Accell Group s profit up 13% in first half year

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1 Number of pages: 12 PRESS RELEASE Accell Group s profit up 13% in first half year Heerenveen (the Netherlands), 22 July Accell Group N.V. booked a further increase in turnover and profit in the first half of Turnover was up 9% at million, compared with million in the first half of Net profit rose by 13% to 27.3 million from 24.1 million in the same period last year. René Takens, Chairman of the Executive Board of Accell Group: Cycling is becoming more popular, both in Europe and beyond. Consumers continue to focus on the environment, mobility, health and active recreation. This leads to increased use of our products for both commuter travel and for recreational and health purposes. Our innovative sports bikes and electric bikes are especially popular. Partly due to the early arrival of summer temperatures, the new bicycle season got off to a good start right from March. Our strong brands and the various segments in which we operate, as well as our geographical spread, enable us to respond quickly to changing market conditions and opportunities. We will continue to actively seek acquisition candidates during the reminder of the year. With our yearly new collection and again many innovations, we expect to book a further increase in operating results in the second half of Key developments first half of 2011 Accell Group s turnover was up 9% in the first half of The rise in turnover was due to both organic growth and acquisitions. Total turnover from the bicycle business rose by 10% and the sales of bicycle parts and accessories was up 14%. The bicycle season began early in many countries but slowed down in June due to reduced consumer spending. The integration of Accell Bisiklet in Turkey and Atala (50% stake) in Italy is progressing well. In June, Accell Group acquired Vartex, a smaller distributor of bicycles and bicycle parts and accessories in Sweden. The turnover from the fitness business, which Accell has streamlined in recent years, decreased in the first half due to changes in the distribution structures and lower sales. The gross margin was good at all product groups. Turnover breakdown (amounts x million) Geographically Per product group The Netherlands 138 (-/-2 %) Bicycles 290 (+10%) Germany 104 (+17%) Parts & accessories 73 (+14%) France 30 (+8 %) Fitness 10 (-/-33%) Rest of Europe 69 (+10%) Outside Europe 32 (+47%) Total 373 Total 373 1

2 Bicycles / bicycle parts & accessories In the bicycles / bicycle parts & accessories segment, turnover rose by 11% to million in the first half of 2011, compared with million in the first half of The acquisition of Accell Bisiklet (Turkey) led to a rise in the number of bicycles sold to 709,000, from around 580,000 in the same period last year, while the average selling price fell to 410. The segment result increased by 9% to 45.0 million Electric bikes sales rose by 26%, while sales of sports bikes were up 14%. Sales of traditional bicycles fell by 3%. Organic turnover growth came in at 3% for bicycles and 14% for bicycle parts & accessories. Bicycle turnover in the Netherlands decreased slightly. Accell Group sold fewer traditional bicycles, but this was largely offset by a rise in electric bikes sales. Turnover from bicycle parts & accessories rose once again. In Germany, bicycle and bicycle parts turnover came in 18% higher. Sales of electric bikes increased by more than 50% in Germany, due to the strong interest in the market for these products. Accell Group also saw a rise in sales of Ghost, Hai Bike and Winora innovative sports bikes. Turnover from bicycle parts & accessories continued to develop positively in Germany. Bicycle turnover fell slightly in France, due to increased competition and a modest market decline. Turnover from bicycle parts & accessories grew strongly in France. Turnover was up in other countries, both in Europe and beyond. The addition of Accell Bisiklet boosted sales primarily in Turkey, Finland and Italy. Turnover was also up in Belgium and Austria, while sales were down in Spain and the United Kingdom. Turnover in Southeast Asia increased, but is still limited. Turnover at SBS in North America fell slightly due to a decrease in sales of bicycles, while the sale of bicycles parts continued to grow. Due to fluctuations in exchange rates, the conversion to euro s had a negative impact of around 1 million on turnover. Fitness Turnover in this small segment is now 10.1 million (3% of Accell Group s total turnover), compared to 14.3 million in the first half of The drop in turnover was due to the transfer of the distribution in Germany and the United Kingdom to third-party distributors in In the past distribution was handled by the fitness division s own local organisations. Turnover derived from these new distributors is considerably lower in Accell Group continued to phase out the activities in North America in the first half of The fitness business now only has own distributors in the Benelux area and Scandinavia. Deliveries in other countries are to third-party distributors. Key financial developments in the first half of 2011 In the first half of 2011, total turnover was up 9% at 373 million, of which 3% was organic growth. The remaining 6% of the turnover growth was due to the acquisition of Accell Bisiklet (Turkey) which was consolidated as per 1 February The absolute added value was up 5% at million, from million in the first half of The added value (net turnover less raw materials costs and inbound transport costs) as a percentage of 2

