Accell N : Full Year 2019 Results Presentation

Full Year 2019 Results

Ton Anbeek - CEO

Ruben Baldew - CFO

March 6, 2020

Disclaimer

• This presentation may containforward-looking statements. These are based on our current plans, expectations and projections about future events.
• Anyforward-looking statement is subject to risks, uncertainties and assumptions and speak only as of the date they are made. Our results could differ materially from those anticipated in any forward-looking statement.
• The financial statements and other reported data in this presentation have not been audited.

2

Ton Anbeek - CEO

Strategic Objectives and Financial Targets

		Strategic objectives					2022 financial targets
•				•
Increasing dealer and consumer satisfaction		Turnover	€ 1.4 - € 1.5 bn
•	Increasing market share		•Added value / Turnover	31%
•	Increasing net profit		•	EBIT / Turnover	8.0%
•	Strong and healthy balance sheet		•Trade working capital / Turnover	< 25%
•	Corporate Social Responsibility		•	Return on capital employed	> 15%

4

Key Messages 2019

• Strategy'Lead Global. Win Local' on track for achieving previously submitted2022 objectives'
• Divestment of North America (discontinued operations)completed.International brands are now sold through a distributor in US
• Turnover increased with 7.5%in line with average growth in last 7 years; shift to e-bikes and cargo continues. Main regions show growing or stable volumes.
• Added valueand EBITup, EBIT excluding one-offs down 1 mio
• Majority ofadditional investments(Opex) as part of strategy have now taken place
• Disappointing TWC%due to lower than forecasted sales in H2 and delayed innovation
• As of 2020 full focus onexecutingour strategy and further growingour profitable European business

5

Higher Net Sales, Added Value and EBIT. Improvement Needed on TWC%

Topline	Added value %	Supply chain	EBIT /	TWC YoY /
growth	vs PY	savings	EBIT excl. one-offs	Avg TWC

+7.5%		€ 60 mio	+611 bps
+53 bps	+13 mio
		€ 55 mio	+70 bps

Recap Strategy 'Lead Global. Win Local'

					Winning at the point of				Consumer centric
	Lead Global. Win Local
					purchase				omnichannel

					Centralised & integrated
	Innovation
					P&A business

Fit to compete

7

Progress Full Year 2019

Lead Global

Cross regional sales transfers rolled out

Volume trend stabilized/growing in all main countries

North America divestment completed, international brands sold through US distributor

Point of purchase

Recovery Netherlands outperforming market growth

Increased B2B sales

Full roll out of selective distribution contracts across Europe

Need to improve on S&OP

Omnichannel

Basics first; data and process harmonization started

Haibike.com live

CRM D2C rolled out

Innovation

E-bike of the year Sparta M8B 2019; 2020 Batavus Finex bike of the year

Introduction of e-MTB Lapierre Zesty.

Urban Mobility. Launch of e-cargo bike CarQon

Need to improve process for on time delivery of innovations

P&A

Additional brands added to portfolio

Growth of online sales (third parties)

Service levels improved through extended cut-off times

Data harmonisation and warehouse management system improvements started

Fit to Compete

Complexity (# SKUs) further reduced

Reduction # of entities and smaller locations

Realised € 13 mio in supply chain savings with

• 6 mio contributing to bottom line offsetting inflation.

8

Summary of our progress

On track

Divestment NA organisation / secured US distribution

Continued growth of top line and added value

Selective distribution contracts implemented

Continued delivery of central supply chain savings

Urban mobility proposition rolled out across Europe Recovery Netherlands

Improvement needed

Innovation delivery

Sales and Operational Planning /TWC management

Digital and IT roadmap

9

Ruben Baldew- CFO

Divesture Completed of North America (discontinued operations)

Discontinued Operations/ Disposal North America				Comments

Sale in Q3 19 of North American operations and brand rights

New company (Alta) is distributor for Raleigh, Haibike, Ghost

Operational loss results €-12.1mioof North America till disposal in August

Impact disposal North America €-38.4mioof which € -44.4 mio in discontinued operations and +€ 6.0 mio in continued operations

•Sale of the Canadian brand registrations to CTC in July 2019 with a gain of € 3.0 mio in discontinued operations and benefit of € 11.4 mio in continued

operations (other income).

•Net transaction results on the sale of the discontinued € -31.8 mio. The transaction result in continued operation was € -5.4 mio (write off of brands in operating expenses).

