Accell Group books higher turnover and profit in first half

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1 Number of pages: 13 PRESS RELEASE Accell Group books higher turnover and profit in first half Heerenveen (the Netherlands), 26 July Accell Group N.V. recorded turnover of million in the first half of 2013, an increase of 13% compared with the million recorded in the first half of Of the total growth, 7% was organic. Operating profit was 19% higher at 35.5 million, from 29.8 million in the first half of René Takens, CEO of Accell Group: The bicycle is popular and cycling is on the increase. This has not resulted in an immediate increase in sales, and a number of bicycle markets are showing a decline, however Accell Group still managed to record an increase in turnover in the first half of Turnover in electric bicycles was 28% higher, mainly in Germany and the Netherlands. All the countries in which Accell Group sells its bicycles and bicycle parts had to deal with the consequences of an unfavourable (cold) spring and a further decline in consumer confidence. This put bicycle sales below the levels we expected, but the overall level was still above that of This is a clear sign the bicycle sector is performing quite well compared with other consumer product segments. One of the main reasons for this is the growing popularity of cycling. Cycling is healthy, fun and offers easy mobility. In declining markets Accell Group adjusts its organisation; the reorganisations in the Netherlands and in Canada are on schedule. Due to market developments in North America and the UK the Raleigh companies are not yet showing the anticipated growth, albeit the integration is in full swing. For the remainder of the year we expect a continuation of the trends and revenue growth. We expect to report a higher year-on-year operating profit compared to Key developments in the first half of 2013 Accell Group recorded a 13% increase in turnover in the first half of 2013, with 7% of this organic mainly realized in Germany. The main sales drivers came from sales of electric bicycles and bicycle parts and accessories. The electric bicycle remains popular, especially in the Netherlands and Germany. Sales of sports bicycles remained stable while sales of traditional bicycles were lower in most European countries and the United States due to adverse weather conditions and a continuing reluctance among consumers to make major purchases. The previously announced reorganisation in the Netherlands and the combination of the bicycle production for Batavus and Sparta is progressing on schedule. Accell Group has in recent months had extensive and constructive talks with all parties involved. This resulted in a positive recommendation from the Central Works Council and agreement on a social plan with the trade unions in early July. Accell Group expects to complete the reorganisation, which will result in the loss of 45 jobs, in the summer of 2014 and expects the reorganisation to result in structural cost savings of 2 million to 3 million annually. Accell Group will include a one-off charge of around 2 million for the reorganisation in its results for the second half of

2 Turnover (in millions) Geographic By product group Netherlands 126 (+2%) Bicycles 385 (+16%) Germany 125 (+11%) Parts and accessories 109 (+5%) North America 76 (+35 %) Fitness 10 (-6%) Rest of Europe 151 (+22%) Other countries 26 (- 9%) Total 504 Total 504 Bicycles / bicycle parts & accessories Turnover in the segment Bicycles/bicycle parts & accessories was up 14% in the first half of 2013 at million, compared with million in the first half of The total number of bicycles sold rose to 1,115,000 in the first half, from 942,000 in the same period of 2012, on the back of the acquisition of Raleigh in April The number of bicycles sold was down 2% in organic terms. The average sales price fell to 345, compared with 352 in the first half of 2012, due to a greater contribution to turnover from Raleigh. Organically the average price rose by 11% to more than 390 due to a change in the product mix and price increases. The profit for the segment rose to 43.1 million, from 37.0 million in the first half of Sales of electric bicycles came in 28% higher, mainly in Germany, the Netherlands, Switzerland and Denmark. The average sales price rose to 1,277, from 1,153 in the first half of Sales of sports bicycles increased by 12% and sales of traditional bikes were up 8% as a result of the addition of Raleigh. In organic terms, sales of sports bikes remained stable, while sales of traditional bicycles dropped by 4%. Provisional figures show that the Dutch bicycle market has remained stable in the first few months of 2013 when compared with the same period of Turnover of Accell Group bicycle brands was up 2%. Turnover in bicycle parts & accessories was up 4%. The German bicycle market fell slightly in the first half mainly due to bad weather, while sales of electric bicycles were up. Turnover of Accell Group bicycle brands was up 12%, while sales of bicycle parts & accessories were up 8%. Poor weather conditions in North America resulted in disappointing sales in the bicycle sector and total supplies to specialist retailers in the market were 15% lower than in the first half of Accell Group bicycle brands saw their deliveries to specialist retailers perform less bad than the market. Turnover of the Accell Group bicycle brands and bicycle parts increased due to the acquisition of Raleigh. The decline in organic turnover was slightly less than the overall market decline. Accell Group announced in the first half that its companies in the US will cooperate more closely and Accell Group will continue with the integration process in the second half of the year. In Canada, as announced in the beginning of the year, Accell Group terminated the production and assembly activities in Waterloo (Quebec) as of the end of June The sales organisation has been adapted, which will now focus entirely on the specialist retail and multi-sports channel, as Accell Group does in the US. The premises in Oakville (Ontario) have been sold. The reorganisation will make a positive contribution to Accell Group results from