3 turnover was 34.9%, compared with 36.2% in the first half of The drop was partly due to seasonal price changes and the sales mix, as well as lower logistics costs and higher discounts. Operating costs as a percentage of turnover fell to 25.1%, from 25.8% in the first half of This drop was primarily due to a relative reduction of personnel costs. The operating result came in at 36.5 million, from 35.4 million in the first half of 2010, which translates into an operating margin (EBIT) of 9.8%, compared with 10.3% in the first half of Interest expenses increased by 15%, primarily due to the greater use of credit facilities. Taxes were down compared with the previous year, at 6.7 million. The use of tax facilities (among others due to the legal restructuring of the German activities and the patent/innovation box, which means income from development in the Netherlands is taxed at an effective rate of 5%) meant the average tax burden fell to 19.6%, compared with 26.7% in the first half of The balance sheet total as of 30 June 2011 rose to million, from million on 30 June 2010, due to the increase in operating activities and the acquisition of Accell Bisiklet. The effect of acquisitions was approximately 38.4 million. Working capital (inventories and receivables, minus creditors) stood at million at end-june 2011, compared with million on 30 June The effect of acquisitions in this was approximately 22 million. As per 30 June 2011, in particular inventories were up due to the increase of the average price of the products, an increase in the number of bicycles in stock, and the addition of acquisitions. The total bank debt stood at million on 30 June 2011, compared with 84.6 million as per 30 June Approximately 38 million of this increase was due to acquisitions. The cash flow from operations before working capital came in at 31.6 million, up from 28.1 million in the first half of The cash flow from working capital excluding acquisitions was -/ million, compared to -/ million in the first half of The cash flow from operations (after acquisitions) decreased to 10.2 million, from 16.0 million in the first half of The free cash flow (including acquisitions) was -/- 8.8 million, compared with 14.4 million in the first half of The solvency rate as per 30 June 2011 was 44.4%, compared with 45.4% on 30 June The financing ratio Net Debt / EBITDA stood at 2.6, compared with 1.4 at 30 June 2010, well within the bank covenants. There are no notable changes with respect to the risks and uncertainties described in the 2010 annual report. Outlook It remains difficult to predict economic conditions, also for the second half of Accell Group s products enjoy a great deal of interest from consumers. Cycling and fitness activities are fun, easy and healthy. Cycling is also inexpensive. Many national and regional governments in Europe and beyond are currently encouraging the use of bicycles as an alternative mode of transport. Accell Group is convinced that cycling and physical exercise will continue to increase in popularity in the coming years. This will have a positive impact on the demand for bicycle parts and accessories, as well as the demand for new bicycles and fitness equipment. Accell Group s businesses are able to launch a new range of products each and every season, which includes many innovations in technology and design. 3

