the distribution of Shimano products.

 

In the other European countries, sales was up 9 percent. The key countries are France, Belgium and the United Kingdom. The sales increase in these countries comes from both bicycle and BP&A. Sales also increased in Scandinavia and Italy mainly as a result of an increase in sales from electric bicycles. In France, the United Kingdom and Italy, Accell Group introduced electric bikes in the current season. Accell Group plans to increase the number of models next season.

 

Sales in countries outside Europe accounted for 4 percent of total sales. Around half of this is realized in Turkey, where sales declined due to political unrest, while in euro terms sales declined due to the lower value of the Turkish lira. The remaining sales outside Europe comes largely from Asian countries and Australia.

 

Fitness segment
Sales in this segment, at €8.7 million, were largely unchanged from the first half of 2013. The segment result came in at -/- €0.4 million, compared with -/- €0.8 million in the first half of 2013. Accell Group announced earlier this week that it had reached agreement with investors on the sale of Tunturi Fitness B.V. Accell Group expects the transaction to have a limited effect on the group results for 2014.

 

Sales in the first half of 2014 came in at €506.2 million, up slightly from the €503.8 million reported in the first half of 2013. The effect of exchange rates on the sales of foreign subsidiaries, in North America and Turkey in particular, was €7.3 million negative, compared with -/- €2.6 million in the first half of 2013.

 

The absolute added value dropped by 3 percent to €155 million, from €159 million in the first half of 2013. The added value (net sales less cost of raw materials and inbound transport costs) as a percentage of sales came in at 30.6 percent, compared with 31.6 percent in the first half of 2013. Higher discounts on the higher sales of last seasons’ bicycles, reduced benefits from currency hedging, as well as an improvement in the sales mix all had an impact on the added value in the first half of the year.

 

Operating expenses fell € 7.0 million to €116.5 million, and as a percentage of sales came in at 23.0 percent, down from 24.5 percent in the first half of 2013. The decline in costs was partly due to lower personnel costs following the reorganizations in the Netherlands and North America. The operating result came in at €38.2 million in the first half of 2014, from €35.6 million in the year-earlier period, which translates into an operating margin (EBIT) of 7.5 percent, compared to 7.1 percent in the first half of 2013

 

Outlook

Barring unforeseen circumstances, Accell Group expects an increase of organic sales and results for the second half of the year 2014 thanks to the introduction of its 2015 model bikes and its strong position in electric bicycles.

 

Accell Group sells mid- and higher-priced bicycles, bicycle parts and accessories in more than 70 countries and operates production facilities in the Netherlands, Germany, France, Hungary, Turkey and China. It has leading positions in the Netherlands, Belgium, Germany, Italy, France, Finland, Turkey, the United Kingdom and the United States.