Accell N : Group reports net sales up 3.3% at € 699 million and EBIT up 35.5% at € 61 million

PRESS RELEASE

HALF YEAR RESULTS 2021

ACCELL GROUP REPORTS NET SALES UP 3.3% AT € 699 MILLION AND EBIT UP 35.5% AT € 61 MILLION

CONTINUED PROFIT ACCRETION AND MARGIN EXPANSION AMIDST GLOBAL SUPPLY ISSUES

HEERENVEEN (THE NETHERLANDS), 23 July 2021 - Accell Group N.V., the leading European bicycle company with well-known brands such as Haibike, Koga, Batavus and Raleigh, today announces its half-year 2021 results.

HIGHLIGHTS

Net sales of € 699.1 million, up 3.3% with supply and logistical issues hampering further uplift

EBIT of € 61.1 million, up 35.5% thanks to higher sales and improved added value, EBIT margin up 208 bps at 8.7%

Net profit of € 44.2 million, up 54.3% mainly driven by higher EBIT

Trade working capital improved slightly to 29.6% from 29.7% per end-June 2020, amongst others driven by lower debtor positions oset by higher component inventory

Negative free cash flow of € 71.9 million, higher cash out as a consequence of inventory build up, partly oset by higher EBITDA

in millions of euro (unless otherwise stated)	H1 2021	H1 2020
Net sales	699.1
676.9
Added value%	30.1%
27.6%
EBIT1)	61.1
45.1
Underlying EBIT 2)	61.1	47.5
Net Profit	44.2
28.6
Trade working capital	390.1
338.1
Free cash flow	-71.9
115.9

1. Operating result derived from the interim financial statements is in this overview presented as EBIT
2. EBIT excluding one-os (in 2020 + € 2.4 mio)

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Ton Anbeek, CEO Accell Group: "Despite lockdowns and closed bike shops in various countries in the first four months of the year, demand for bikes and parts & accessories remained strong across Europe and across segments.

As stated before global supply chain constraints for critical components have limited product availability and therefore impacted our bicycle sales in H1. Our added value rebounded thanks to lower discounts and pricing actions taken, which have more than offset increases in material prices and additional supply chain expenses. Combined with our continued focus on cost management this has resulted in a substantial EBIT increase and further margin expansion.

Our new and innovative bike collections again received multiple international recognitions and awards, such as Bike of the Year for the Batavus Dinsdag and design & Innovation awards for our Haibike AllMtn 7, Lapierre Overvolt and Koga Pace. We also continued our digital roll out at pace with the launch of new Lapierre and Sparta websites.

Overall demand for our bicycle brands and products remains high across Europe. This clearly reflects the increased recognition of the underlying positive impact of cycling on health, business and the environment. We are well on track to meet our 2022 targets."

GROUP PERFORMANCE

in millions of euro (unless otherwise stated)	H1 2021	H1 2020
Net turnover	699.1
676.9
Other income	0.0
0.0
Net sales growth% vs py	3.3%
4.0%
Added value	210.2	186.9
Added value%	30.1%
27.6%
Added value bps vs py	246
-359
OPEX	-149.1	-141.8

EBIT	61.1	45.1
EBIT%	8.7%
6.7%
Net finance costs	-6.0	-6.4
Income from equity-accounted investees, net of tax	2.3
0.4
Result on the sale of subsidiaries	0.7
-
Income tax expense	-14.0
-10.5
Net profit	44.2	28.6

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in millions of euro (unless otherwise stated)	H1 2021	H1 2020
EBIT reported	61.1
45.1
One-off	-
2.4
EBIT excl. one-off	61.1
47.5
TWC% net sales	29.6%	29.7%
TWC in bps vs py	-16
-243

Net sales came in at € 699.1 million, up 3.3% versus € 676.9 million in H1 2020. Corrected for the disposal of the fitness and motorcycle parts business of Tunturi Sweden the organic growth was 3.7% in H1. Growth was mainly driven by the 29.3% sales increase at Parts & Accessories. Order books for e-bikes remained very strong, but sales came in 6% lower due to critical component shortages as a result of the global supply chain constraints. Sales of traditional bikes declined by 7%. Cargo bike sales came in 43% higher, now representing 4% of total net sales.

NET TURNOVER BASED ON LOCATION OF THE CUSTOMER

in millions of euro	H1 2021	H1 2020	Growth%
Benelux 1)	134.0
134.3	-0.2%
Central 2)	198.1	234.3
-15.4%
Other regions 3)	158.8	147.3	7.9%
Accell Bicycles	490.9
515.8	-4.8%
Accell Parts	208.2
161.1	29.3%
Accell Group	699.1
676.9	3.3%

1. Benelux: Netherlands, Belgium and Luxembourg
2. Central: Germany, Austria, Switzerland and Eastern-Europe regions
3. Other bike regions: France, UK, Ireland, Nordics and other regions

In Central region, bicycle sales declined by 15.4% due to component shortages which especially manifest in the sport segment (Haibike and Ghost) but also due to limited alternatives for critical parts for Winora bicycles. In the Benelux region, bicycle sales remained fairly stable at -0.2% as specific component shortages were partly offset by alternative supplies. In the Other regions bicycle sales were up 7.9%, mainly driven by stronger sales in France, also helped by a relatively low H1 2020 comparison base due to the lockdowns. Cargo bike sales were up significantly in all three regions.

