Higher sales for Head across the board

Meanwhile, Head has put out its 2014 financial report. The company's total revenues increased by 4.7 percent to €375.4 million, with growth of 5.3 percent in constant currencies and higher numbers in all the divisions. The adjusted operating margin improved slightly to 3.6 percent from 3.4 percent in the previous year, while the net profit declined to €2,849,000 from €5,296,000.

The gross margin progressed by 2.5 percentage points, reaching €161.1 million, mainly due to higher licensing revenues, lower costs for tennis balls and a change in the mix in the group's diving business. Higher advertising costs in the winter sports and racquet sports divisions contributed to boost selling and marketing expenses by €8 million. Foreign exchange movements had a negative effect on the bottom line.

Winter sports revenues grew by 2.9 percent in euros and by 3.4 percent in local currencies, in spite of another year of poor snow. Head shipped higher volumes of skis and bindings, and the product mix was more favorable than before for skis and ski boots.

Head noted that the winter 2014/15 winter season started out well in North America and Japan but arrived in Europe extremely late. In December, the re-orders received by the company were 40 percent lower than in the same month a year earlier. They were especially poor in Germany, Austria and Switzerland. The snow situation subsequently improved in many parts of Europe. Head said the late start of the season will have a negative impact on its reorders for the next one, but the good conditions experienced so far this year should help to compensate in part for the slow start of the season.

Head's estimates for the global snow sports hardware market have not changed except for skis, whose wholesale value fell to €300 million last year, according to the company's calculations, from €310 million that it had previously given for 2013. It noted that the volume of skis sold around the world has declined from 6.5 million pairs 25 years ago to about 3.2 million pairs last year. It continued to report data such as 3.2 million sets of ski bindings worth €150 million, 3.6 million pairs of ski boots worth €250 million and 800,000 snowboards worth €180 million.

The tennis ball market was globally flat last year, Head added, as participation levels were stable around the world. The introduction of innovative products led to higher average selling prices for tennis racquets, especially in the U.S., but the market has yet to recover from the drop it experienced in 2013.

The racquet sports market declined in 2014 by almost 6 percent in units in the U.S., according to external and internal estimates, but rose slightly in terms of value. The European market dropped by around 2 percent in units and value, while the Asian market showed a slight decrease. Overall, Head estimates that the global market for tennis racquets amounted last year to 7.9 million units with a wholesale value of €290 million, marginally below the levels of the previous year. With about 24 million dozens delivered worldwide, sales of tennis balls were stable in most regions, generating a wholesale turnover of €200 million.

In Head's racquet sports division, sales went up by 3.3 percent in euros and by 4.4 percent in constant currencies. Unit sales went up for tennis racquets and Head branded tennis balls. The product mix was favorable across the key categories, and revenues from accessories improved. Head noted that it reached a peak market penetration of around 63 percent in the U.S. with its tennis balls in terms of units.

The group believes that its Mares subsidiary raised its market share in most markets, thanks to new products and improved operations. It noted that European markets continued to be affected by the political turmoil in Egypt and the economic crisis in Southern Europe.

Sales in Head's diving segment increased by 9.2 percent in euros and by 9.3 percent in constant currencies last year, but this was largely due to the inclusion of a newly acquired dive certification business, SSI, from the start of 2014. Equipment sales declined as the European diving market remained tough, but some growth was achieved in North America and Asia.

Head estimates that the global diving equipment market was worth around €400 million in 2014, and that it declined in Europe and the U.S., but rose slightly in Asia, except in Japan.

Sportswear revenues went up by 3.4 percent in euros and by 2.7 percent on a currency-neutral basis. They were lifted by higher sales of winter sports apparel, partly offset by lower sales of bags in the U.K. Licensing income rose by 38.1 percent to $7,151,000.

Geographically, the group's sales advanced by 3 percent both in Europe and North America, reaching respective levels of €241.9 million and €101.0 million. A 26 percent jump to €32.4 million was recorded in Asia.

The group employed a total of 2,499 people at the end of 2014, including 1,595 in manufacturing. It ended the year with cash on hand of €31.0 million. Notably, it had 712 employees in the Czech Republic, 546 in Austria and 199 in Italy. The Czech staff grew sharply last year following the acquisition of Catis, a manufacturer of ski bindings that worked for its Tyrolia subsidiary. The takeover became effective on Jan. 1, 2014.

The annual report, which will probably be the last one to be made public by Head, says that the company outsources a substantial portion of its manufacturing to third parties, including diving products in Bulgaria and tennis racquets in Thailand.

The company's net debt increased by €53.5 million to €106.9 million in the course of the year, mainly because of share buybacks and €9.8 million worth of acquisitions. It compared with equity of €150.9 million at the end of the year.

Head says in its annual report that it intends to continue to invest in product innovation and development, pointing to recent new product introductions such as its Joy line of women's alpine skis, including the ultralight Graphene ski, and the extension of its Graphene line of racquets. It also mentioned Head's new ski boots with integrated Perfect Fit and Adapt Fit technologies, as well as Mares' new Fusion Regulator with Twin Power technology in diving. The group's R&D costs went up last year to €11.1 million from €10.3 million the year before.

New products introduced for this year include two new lines of all-mountain skis, new SRL bindings for women and a new touring binding, new customization systems for ski boots, a high-performance category of snowboards and the first women's snowboard concept, and a new generation of Graphene racquets. The company also began to grow in the area of tennis strings by launching innovative products. SSI launched a new digital platform providing dive training material online and offline on tablets and smartphones in over 15 languages.