3 Accell Group s main other European markets are France, the UK, Belgium, Switzerland, Austria, Scandinavia, Italy and Spain. Turnover was up in all of these countries. The growth was largely due to higher turnover in bicycle parts and accessories and electric bikes. The rise in the UK was largely driven by the acquisition of Raleigh and growth at bicycle parts. The company s main markets outside Europe are Turkey, Australia and countries in South America and Asia. Turnover in most countries increased. Turnover also includes the licensing income from Raleigh bicycles in these regions. The reduction in the turnover reported in other countries was due to a change in the way the turnover of Raleigh s trading company in Taiwan is accounted for. In line with the 2012 annual accounts, and unlike in the first half of 2012, only the service fee is now recorded as turnover, rather than the value of the goods. Fitness segment Turnover in this segment came in at 9.2 million, down 9% compared with the first half of The drop was due to lower-than-expected sales at distributors outside Europe. Turnover in the Netherlands, Germany and Scandinavia came in at approximately the 2012 level. The new Tunturi Pure product line has yet to yield the expected results. The result from this segment was largely unchanged at -/- 0.8 million, due to the adaptation of the organisation en improved margins. Key financial developments in the first half of 2013 Overall turnover in the first half of 2013 came in at million, an increase of 13%, with 7% of this increase organic. Absolute added value was up 14% at 159 million, from 140 million in the first half of Excluding the effect of acquisitions, added value was up around 4%. Added value (net turnover less material costs and inbound transport costs) as a percentage of turnover stood at 31.6% in the first half of 2013, compared with 31.4% in the first half of Added value was effected in the first half of the year in part by lower margins as a result of inter alia a shift in the margin mix and partly due to reduced discounts, currency exchange results and synergies due to the acquisition of Raleigh. Operating costs as a percentage of turnover were down at 24.5%, from 24.7% in the first half of Organically, operating costs as a percentage of turnover dropped to 24.3%. Operating profit came in at 35.5 million in the first half of 2013, up from 29.8 million in the first half of 2012, which resulted in an operating margin (EBIT) of 7.0%, up from 6.7% in the first half of The operating result of the acquired Raleigh companies remained on the same level compared to the same period in 2012, despite decreased sales. The financing costs showed a considerable increase due to the acquisition of Raleigh, increased use of credit facilities, costs of factoring and an increase in interest rates as a result of the new financing agreement. Taxes were higher than in 2012, at 4.4 million. The application of tax facilities (in particular the beneficial effects on the tax burden of the legal restructuring of the German activities in 2009) has been completed successfully. The average tax burden increased to 15% in the period under review, compared with 12% in the first half of The net operating profit came in at 24.5 million in the first half of 2013, up from 23.2 million a year earlier. 3

