Accell sells fitness division, lifts bike sales

Warm spring weather in Europe along with robust demand for electric bicycles and high-end sports bikes again lifted half-year sales and profits at Accell Group, the Dutch company that owns Batavus, Sparta, Koga, Raleigh and Lapierre, among other bicycle brands.

Accell raised its sales by just 0.5 percent to €506.2 million in reported terms for the six-month period following the divestment of Hercules, one of its brands in Germany. The deal should enable Accell to more sharply focus on the distinctive offering of its three other German brands, Winora, Ghost and Haibike. Another factor that weighed on sales for the period was the group's decision to no longer serve the mass market in North America. Exchange rates were also an unfavorable factor, shaving €7.3 million off sales in reported terms, compared with a negative impact of €2.6 million for the same period last year. The hit mostly came from the exchange rates for the U.S. dollar and the Turkish lira.

However, the group achieved organic growth of 4 percent for the half-year. Sales of electric bikes increased by 14 percent, driven by demand in the Netherlands and Germany and aided by the launch of new e-bikes in France, the U.K., Italy and the U.S. They made up for dropping sales of traditional bicycles: they slipped by 1 percent in reported terms, even though that amounted to an organic increase of 4 percent. Sales of sports bicycles even fell by 14 percent, partly due to the sale of Hercules and the end of deliveries to the North American mass market.

The entire group's bicycle sales crept up by 1 percent to €387 million for the first half. The number of bicycles sold dropped to 1,018,000 units, down by 8.7 percent, but organically it declined by 6 percent. This was compensated for by an increase of 10 percent in the average sales price: it came in at €380, compared with €345 for the same period last year, due to higher sales of electric bicycles and high-end sports bikes. On an organic basis, the average price of bicycles sold even improved by 12 percent. Parts and accessories also managed a tiny sales increase of 1 percent to €110 million.

Sales in the Netherlands advanced by 11 percent to €140 million for the six months. Apparently, Accell outperformed the Dutch market, which grew by 3 percent based on provisional figures. The group's turnover in Germany declined by 7 percent to €116 million, due to the divestment of Hercules. An organic German sales increase of 3 percent was chiefly attributed to robust demand for high-performance electric bikes by Haibike, which started a trend in the European market.

The group's sales in other European countries were up by 9 percent to €165 million, with increases in France, Belgium and the U.K., for both bicycle and parts sales. Electric bicycles spurred demand in Scandinavia and Italy.

Accell's sales in North America contracted by 14 percent to €65 million, again due to the pull-out from the mass market. Sales of the Diamondback brand were on the rise due to more demand from multi-sports retailers, while the harsh winter on the east coast of the U.S. affected sales of the Raleigh brand to specialist stores. Turnover in bicycle parts in North America was also hit by a decline in the after-market and the partial end of a distribution deal with Shimano.

Turnover in other countries shrank by 22 percent to end at €20 million, about half of that coming from Turkey, where Accell's business was hurt by political unrest and exchange rates. The result for bicycles and parts advanced to €45.4 million, up from €43.2 million.

The turnover of the fitness division declined by 8 percent to €8.7 million for the half-year. The division's result amounted to a loss of €0.4 million, which was better than the loss of €0.8 million record in the same period last year.

The operating profit of the group jumped by 7 percent to €38.2 million, amounting to an Ebit margin of 7.5 percent, up from 7.1 percent. This improvement came after a round of cost-cutting in the Netherlands and North America, as previously reported. Operating expenses fell to 23.0 percent of sales, down from 24.5 percent, mostly due to lower staff costs. The integration of bicycle production for the Batavus and Sparta brands in Heerenveen is on schedule and should be completed after the summer holidays. The relocation of Juncker to another site in Apeldoorn should start in the second half of the year and be finalized in early 2015.

The group's net profit ended 13 percent higher at €27.5 million. The first-half results include a net book profit of €2 million made on the sale of Hercules as well as restructuring costs of €0.8 million.

Separately, the group announced that it was selling its fitness equipment division, which reached sales of about €18 million last year. The company said it had found investors to take over the division, built around the Tunturi brand from Finland, and to continue its activities under the name of Tunturi New Fitness BV. It had been downsized over the last years and was deemed too small for the Accell group.

The division was supervised from Almere in the Netherlands and that should still be the case under the new owners, who are expected to take over Tunturi's assets and staff from the start of August. Due to the near-closure of the Accell Group in this part of the holiday season it remains unclear who the investors are but Dutch newspapers reported that Tunturi New Fitness would be led by Steef Ploeger, the general manager of Tunturi Fitness. Employing 32 people, the division sells directly to dealers in the Netherlands, Belgium and Germany, and to distributors in 30 other countries.

The impact on the operating results of Accell Group and the repayment of liabilities are expected to amount to no more than €1 million. For the second half of this year, the company expects an organic increase of its turnover and results, helped by a strong product range and fewer discounts.

Among its latest initiatives, Accell Group has inked a deal with Suncross Bikes for the distribution of Haibike bikes and XLC Components in India. Suncross already sells the group's Ghost and Lapierre brands in the country and it has licensed the Raleigh brand name for production in India. It reportedly hopes to sell 15,000 to 20,000 units under the Haibike brand per year, as the Indian demand for high-end bicycles is growing, while making up just two to four percent in a market estimated at 13.5 million to 14.5 million units.