•Translation reserve € -7.9 mio: Impact of historical exchange rate difference within equity (from translation reserve through P&L to other reserves)

•Closing and restructuring costs € -7.8 mio

Accell expects Accell expects qualification for the Dutch liquidation loss facility to be probable (+ € 21.4 mio).

11

Net Sales Growth and Profit 2019

Net Sales				Profit 2019

	% Growth		% Added value	EBIT	EBIT
				Y-o-Y		excl one-offs
	+7.5%	FY		+53 bps		€ 60 mio
FY			€ 55 mio

PY

+6.1%

PY

+82 bps

€ 51 mio

€ 56 mio

12

Growth Accelerates from 6.1% to 7.5% Driven by H1

Growth				Comments

20192018

•Growth from 6.1% to 7.5% on FY

FY

+7.5%

+6.1%

•Driven by growth in H1 8.8% vs 3.2% in H1 2018

H1

+8.8%

+3.2%

•Solid growth in H2 but below forecast due to delayed innovations

H2

+5.7%

+10.4%

13

Performance 2019 Bicycle Regions

DACH

																+1,8%
															429
		+1,4%								421
				273					+2,7%
	269
												156
							152
		H1							H2								FY
									2018			2019

• Slow growth due to delay of some major innovations
• Germany +5%, decline mainly driven by smaller countries

								Benelux																Other
															+7, 3%																				+9,0%
			+8,6%														220																						161
									205							+17,3%					-0,3%	148
				135				+5,2%
		125																							92
																							78						70
												85															70
								81
				H1			H2								FY						H1			H2							FY
									2018			2019																		2018		2019
•	Accell NL outperforming market growth			•Strong performance of Raleigh e-bikes in
•	Continued strong e-bike market									UK
•Sparta, Batavus, Koga growing double digit			•H2 sales flat due to lower sales Haibike in
																											UK and Southern Europe

Net sales numbers in € mio, based on geographicallocation of entity. P&A excluded

Performance 2019 Velosophy and Parts & Accessories

							Velosophy														P&A
															+254,3%																			+6,8%
															35																								266
										+81,7%												+6,2%							249
																								+7,4%
												18													134						131
					17
																		127		122
							10					10
0
			H1						H2						FY							H1			H2								FY
							2018			2019																		2018			2019
•Acquired and consolidated per August		•Growth mainly driven by DACH and UK
2018																				•XLC introduced in premium segment

• 47% annualized growth across countries

Net sales numbers in € mio

Growth Track Continues

		Net Sales 2013 - 2019
						+7. 5%
						1,111
			+7.5%			35	Velosophy
					1,033
						Total
					10
				974
			933
		853
	768				1,023	1,076
719
2013	2014	2015	2016	2017	2018	2019
2013-2017 core (Accell Group excl North America); 2018 and 2019 continued operations

Comments

• Average growth over last 7 years 7.5%
• 2019 growth in line with average since
  2013
• Additional contribution of € 25 mio by Velosophy of which € 15 mio due to annualized effect

16

Continued Shift of Portfolio To E-bikes and Cargo

Categories as % of net sales		% Growth FY 19
	974	1.033	1.111		like for like
Trad Bikes	24%	20%	16%	Trad	-13%
	3%
	0%	1%
Cargo
	24%
Parts	24%	24%	Cargo	47%
				Parts	7%
E-bikes	51%	55%	56%
				E-bike	11%
	2017	2018	2019

Comments

• Portfolio continues to shift to growing categories.
• In 2019 84% in growing categories up from 76% in 2017. Expected to move further to 90%
• Cargo was 3% of net sales in 2019. Potential to become 5% to 7% of portfolio. Growth 2019 47% (annualised)
• E-bikesexpected to move towards 60% of portfolio of net sales. Growth 2019 of 11%
• Traditional bikes expected to move towards 10% of net sales. Decline-13% in 2019

17

Added Value % Up 53 bps

			Added Value % 2013 - 2019
							Actuals
33.0%			33.0%
32.5%
32.0%	31.7%	31.6%
31.5%				31.0%
31.0%						30.7%
30.5%						30.2%
30.0%					29.6%
29.5%
29.0%
28.5%
1.0%
0.5%
0.0%	2013	2014	2015	2016	2017	2018	2019
2013-2017 core (Accell Group excl North America); 2018 and 2019 continued operations