4 In the first half of 2012, net profit was negatively impacted by the acquisition costs related to the takeover of Raleigh. In the first half of 2013, Accell Group took a one-off charge of 0.9 million for the reorganisation of Raleigh Canada, which was largely counterbalanced by a book profit on the sale of Raleigh Canada s premises in Oakville (Ontario). The charge for the reorganisation of the Dutch activities of around 2.0 million will be booked against the net result in the second half of the year. The balance sheet total had increased to million as per 30 June 2013, largely due to the increase in inventories. Working capital (inventories and accounts receivable minus creditors) stood at million, up from million as per 30 June The item inventories was higher as per 30 June 2013, partly due to an increase in the average price (+21%) and partly due to the higher number of bicycles in stock (+20%) as sales were lower than expected. Trade receivables fell to million, due in part to factoring, which had an impact of 26 million, and as a result of the lagging turnover in the month of June. The use of factoring will be discontinued completely in the course of this year, in line with the terms of the new financing agreement. The item trade creditors was stable. The total net bank debt stood at million as per 30 June 2013, up from million as per 30 June Shareholders equity stood at million as per 30 June The cash dividend part deducted from shareholders equity in May was 10.8 million, from 11.0 million in The solvency ratio stood at 41% at the end of June 2013, compared with 42% at the end of June Operating cash flow before working capital came in at 29.2 million in the first half of 2013, compared with 24.8 million in the first half of The cash flow from working capital excluding acquisitions stood at -/ million, compared with -/- 5.3 million in the first half of The cash flow from operating activities (after acquisitions) fell to -/ million, from 19.4 million in the first half of The acquisition of participations involved a sum of 2.1 million, compared with 59.4 million in the first half of There have been no material changes compared to the risks and uncertainties outlined in the 2012 annual report. Outlook Accell Group s products have strong interest from consumers, with bikes seen increasingly as a lifestyle product, especially among young people. Cycling and fitness activities are fun, easy and healthy. Cycling is also relatively inexpensive. Numerous national and regional authorities in Europe and beyond are currently promoting the use of bicycles as an alternative means of transport as part of their drive for environmental awareness, mobility and health & fitness. Accell Group is convinced that cycling and exercise will increase in the years ahead. This will have a positive impact on the demand for bike parts and accessories and the demand for bikes and fitness equipment. Accell Group s brands are able to launch new ranges of products with numerous technical and design innovations each and every season. Continuous market research ensures that Accell and its brands continue to develop the right products for the market at the right time. Thanks to continued product development and constant attention for this market, the sale of electric bikes (e-bikes) will also continue to grow. Accell Group s brands are not only market leaders in the field of e-bikes; they are also major players in the market for high-quality sports bikes. Accell Group will continue to build on this position in the years to come, using its solid positioning in the mid and higher segments as a basis for growth. 4

5 The structural market trends and the company s own differentiating factors together provide a strong basis for Accell Group s revenue model and profit potential in the years to come. Expectation The ongoing macro-economic developments and the weather remain difficult to predict for the second half of Furthermore, sales fell short of expectations in the last few months, whereby it is expected that for the second half of 2013 some more discounts must be granted with regard to this season s collections, as compared to last year. For the full year, Accell Group expects to record a yearon-year increase in operating profit. The net operating profit is expected to come in at approximately the same level as in 2012, barring unforeseen circumstances, whereby the financing costs and taxes will be higher compared to Accell Group expects continued growth in turnover and profit in the longer term. / / / / / / / About Accell Group Accell Group N.V. ( Accell Group ) focuses internationally on the mid-range and higher segments of the market for bicycles, bicycle parts and accessories and fitness equipment. The company has leading positions in the Netherlands, Belgium, Germany, Italy, France, Finland, Turkey, the United Kingdom and the United States. In Europe Accell Group is market leader in the bicycle market in terms of revenue. Accell Group s best known brands are Batavus (NL), Sparta (NL), Koga (NL), Loekie (NL), Ghost (Ger), Haibike (Ger), Hercules (Ger), Winora (Ger), Raleigh and Diamondback (UK, US, Canada), Lapierre (Fr), Tunturi (Fi), Atala (IT), Redline (US) and XLC (international). Accell Group and its subsidiaries employ approximately 2,750 people worldwide in eighteen countries. The company has production facilities in the Netherlands, Germany, France, Hungary and Turkey. Products of Accell Group are sold in more than seventy countries. The headquarters of the company are located in Heerenveen (the Netherlands). The Accell Group shares are traded on the official market of NYSE Euronext in Amsterdam and included in the Amsterdam Small Cap Index (AScX). In 2012 Accell Group realized a profitable revenue of million. Financial agenda 2013 Publication half year results 26 July 2013 Publication trading update 19 November 2013 For further information: Accell Group N.V. René Takens, Chairman of the Board (CEO) tel: (+31) Hielke Sybesma, Member of the Board (CFO) tel: +(31) Website: Press conference Today, 26 July Okura Hotel, Amsterdam (Otter Esperance room), reception: 9.30 am; start am 5

6 Analysts meeting Today, 26 July Okura Hotel, Amsterdam (Otter Esperance room), reception: noon; start pm Annexes - Summary consolidated profit and loss statement as per and data per share - Summary consolidated balance sheet as per Summary consolidated cash flow statement as per Summary consolidated statement of changes in equity as per Summary consolidated statement of realised and non-realised results as per Explanatory notes 6