4 Accell Group s continuous market research ensures that the company develops the right products. As a result of further product development and continued interest, sales of electric bikes will continue to grow. In addition to being market leaders in electric bicycles, Accell Group s companies are important players in the markets for high quality sports bikes. Accell Group will continue to expand this position in the coming years, with its current positioning in the mid-range and higher market segments as a strong starting point. Forecast Based on current market conditions, Accell Group expects to book a higher operating result (excluding one-off gains and charges, such as the additional restructuring costs of the fitness activities) in the second half of 2011 compared with the second half of Taking this into account, Accell Group reiterates its forecast for the full-year 2011 of a further rise in turnover and result, barring economic developments and unforeseen circumstances. / / / / / / / Profile Accell Group Accell Group is active internationally in the mid-range and higher segments of the market for bicycles, bicycle parts & accessories and fitness equipment. The group is market leader in Europe in the bicycle market. The market approach is based on the key concepts quality, innovation and recognisable added value. For consumers this means a broad and strong portfolio of brands, including international top brands and well-known national brands, often with a long history. Accell Group operates close to the market and largely because of its high added value and numerous innovations, sells primarily via the specialist retail trade. Accell Group s best known brands are Batavus, Koga, Sparta, Winora, Hai Bike, Ghost, Lapierre, Atala, Redline, Tunturi en XLC. The company has production facilities in the Netherlands, Germany, France, Hungary and Turkey. Accell Group shares are traded on the official market of the NYSE Euronext in Amsterdam and included in the Amsterdam Small Cap Index (AScX). Accell Group recorded turnover of million in 2010, compared with million in 2009, and net profit of 36.4 million, compared with 32.7 million in Turnover is distributed across the company s keys markets as follows: the Netherlands (39%), Germany (25%) and France (9%). Other EU countries, including Belgium, Denmark, Finland, Austria, Spain and the United Kingdom, account for 19% of turnover. The remaining 8% of turnover comes from countries outside the EU, including Switzerland, the US and Canada. 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, 22 July Hilton Hotel, Amsterdam, reception: 9.30 hrs; start hrs Analyst meeting Today, 22 July Hilton Hotel, Amsterdam, reception: hrs; start hrs 4

5 Annexes - Summary consolidated profit and loss account as per and data per share - Summary consolidated balance sheet as per Summary consolidated cash flow statement as per Summary consolidated statement of changes to group equity as per Summary consolidated statement of realised and unrealised results as per Explanatory notes 5

6 SUMMARY CONSOLIDATED PROFIT AND LOSS STATEMENT 1) (amounts in thousands) H H Net turnover 373, ,389 Cost of raw materials and auxiliary materials (242,982) (218,552) Staff costs (44,578) (43,059) Depreciations (3,906) (3,764) Other operating costs (45,030) (41,622) (336,496) (306,997) Operating profit 36,528 35,392 Result of participations Financial income and expenses (2,884) (2,499) Pre-tax profit 33,917 32,893 Taxes (6,655) (8,795) Net profit 27,262 24,098 Earnings per share ²) (amounts in ) Earnings per share Weighted average number of outstanding shares 20,729,642 20,174,350 Number of outstanding shares ultimo 21,051,360 20,569,212 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; the comparative figures have been adjusted due to the stock split on 1 June

7 SUMMARY CONSOLIDATED BALANCE SHEET (amounts in thousands) ASSETS 30 June December June 2010 Fixed assets Tangible fixed assets 61,869 59,600 60,040 Intangible fixed assets 48,595 42,244 43,240 Financial fixed assets 18,894 9,538 8,508 Current assets Inventories 182, , ,247 Receivables 127,926 92, ,767 Liquid assets 1,076 1,322 1,530 TOTAL 440, , ,332 LIABILITIES Group equity 195, , ,432 Provisions 1) 25,009 23,310 34,537 Long-term debts 33,850 58,546 58,274 Credit facilities 110,285 43,286 26,303 Other short-term liabilities 75,970 78,400 84,786 TOTAL 440, , ,332 1) Provisions include both long-term and short-term provisions. 7

8 SUMMARY CONSOLIDATED CASH FLOW STATEMENT (amounts in thousands) H H Cash flow from operations Net profit 27,262 24,098 Depreciations 3,906 3,764 Share-based payments Cash flow from operations before working capital and provisions 31,557 29,097 Movement in working capital and provisions (16,853) (12,105) Net cash flow from operations 14,704 15,992 Cash flow from investment activities Movement in fixed assets (9,046) (1,502) Acquisitions subsidiary companies (14,452) (60) Net cash flow from investment activities (23,498) (1,562) Free cash flow 1) (8,794) 14,430 Cash flow from financing activities Movements in bank loans and bank credit 18,532 (6,609) Share- and option arrangements Dividends (9,890) (7,593) Net cash flow from financing activities 8,642 (13,775) Net cash flow (152) 655 Liquid assets as per 1 January 1, Effect of currency exchange liquid assets (94) 26 Liquid assets as per 30 June 1,076 1,530 1) Free cash flow is defined as the balance of net cash flow from operations and investment activities. 8

