German bike maker Derby Cycle said its sales outside Europe rose 171.9 percent to €3.9 million ($5.3mm) in the first half of 2010/2011 primarily due to sales by its U.S. subsidiary. As a result, the proportion of sales achieved in the rest-of-world segment rose to 3.4% from 1.8% in the previous year.


The German bicycle maker said overall revenues reached €114.4 million ($156.0mm) in the first half ended March 31, up 40.3 percent from €81.5 million in the previous year. In the second quarter alone, the company’s revenues increased 45.7 percent to €76.6 million over the year earlier quarter.


Operating profit (EBIT) in the first half of the financial year reached €10.5 million ($14.3mm), up 65.4 percent from €6.3 million in the comparable year ago period. Consequently, the EBIT margin improved from 7.8% in the first half of financial year 2009/10 to 9.1% in the first six months of financial year 2010/11.
 
Consolidated net income for the period rose by 42.4% from €4.2 million ($5.7mm) in the first half of financial year 2009/10 to €6.0 million in the first half of 2010/11.


Sales
The company sold a total of 243,890 bicycles in the first quarter of 2010/11 (+17.0% year-on-year). Some 32,762 electric bikes were sold in Germany during the period from October 2010 to March 2011 (+133.2% year-on-year). A total of 6,132 units (+140.0%) were sold outside Germany.


In the first quarter of 2010/11 the company achieved a sales volume of €77.7 million (previous year: €57.9 million) on the German market. This equates to an increase of 34.2% and represents 68.0% of total revenue in the reporting period.


Sales in the remaining European countries amounted to €32.7 million ($44.6MM), up 47.6 percent from the first six months of 2010/11. Consequently, the share of sales in the rest of Europe in terms of total sales rose from 27.2% in the first half of 2009/10 to 28.6% in the first half of 2010/11. Important markets worthy of mention in Europe in particular include Austria, France, Great Britain and Spain.


Sales in the international markets outside Europe reached a level of €3.9 million in the first half of 2010/2011 (previous year: €1.4 million), the bulk of which were accounted for by our US subsidiary. This represents an increase of 171.9%. As a result, the proportion of sales achieved in the rest-of-world segment rose to 3.4% from 1.8% in the previous year.


Expenses
The cost of materials increased by 35.3% from €63.1 million to €85.4 million ($116.4mm). As a result, the material cost ratio rose from 68.1% in the first half of 2009/10 to 69.1% in the first half of financial year 2010/11. This is due to changes in the product mix in favour of high-quality bicycles, such as electric bikes and top-of-the-line sports bicycles, which pushed up the material cost ratio particularly in the first quarter of the financial year. With regard to the second quarter of the financial year, the material cost ratio, at 67.9%, was even slightly below the previous year’s figure of 68.2%.


The rise in personnel costs was less pronounced than the increase in aggregated operating performance, increasing by just 19.5% from € 12.4 million to € 14.8 million. As a result, the personnel cost ratio fell from 13.4% in the first half of financial year 2009/10 to 12.0% in the first half of financial year 2010/11. This was due to efficiency gains, the changed product mix to include more higher-quality products such as electric bikes, and economies of scale.


Depreciation remained virtually unchanged at €500,000. This underscores the low capital intensity of our business compared to other economic sectors.


Although Derby Cycle AG was not yet listed on the stock market during the first quarter and part of the second quarter of financial year 2010/11, in the interest of comparability and continuity of the reported data, the company shall be reporting our earnings per share throughout financial year 2010/11. As of March 31, 2011, earnings per share amounted to €0.80, up from €0.56 per share, based on the share capital of 7.5 million shares existing after the company’s stock market flotation.


Cash flow
Cash flow from operating activities in the first six months of financial year 2010/11 amounted to €-54.5 million (-$74.3mm) (previous year: €-39.2 million). This development was essentially attributable to an increase in inventories due to the scheduled earlier start of production for financial year 2010/11.


Cash flow from investing activities, at €-1.0 million, changed only marginally in the first half of financial year 2010/11 (previous year: €-0.5 million). This cash outflow was essentially attributable to investments in operating and office equipment.


Cash inflows from financing activities amounted to €20.2 million in financial year 2010/11 (previous year: €2.4 million). These were mainly due to the stock market flotation on February 4, 2011, which resulted in a cash inflow of €18.8 million for the company.


The cash balance changed from €-33.9 million in the first half of financial year 2009/10 to €-38.5 million in the first half of financial year 2010/11, a change of 13.8%.