Performance Sports Group (PSG) is building up its number one market position in hockey by taking over the Easton Hockey business from Chartwell Investments, the private equity firm that had taken it over in August 2014 from BRG Sports, the successor company of Easton-Bell Sports.
PSG, parent company of Bauer and other sports brands, had already bought BRG's Easton baseball and softball business earlier in that same year, but hockey still represented 60 percent of its turnover prior to the latest acquisition. Easton's archery and cycling businesses have gone to other investors.
Easton Hockey's annual revenues were estimated at $73.4 million in 2013, but PSG's management indicated that they have declined substantially since then. Its product line will be complementary with that of Bauer, and it will bring patent rights that will benefit all of PSG's hockey lines.
PSG said that the Easton Hockey operation should break even in terms of operating results and generate positive cash flow in the first 12 months, although it will dilute its net earnings slightly. It expects to record an accounting gain on the transaction, so it looks like PSG got a bargain.
PSG claimed that all its brands continued to gain market share in the second quarter of its financial year, ended on Nov. 30. However, the hockey segment of the group recorded a sales decline of 19 percent to $91.9 million in the quarter, with a drop of 11 percent in constant currencies, in spite of price increases. The company blamed lower sales to its Russian and Eastern European distributors, earlier launches of new products and a drop in performance apparel. Sales of hockey team apparel and hockey uniforms were up by 18 and 13 percent on a currency-neutral basis.
The weakening Canadian dollar had a big impact on the profitability of the hockey segment, as its operating results before amortization (Ebitda) grew by 26 percent in local currencies but fell by 43.4 percent in dollars, down to $7.3 million. PSG's two other business units - lacrosse and other sports - saw declines in Ebitda in dollars as well as in local currencies.
The group's total revenues were off by 11.2 percent to $153 million in the quarter, and down by 6 percent in constant currencies. The gross margin fell by 2.6 percentage points to 29.9 percent, but it would have been up by 1.6 points to 34.1 percent if currency had remained the same.
The bottom line showed a net loss of $4,503,000 against income of $1,031,000 in the year-ago period. The depreciation of the Canadian dollar shaved $5.5 million from PSG's net profit. Another negative factor was a $1.8 million writeoff for bad debt. The management has lowered its profit forecast for the full financial year because of the currency situation.