Comments

• Added value shows gradual increase since start of revised strategy
• € 13 mio supply chain savings of which € 6 mio to the bottom line
• Forex offsetting material inflation
• Around € 2 mio move to Opex

18

Opex Increase Due to Growth and Planned Additional Strategy Costs

			OPEX 2018 - 2019
								292
							4
			+14 mio YoY		12
	+3 mio YoY
258
2018A	One off 19 One Off 2018	Move	Distribution	Production	Velosophy	Central IT,	Other	2019A
	(mainly	from AV				R&D, Markt

write off)

Comments

Opex increased from € 258 to € 292 mio, up € 33 mio

1. One-off's and move from Added Value: € 3 mio
2. • € 2 mio move from added value
   • € 6 mioone-offs 2019 (mainly write-off Diamondback)
   • € 5 mioone-offs in 2018
3. "Variable" related costs driven by growth approximately€ 14 mio
   •Distribution € +5 mio and production € + 4 mio increases linked to higher net sales.
4. • Distribution and production costs around 35% of total Opex

• € 5 mio annualized effect Velosophy (acquired summer 2018)

1. Strategy€ 12 mio: additional digital, central Marketing and R&D investments.

• In total cumulative € 24 mio additional Opex spend on strategy implementation.
• Vast majority of additional investment now behind us

4) Other € 4 mio(eg local activation costs, provision for quality)

19

EBIT% Margin Up At 5.4%

EBIT% 2013 - 2019

																				Strat Target
12%																				Actuals/ Plan
10%
8%						8.0%	7.7%
			7.0%			6.4%
6%			5.4%					5.0%	5.4%	4.9%
4%
2%
0%
		2013	2014	2015	2016	2017	2018	2019	2019 excl

One Off

2013-2017 core (Accell Group excl North America); 2018 and 2019 continued operations

Comments

• EBIT up € 9 mio and 40 bps versus 2018
• Increase driven by:
• • topline growth 7.5%
  • higher added value 53 bps
  • One-offsof € 6 mio related to CTC deal
• Excludingone-offs, EBIT margin came in at 4.9% mainly due to planned additional costs as part of the strategic agenda. Impact of these additional costs around 110 bps

20

Total Group: Net profit Decline due to Discontinued Operations

Profit & Loss 2019 - 2018				EBIT Excl One-Off2019-2018

Comments

•Growth 7.5% with H1 at 8.8% and H2 at 5.7%

•Other income in continued operations of €12 mio mainly linked to sale to CTC

•Added value increaseof 53 bps driven by savings, move to Opex offsetting inflation

•Opex increase driven by:

•One off and accounting € 3 mio

•Variable costs € 14 mio

•Strategy € 12 mio

•Other € 4 mio

•Income tax positively impacted driven by recognition of deferred tax asset

•Discontinued € 57 mio, see breakdown earlier

•Net profit € 2.8 mio of which € 59.3 mio in continued operations

•EBIT excl one-offs € 55 mio; one off € 5.1 mio

•Income of + € 11.4 mio as a result of CTC deal

•Write off of -/- € 5.4 mio as a result of Regent deal

•-/- € 0.8 mio: mainly related to restructuring

21

Trade Working Capital Disappointing at Year-end, Affecting Average As Well

	Year End Position December
			+3,5%
				+6,1%
		29,4%		32,4%
	28,9%	26,3%
	30,5%	31,0%	31,0%	34,8%
	12,6%	12,1%	11,7%	12,7%
	(14,3%)	(13,7%)	(16,5%)	(15,1%)
	2016	2017	2018	2019
2013-2018	core (Accell Group excl North America); 2019 continued operations

Average FY December

			-1,2%
				+0,7%
	32,5%	30,5%	30,6%	31,3%
Inventory	29,7%			31,9%
Debtors	29,5%	29,3%
Creditors
TWC%
	15,2%	15,0%	14,6%	15,1%
	(12,4%)	(14,1%)	(13,4%)	(15,7%)
	2016	2017	2018	2019
2013-2018 core (Accell Group excl North America); 2019 continued	operations

Comments

•End of year development working capital very disappointing due to:	•Average at 70 bps
•	Lower than expected and forecasted sales in last half year	•	Increase driven by inventories due to delay innovation
•Innovation delay with component available on stock		and lower sales in Q4
•	Phasing of creditors	•	Improvements on creditors

