Head N.V., owner of the Head, Penn and Mares/Dacor brands, reported total net revenues reached  €218.4m ($287.6 mm) in the nine months ended Sept. 30, up €11.7 million ($15.4 mm), or 5.7%, from €206.7m ($282.5 mm)reported in the comparable 2009 period.


The increase was mainly due to improved volumes in the winter sports business, compounded by the strengthening of the US dollar against the Euro, offset in part by lower volumes in racquets.


Winter sports sales for the first nine months grew 13.4% due to increased volumes in all of our winter sports products except snowboards and protection wear and a favorable product mix of ski as well as the strengthening of the US dollar against the Euro.


Racquet sales for the first nine months grew 2.7% due to higher sales volumes of balls, a favorable product mix in racquets and the strengthening of the US dollar against the Euro partially offset by lower sales volumes in tennis racquets and an unfavorable product mix for balls.


Diving saw a slight improvement in sales of 2.6% due to sales of our newly introduced swimwear partially offset by lower revenues of diving equipment.

Licensing revenues decreased by 15.5% due to fewer licenses – the company took its previously licensed sportswear business in-house and will start delivering apparel in 2011.


The gross margin for the nine months was positively impacted by both the increase in sales for the period and improved manufacturing costs, but offset by higher raw material costs. The margin improved by 1.8 percentage points for the nine months period compared to the prior year and in absolute terms was up  €8.7m.


The operating profit for the nine months improved by €4.8m ($6.3 mm) compared to the prior year as a result of the improved gross margin ( €8.7m), the positive impact of the non-cash ESOP plan ( €4.1m) and no repeat of the restructuring in the prior year ( €2.1m), offset by higher Selling and Marketing ( €1.6m), higher General and Admin ( €0.2m) and lower Other Operating Income ( €8.4m) – which for 2009 was mainly from the gain on the sale of a trademarks.


The net loss for the nine months ended 30th September 2010 was  €900,000 ($1.2 mm) compared to a profit of €24.4m in 2009. The main driver of the decline was an inclusion of the gain on the exchange of the senior notes which amounted to  €28.9m ($33.4 mm) (net of tax) in the 2009 results. The 2010 net loss was positively impacted by the improved operating profit and a reduction in interest of  €1.9m due to the successful bond exchange in 2009.

Operating cashflow for the first nine months of 2010 was  €11.1m, a decrease of  €2.0m compared to the same period in 2009. In the third quarter 2009 there was significant cash inflow as a result of considerable efforts to manage working capital and whilst the company continues to focus on efficiently managing working capital, the same gains are not achievable in the current year due to the low starting position at the beginning of the year.

The continued positive cash flow development of the business has resulted in a €22m improvement to net debt compared to the balance at the end of September 2009.


Outlook for 2010
The winter sport order book suggest sales will be ahead of 2009 in this division, but conditions in the racquets sports market are becoming very challenging and we believe that overall sales may exceed last year's. There is sustained pressure on margins with increasing raw material costs and mix effects which will have deteriorating effect on overall margins. The company is initiating continued cost cutting and restructuring programs to mitigate the impact.