Head N.V. reported that total net revenues increased by €5.5 million, or 4.8%, to €120.0 million for the six months ended June 30, 2010 from €114.4 million in the comparable 2009 period. The increase was mainly due to improved winter sports and racquet sports sales offset by a decline in licensing and diving.
The first six months of the year are not significant for the winter sports division, as typically less than 15% of the annual revenues are derived in this period. The increase in the sales in this period was due to higher volumes and some improved mix.
Racquet sales for the first six months grew from a combination of exchange rate movements (the US dollar strengthened in the period), higher volumes in both racquets and balls and some mix improvement in racquets in the first quarter, offset by mix decline in balls.
Diving saw a slight improvement in sales in the quarter compared to the same period in 2009, but declined during the six months ended June 30, as consumers still appear to be wary of spending on items at these high price points.
The sales improvement for the first six months of 2010 compared to 2009, combined with improved margins positively impacted the adjusted operating loss which decreased by €2.7m during the period. The margin improvement was caused by some manufacturing improvements and mix in the first quarter which were off set in part by higher raw material costs, exchange fluctuations and a deteriorating mix in racquet sports in the second quarter.
The net loss decreased by over €7m in the six months to 30th June 2010 compared to the same period in 2009 mainly due to the improved adjusted operating performance compounded by ESOP income, lower interest costs and no restructuring or bond exchange costs in 2010.
Operating cashflow for the first six months of 2010 compared to the same period in 2009 improved by €8.9m due to enhanced operating results and tighter working capital management. The positive trend in the first quarter of 2010 compared to the same period in 2009 when operating cashflow improve by €12.6m was, however, reversed in the second quarter when it deteriorated by €3.8m mainly due to the higher adjusted operating loss in the second quarter.
The overall improved cashflow and the success of our bond exchange in 2009 has brought our net debt down from €131.2m at the 30th June 2009 to €57.1m at the 30th June 2010.
Based on our current order book, we expect sales to be slightly ahead of last years, but conditions in the industry still remain tough, economic conditions uncertain, and margins suppressed due to mix changes, increasing raw material costs and foreign exchange movements. We will need to continue with restructuring programmes in order to further reduce costs so that we remain price competitive in what continues to be a difficult industry in which to operate.