7 SUMMARY CONSOLIDATED PROFIT AND LOSS STATEMENT 1) (amounts in * 1,000) H H Net turnover 503, ,597 Cost of raw materials and auxiliary materials (344,651) (305,899) Staff costs (59,425) (52,552) Depreciation and amortisation (4,636) (4,244) Other operating costs (59,553) (53,067) (468,265) (415,762) Operating profit 35,489 29,835 Result of participations 0 79 Financial income and expenses (6,597) (3,848) Pre-tax profit 28,892 26,066 Taxes (4,441) (2,846) Net operating result 24,451 23,220 Acquisition costs 0 (2,768) Net profit 24,451 20,452 Earnings per share ²) (amounts in euro) Earnings per share Weighted average number of outstanding shares 23,984,648 21,915,500 Number of outstanding shares at year-end 24,402,849 23,863,432 1) The figures mentioned in this half-year report have not been audited. 2) Earnings per share are calculated based upon weighted average number of outstanding shares. 7

8 SUMMARY CONSOLIDATED BALANCE SHEET (amounts in * 1,000) ASSETS 30 June December ) 30 June ) Fixed assets Tangible fixed assets 75,203 76,981 75,192 Intangible fixed assets 101,094 98,310 96,349 Financial fixed assets 16,746 18,650 13,417 Current assets Inventories 272, , ,198 Receivables 160, , ,227 Liquid assets 16,902 6,552 6,163 TOTAL 642, , ,546 LIABILITIES Group equity 261, , ,897 Provisions 2) 34,598 34,945 36,745 Long-term debts 110,224 15,780 72,973 Credit facilities 107, , ,252 Other short-term liabilities 129, , ,679 TOTAL 642, , ,546 1) Adjusted for regime change in pensions (IAS19R). 2) Provisions include both long-term and short-term provisions. 8

9 SUMMARY CONSOLIDATED CASH FLOW STATEMENT (amounts in * 1.000) H H Cash flow from operations Net profit 24,451 20,452 Depreciations 4,636 4,244 Share-based payments Cash flow from operations before working capital and provisions 29,221 24,780 Movement in working capital and provisions (68,552) (5,348) Net cash flow from operations (39,331) 19,432 Cash flow from investment activities Movement in fixed assets (5,104) (6,143) Acquisitions subsidiary companies (2,059) (59,421) Net cash flow from investment activities (7,163) (65,564) Free cash flow 1) (46,494) (46,132) Cash flow from financing activities Movements in bank loans and bank credit 68,081 28,890 Share- and option arrangements (248) (447) Share issue 0 30,808 Dividends (10,836) (10,978) Net cash flow from financing activities 56,997 48,273 Net cash flow 10,503 2,141 Liquid assets as per 1 January 6,552 4,259 Effect of currency exchange liquid assets (153) (237) Liquid assets as per 30 June 16,902 6,163 1) Free cash flow is defined as the balance of net cash flow from operations and investment activities. 9

10 SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (amounts in * 1.000) Balance on 31 December previous financial year 1) 246, ,877 Dividends (10,831) (10,971) Share issue 0 30,808 Share- and option arrangements Other movements 1,389 (4,353) Net profit current year 24,451 20,452 Balance on 30 June current financial year 261, ,897 1) Adjusted for change in pensions (IAS19R) SUMMARY CONSOLIDATED STATEMENT OF REALISED AND UNREALISED RESULTS (amounts in * 1.000) H H Realised net profit 24,451 20,452 Fair value adjustments financial instruments 6,721 (6,937) Exchange differences foreign activities (3,397) 1,406 Movements in deferred taxes (1,681) 1,735 Total of realised and unrealised results 26,094 16,656 10