9 SUMMARY CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (amounts in thousands) Balance on 31 December previous financial year 180, ,756 Dividends (9,885) (7,588) Share- and option arrangements Other movements (2,582) 504 Net profit current year 27,262 24,098 Balance on 30 June current financial year 195, ,432 SUMMARY CONSOLIDATED STATEMENT OF REALISED AND UNREALISED RESULTS (amounts in thousands) H H Realised net profit 27,262 24,098 Fair value adjustments financial instruments (638) 12 Exchange differences foreign activities (1,436) 500 Movements in deferred taxes 142 (3) Total of realised and unrealised results 25,330 24,607 9

10 EXPLANATORY NOTES Principles of valuation and the determination of results This interim financial information pertaining to the period ending on 30 June 2011 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 2010 (see the Accell Group N.V annual report or go to In addition to the principles, the participation in Italian company Atala is valued by use of the equity method and the stake in German Derby Cycle AG is valued at cost. 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 2011 (2010: million). Up to and including June 2011, the segment result of bicycles and bicycle parts was 45.0 million (2010: 41.5 million). In the first half of 2011, the fitness segment has booked a net turnover of 10.1 million (2010: 14.3 million). The segment result of fitness was -/- 1.8 million for the first half year of 2011 (2010: -/- 0.7 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 were 6.8 million (2010: 5.4 million) and the financial income and expenses were -/- 2.9 million (2010: -/- 2.5 million). Purchase of subsidiaries At the start of 2011, Accell Group N.V. acquired all the shares of Bianchi Bisiklet ( Bisiklet ) A.Ş. in Manisa (Turkey). In the mean time, the name has changed to Accell Bisiklet. The acquisition also includes a 50% stake in Atala SpA in Monza (Italy). Bisiklet focuses primarily on development, marketing, sales and production of bicycles. Bisiklet is fully consolidated into the Accell Group results as per 1 February The 50% stake in Atala is consolidated as a non-consolidated participation from that same date. As per 30 June 2011, the acquisition of all the shares of Vartex AB ( Vartex ) has been completed. Vartex is a trading company in bicycles and bicycle parts based in Varberg (Sweden) which operates via a nationwide network of dealers. Vartex is fully consolidated into the Accell Group results as from 30 June

11 Both transactions are accounted for using the purchase method of accounting. The preliminary composition of the acquired combined net assets on the date of acquisition is as follows (in thousands): Fair value assumed at Fair value acquisition adaptions Book values Fixed assets 7,288 2,092 5,196 Other assets 30, ,326 Liquid assets Other debts and acquisition obligations (30,123) (5,877) (24,246) 8,132 Goodwill 6,670 Acquired liquid assets (350) Net investment cash flow 14,452 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 rate of corporate tax. Outstanding shares The number of outstanding shares as of 31 December 2010 was 10,304,506. In connection with the granting of provisionally assigned shares to the Executive Board and a number of directors, the number of outstanding shares increased with 19,378 shares. Mid-May 2011 the stock dividend for the financial year 2010 was paid, for which 201,796 shares were issued and added to the outstanding share capital. As per 1 June 2011, the number of outstanding shares has doubled due to the stock split. As per 30 June 2011, the number of outstanding shares amounted to 21,051,360; the average number of outstanding shares amounts to 20,729,642 as per the same date. 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 1.3%. Dividend At the Annual General Meeting of shareholders held on 28 April 2011, the dividend for the financial year 2010 was determined at 1.71 per (unsplit) share, or a dividend in shares. Following the expiration of the option period, it appeared that 44% of the shareholders had opted for a stock dividend. As per 20 May 2011, 9,890,000 in cash dividend was paid and 201,796 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 4.4 million. Obligations not shown in the balance sheet The obligations not shown in the balance sheet, as these were included in the 2010 annual accounts, have not changed essentially in the first half of

12 Directors statement The Board of Directors is responsible for setting up and monitoring the efficiency of the internal systems for risk management and audit systems. The Board of Directors 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 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 Board of Directors state that as far as they are aware, the financial statements as included on pages 6 up to 12 of this report provides a true representation of the assets, liabilities and the financial position on the balance sheet date as well as the profit for the first financial 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 5 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 * * * 12