• • Debtor position with new distributor in North America
• Improvements plans are being executed:
• • Focus top 20 per brand/country reduction. Focus main customers
  • Bias and error tracking, put in target setting
  • Further move to standardized platforms
  • Systems and data improvement
  • Innovation planning and overall calendar drumbeat revised

22

Group Cash Flow Impacted by Higher TWC

Cash flow 2019 - 2018				Cash	flow 2019 - 2018

Comments

• Operating cash flow €-62.6 mio includes discontinued impact of € -23.3 mio
• Negative cash flow driven by increase in working capital
• Working capital increase approx. € +70 mio
• • Sales growth related approx. €+20-25 mio
  • Impact disposal North America deal approx. €-15 mio
  • Remaining approx. € 60 mio due to innovation delay and lower sales than forecast
• Free cash flow €-61.6 mio of which from discontinued operations € -20.3 mio
• Cash benefit proceed of sale Canada € 14 mio offsetting capex investments

23

Covenant Ratios

Covenants 2019 - 2018

Comments

• Accell Group has voluntarily repaid € 25 mio on the term loan of € 100 mio nominal in the first quarter of 2019
• Outstandings contain the working capital financing of € 15 mio insofar as used for acquisitions of companies (excluding acquired working capital), this relates to Velosophy
• Rolling EBITDA is corrected for frozen GAAP adjustment (IFRS 16) of € 9.9 mio and normalized for positiveone-off charges of € 12.3 mio (mainly benefit sale brand registrations to CTC)
• Solvency is calculated with equity and balance sheet total corrected for intangibles and frozen GAAP adjustment (IFRS 16)
• At 31 December 2019 the borrowing reference headroom was € 49 mio (31 December 2018: € 117 mio)

24

Total Group: Full Balance Sheet

Total Group Assets & Liabilities				Equity & Liabilities

25

Cash, Capital and Debt

Total Group Return on Capital and Debt

ROCE	Net Debt / rolling
	EBITDA

11.4%	3.1
Excl. IFRS 16 & one-offs: 3.6
Excl. IFRS 16 & one-offs: 10.6%	€ 265 mio
	Excl. IFRS 16: 235 mio

FY 2018: 10.8%	FY 2018: 2.4
excl IFRS, one-offs 11.8%	FY (pre IFRS 16) € 152 mio

Comments

• ROCE at 11.4%; increase versus previous year driven by higher EBIT
• ROCE excluding one off at 10.6% (PY 11.8%); Decrease due to higher working capital
• Higher working capital also main driver of increase of net debt

26

Financial Summary

Main conclusions 2019

• Net sales growth at 7.5%in line with long term average
• • Competitive recovery Netherlands and strong growth UK, Nordics and Southern Europe
  • DACH results hampered by delayed innovation
  • Velosophy with main brand Babboe showing excellent growth in Europe
  • P&A at 7% growth driven by higher online sales
• Portfolio continues to shift further toe-bike and cargo.
• Added value % continuing gradual increase of last year. Improvement amongst others thanks to savings agenda
• Opex increaseddriven by variable costs and additional costs related to strategy. The majority of additional investments linked to strategy now behind us
• EBIT up € 9 mio, excluding one-offs € 1 mio decrease
• Disposal North America completedand in line with earlier communication, tax asset recognised of € 21 mio
• Net profit declined to 3 miodue to discontinued operations. Net profit continuing operations € 59.3 mio
• Disappointing Working Capital up 611 bps at year endand 70 bps average leading to negative overall cash flow and increase of net debt. Required improvement plans in place and being executed

27

Ton Anbeek - CEO

2020 Priorities

1. Improve demand planning/forecasting
2. Improve in time in full innovation delivery
3. Continue reducing complexity (business/assortment)
4. Strict cost control
5. Drive cargo /urban mobility solutions
6. Continue savings program and drive cost efficiencies
7. Mitigate Corona risk

29

2020 Outlook

1. Current market momentum expected to continue driven by electrification trend, investments in infrastructure and tax benefits
2. Barring unforeseen circumstances we expect net sales and EBIT (excl.one-offs) to grow
3. However impact Corona virus on overall economy and Accell business unclear and could influence 2020 results
4. 1. Situation is being monitored closely
   2. Current stocks levels provide a buffer
   3. We anticipate delay in delivery of components affecting innovation introductions

30