11 EXPLANATORY NOTES Principles of valuation and the determination of results This interim financial information pertaining to the period ending on 30 June 2013 has been drawn up in accordance with IAS 34 Interim Financial Reporting. For the principles of valuation and the determination of results, we refer to the annual accounts for the financial year 2012 (see the Accell Group N.V annual report or go to These principles are applied to the financial statements in this interim report, except for the changes in IAS19R, Employee benefits, as explained in the annual report The interim report does not contain all the information that is prescribed for full annual accounts and should therefore be read in accompaniment with the Accell Group N.V. consolidated annual accounts for This interim report has not been audited. Seasonal influences The operations of Accell Group N.V. are subject to seasonal influences. In general, more turnover is generated in the first half of the calendar year than in the second half of the calendar year. The seasonal pattern is a result of the influence of weather on the sale of the products delivered by Accell Group N.V. Segment information The bicycles and bicycle parts segment has booked a net turnover of million in the first half of 2013 (2012: million). Up to and including June 2013, the segment result of bicycles and bicycle parts was 43.1 million (2012: 37.0 million). In the first half of 2013, the fitness segment has booked a net turnover of 9.2 million (2012: 10.1 million). The segment result of fitness was -/- 0.8 million for the first half year of 2012 (2012: -/- 0.9 million). For the purpose of aligning the total of the segment results with the result before taxes of Accell Group N.V., non-allocated costs, and financial income and expenses have been deducted. The non-allocated costs, excluding acquisitions costs, were 6.8 million (2012: 6.3 million) and the financial income and expenses were -/- 6.6 million (2012: -/- 3.8 million). Purchase of subsidiaries At the beginning of April 2013, Accell Group N.V. completed the acquisition of all the shares of Oy Proway International AB ( Proway ) in Turku, Finland. Proway is a distributor of among others to Raleigh in Finland and will be integrated with Accell Group company Tunturi-Hellberg Oy. The figures of Proway are consolidated as of 1 April The transactions have been accounted for by the purchase method of accounting. The preliminary composition of the acquired combined net assets on the date of acquisition is as follows (in thousands): 11

12 Fair value assumed at Fair value acquisition adjustments Book values Fixed assets Other assets Liquid assets Other debts and acquisition obligations (941) (214) (727) Goodwill Obtained liquid assets (941) Net investment cash flow Taxes In the interim financial information, taxes have been included in the profit and loss account on the basis of the estimated weighted average applicable nominal corporate tax rate. Outstanding shares The number of outstanding shares as of 31 December 2012 was 23,863,432. In connection with the granting of provisionally assigned shares to the Executive Board and a number of directors, the number of outstanding shares increased by 15,509 shares. Mid-May 2013 the dividend for the financial year 2012 was paid, for which 523,908 shares were issued and added to the outstanding share capital. As per 30 June 2013, the number of outstanding shares amounted to 24,402,849; the weighted average number of outstanding shares amounted to 23,984,648 over the first half period. The company has a long-term bonus plan for the Executive Board and a number of directors. The full exercise and respective appropriation of the share and option rights granted to date would increase the number of issued shares by 0.6%. Dividend At the Annual General Meeting of shareholders held on 25 April 2013, the dividend for the financial year 2012 was determined at 0.75 per share, or a stock dividend. Following the expiration of the option period, it appeared that 39% of the shareholders had opted for a stock dividend. As per 22 May 2013, 10,836,000 in cash dividend was paid and 523,908 shares were issued and added to the outstanding share capital. Related party transactions Intercompany transactions and balances between Accell Group N.V. and its subsidiaries are eliminated in the consolidation. The sum of the connected party transactions was 5.0 million. Off balance sheet obligations The obligations not shown in the balance sheet, as included in the 2012 annual accounts, have not significantly changed during the first half of Executive Board statement The Executive Board is responsible for setting up and monitoring the efficiency of the internal systems for risk management and audit systems. The Executive Board would like to note at this point that the internal risk management and audit system is intended to identify and control significant risks the company is exposed to, with due consideration for the nature and scope of the organisation. Such a system cannot offer absolute certainty for achieving the objectives. Similarly, it is not possible to 12

13 completely prevent cases from occurring that involve material errors, damage, fraud or the violation of statutory regulations. Actual effectiveness can only be assessed on the results achieved over a longer period. With reference to article 5.25d paragraph 2c of the Dutch Financial Supervision Act ( Wft ) and with due observance of the above notes regarding the set-up and operation of the internal risk measurement and audit system, as well as based on the audit of the financial statements of the accountant, the Executive Board members state that as far as they are aware, the financial statements as included on pages 7 up to 13 of this report provide a true representation of the assets, liabilities and the financial position on the balance sheet date as well as the profit for the first half year of Accell Group N.V. and the companies included jointly in the consolidation, and the reports as included on the pages 1 to 6 of this report provide a true representation of the information as required under article 5.25d paragraph 8 and 9 of the Financial Supervision Act ( Wft ). R.J. Takens, CEO H.H. Sybesma, CFO J.M. Snijders Blok, COO * * * 13