Accell Faced ‘Challenging Conditions’ in First Half-Year
HEERENVEEN, Netherlands – The 2017 first half-year results Accell Group NV announced last Friday reflect the changes in consumer behavior resulting in more online sales which is having a big impact on the company’s business specifically in The Netherlands and North America. These ‘dynamic circumstances’ caused double digit turnover drops in the named countries. Overall Accell still managed a 3% increase in net turnover, but net profit was down by 23%.
It was once again Accell’s Winora business in Germany that came to the rescue and made up for the turnover drops in other countries. In Germany the sale of Haibike and Ghost branded e-MTB’s proved again their popularity with a 19% increase in sales. Also in the ‘Rest of Europe’ higher sales of electric mountainbikes accounted for a turnover growth of 4%. But in the Netherlands sales were down by 10% and in North America by a big 22%. Also in Turkey turnover declined as a result of the country’s economic situation.
Disrupting online business models
This year Accell didn’t hold a press conference for its financial result announcement. Instead it organized a webinar. Here the “challenging conditions” were explained by the interim-Chairman of the Board of Directors, Hielke Sybesma. He said that the traditional retailers in Holland are under pressure by the disrupting business models of online competitors. A similar situation is taking place in North America. “Here we see a downturn in sales at brick and mortar retailers as well as to multi-sports chains in. Our sales via other channels in North America are increasing as a result of the changes in distribution strategy for our brands Raleigh and Diamondback but this change to an omni-channel approach cannot make up yet for the loss in retail channels.”
17% drop in bikes sales for Accell Group
In the first half year of 2017 all the Accell companies and brands sold a total of 753,000 bicycles, e-bikes and e-MTB’s. This number is a big 17% down of the sales total of 908,000 Accell Group sold in the first half of 2016. Despite this big drop “Net turnover in the bicycle segment remained virtually unchanged compared with the first half of 2016. In Germany and other neighbouring countries higher sales in e-bikes were recorded. Sales of sports e-MTB’s from the Haibike, Ghost and Lapierre brands recorded particularly strong growth.”
Net turnover in bike sales stood at € 491.4 million; up 0.2% on the 490.3 mn of 2016. The profit result of bicycle sales was down by 2.6% to € 48.3 million.
Accell’s sales of parts & accessories showed a better performance compared to bikes. The holding company’s statement says on this “Net turnover in parts & accessories came in higher in 2017. The share of turnover accounted for by Accell Group’s own brand XLC increased once again in Europe. On the back of good results in all the European countries in which we are active, the segment result from this trading activity came in higher. The greater share of turnover accounted for by our own brand XLC (in Europe) made a positive contribution to the higher segment result, due to improved utilization of purchasing benefits.” Accell’s P&A sales was up 2.2% to € 142.6 million while the results improved by a big 33% to € 11.0 million.
Big drop in net profit
Next to the 17% drop in bike sales as well as the challenging conditions in the Netherlands and North America Accell also faced a one-off non-cash write down of € 3.8 million on a tax asset related to its North American operations. What also impacted the net result is the five million euro Accell is spending on the implementation of its “refined strategy”. All this impacted the company’s net profit that came in at € 26.3 million down 22.7% on the € 34.0 of last year.
‘Laying the foundations’
Interim CEO Sybesma further said “In recent months, we have devoted considerable energy to the implementation of the strategy we announced in March. We are making good progress on the various strategic fronts and we are laying the foundations that will help us achieve our medium-term goals. We are booking particularly solid progress in the fields of supply chain, parts & accessories, portfolio management and IT. The supply chain management organization is currently in full swing. A clear effect of this is that the working capital situation continues to improve. However, the costs incurred for the implementation of the strategy are exerting additional pressure on our results.”
‘Work in progress’
For what’s to happen in the second half of 2017 interim CEO Sybesma explained that with regard to the refined strategy and the company’s operations in Holland and North America it is “Work in progress. We are in the US switching to omni-channel distribution. We are recording growth here and we will continue on this path. In Holland the market isn’t seeing any growth this year. Here we have to find way’s with our dealer-partners to switch from selling bikes at discounts to creating sustainable business models. What we see in the US and Holland are strong indications of the fundamental changes the bike markets are faced with. We are creating solutions to meet these challenges. For that we will create solutions geared to the situation per country. In all these dynamics we will find ways for sustainable growth in the near future.”
For the second half of 2017 Accell expects to record turnover and operating results comparable to the ones of the second half of 2016.