Parts & Accessories sales increased by 29.3%. Growth was very strong throughout the year, driven by strong sales to dealers and online shops across Europe. Sales of our own XLC brand grew by 40.1% in this segment.

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Added value increased to € 210.2 million from € 186.9 million, up € 23.3 million. As a percentage of net sales, added value increased 246 bps to 30.1% from 27.6% in H1 2020 thanks to:

Lower discounts, H1 2020 had higher discounts for conversion of stock into cash, especially during the first lockdowns

Higher pricing including passing through of increased costs of materials

Opex increased to € 149.1 million from € 141.8 million, up € 7.3 million. As a percentage of net sales, opex increased 38 bps to 21.3%. The absolute increase was driven by:

-/- € 2 million lower one-offs costs (H1 2020 mainly impairment IT)

+ € 1 million higher distribution costs, attributable in full to volume growth mainly in Parts & Accessories

+ € 3 million increased production (assembly) costs resulting from less efficiency driven by supply and logistical limitations

+ € 3 million more costs in marketing and R&D versus the restricted H1 2020 levels of expenses in response to the Covid-19 outbreak

+ € 2 million other (including inflation)

EBIT came in at € 61.1 million, up 35.5%, reflecting a marked EBIT-margin expansion of 208 bps at 8.7% (H1 2020: 6.7%). No one-offs were recorded in H1 2021, which implies a 28.6% increase versus underlying EBIT of € 47.5 million in H1 2020.

FINANCE COSTS, TAX EXPENSES AND PROFIT

With finance costs slightly below H1 2020, the GO-C facility upcharge is fully offset by lower interest margin driven by a low leverage ratio. The effective tax rate stood at 24.1% versus 26.8% in H1 2020. Net profit increased with 54.3% to € 44.2 million versus € 28.6 million in H1 2020.

TRADE WORKING CAPITAL

	H1 2021		H1 2021	FY 2020		FY 2020		H1 2020		H1 2020
	x €1	%	x €1		%		x €1		%
	million	million			million
Trade working capital	390.1	29.6%					338.1		29.7%
251.5		19.4%
Inventory	438.5	33.2%	285.3		22.0%		317.7		27.9%
Trade receivables	167.0	12.7%					197.1		17.3%
104.0		8.0%
Trade liabilities	215.4	16.3%					176.7		15.5%
137.8		10.6%

Trade working capital relative to net sales of last twelve months (TWC%) came in at 29.6%, 16 bps below end- June 2020. Inventory increases were offset by lower receivables and higher creditors. On a twelve months average the TWC% decreased - 972 bps towards 23.4% from 33.1% in H1 2020.

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TWC% versus year-end 2020 was 1018 bps higher. At year-end, inventory levels were exceptionally low due to a combination of the elevated high demand for our bike products and the emergence of global supply shortages. This implied a need to replenish stock and at the same time build up inventory as part of the regular seasonal pattern. In addition, inventory levels increased due to longer and more unstable lead times from suppliers and logistical providers which caused the conversion from component stock to finished products to be longer and less efficient.

FINANCIAL EFFECTIVENESS AND CAPITAL EFFICIENCY

in millions of euro (unless otherwise stated)	H1 2021	H1 2020
ROCE (Rolling EBIT / Average capital employed) 1)	17.0%
9.1%
Net debt	154.2	153.7
Net debt / Rolling EBITDA	1.4
2.0

1. Capital employed is the sum of goodwill, other intangible assets, property, plant and equipment, right-of-use assets, inventories and trade and other receivables minus trade payables and other current liabilities.

Free cash flow came in at -/- € 71.9 million, as EBITDA of € 71.8 million was offset by the trade working capital needs (-/- € 138.6 million) and other movements (-/- € 5.1 million), mainly related to investing activities.

Net debt came in at € 154.2 million versus € 153.7 million per end-June 2020. Combined with a higher underlying EBITDA, net debt/rolling EBITDA came in at 1.4. ROCE increased to 17% on the back of a higher rolling twelve months EBIT.

FINANCING AND BANK COVENANTS

On 31 March 2021, we drew € 55 million under the GO-C facility increasing it to € 115 million. On 30 June 2021, the first scheduled repayment of € 23 million was made reducing the GO-C facility to € 92 million. The agreed repayment schedule is € 23 million per quarter, starting on 30 June 2021 with the last payment on 30 June 2022.

Accell Group complied with the financial covenants in the group financing agreement as of 30 June 2021 and as of all earlier test dates.

MANAGEMENT AGENDA AND OUTLOOK

The positive impact of cycling has been firmly recognized by governments, businesses and consumers alike. Electrification, bicycle infrastructure investments, government fiscal incentives and subsidies will remain solid growth drivers for the years to come. Combined with our strong portfolio, these favourable secular trends translate into high demand for our bicycle brands and products.

Our order books are strong and well-filled and we expect that the traditional bike season will extend into the second half of 2021. However, global supply chain constraints will continue and sales levels both on bikes as well as on P&A will be strongly dependent on the timely arrival of certain components, particularly from the Asia region where the spread of the Delta variant has been prompting new lockdowns recently.

Backed by strong bicycle sector tailwinds, our strong portfolio and all supply and sales & operations planning (S&OP) actions taken, we are well on track to deliver on our 2022 targets.

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