Accell N : Group H1 2020 results

H1 2020 results

Ton Anbeek - CEO

Ruben Baldew - CFO

24 July 2020

Disclaimer

• This presentation may contain forward-looking statements. These are based on our current plans, expectations and projections about future events.
• Any forward-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

3

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

H1 highlights

• Steep post lockdown sales rebound in May and June bringing YTD net sales to +4%
• Intensified focus on cash delivery; strict governance on expenses and working capital reduction in response to COVID-19 outbreak
• Added value down 359 bps due to negative mix, discounts during lockdown and higher supply chain costs mainly due to disruptions caused by COVID-19
• Opex down € 6 mio. Excluding one-offs down € 8 mio driven by cost savings
• Working capital improved 243 bps to 29.7% of net sales versus end-June 2019 due to substantially reduced inventory levels
• Strong cash generation resulting in a positive cash flow of € 129 mio and a net debt / rolling EBITDA of 2.0
• Additional headroom secured to deal with uncertainty and depth of COVID-19
• Strategy progressing further with improved innovation, strong P&A expansion and optimized omnichannel plans

5

H1 key financial performance indicators

Net sales	Added value %	EBIT /	TWC YoY /
growth	vs PY	EBIT excl. one-offs	Avg TWC

+4.0%	€ 45 mio	-243 bps
-359 bps
	€ 48 mio	+368 bps

6

Recap of strategy

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

					Centralised & integrated
	Innovation
					P&A business

Fit to compete

7

H1 strategic progress

Lead Global

Velosophy expanding further across Europe

Brand teams in place, coordinated by country leads

Innovation centrally led with sign-off in local brand innovation team

Point of purchase

Strong growth in the Netherlands. Availability on top runners hampering further uplift

Strong recovery in Germany after lockdown; German stock has been shared with UK and Nordics during lockdown

Nordics, UK, Southern Europe strong consumer demand and penetration growth of e-bikes

Omnichannel

Focus on brand websites:

• Strong availability through search
• Click and collect functionality
• Go live Raleigh.co.uk
• • D2C growth Raleigh UK of 460%

Optimizing dealer stock and order management through CRM and order entry tools

Innovation

Continued award winning bikes in the Netherlands (eg. Batavus Finez bike of the Year)

Premium e-cargo bike Carqon launched and well received with strong demand so far

Haibike Flyon production up and running

P&A

Additional brands added to portfolio

Continued excellent growth of online sales (third parties)

29% growth XLC business in H1

Fit to Compete

Cash delivery and product availability main focus points in 2020

Higher costs per bike due to COVID-19 disruptions

Complexity (# SKUs) further reduced and good progress booked with standardization (frame platforms)

8

Well on track with ample room for further improvement

On track

Continued strong underlying demand for our products and brands as seen in May and June recovery

Working capital reduction

Overall cash delivery with additional headroom secured

Fixed costs increase halted

Urban mobility growth continued, with launch Carqon P&A growth

Improvement needed

Supply chain disruptions hampering availability and costs

Lower added value due to negative mix, discounts and higher supply chain costs

Average working capital and inventory levels

9

Ruben Baldew - CFO

10

Net sales and profit

Net sales				Profit

	% Growth		% Added value	EBIT	EBIT
				Y-o-Y		excl. one-offs
H1	+4.0%	H1		-359 bps		€ 45 mio	€ 48 mio

H1 PY +8.8%

H1 PY +35 bps

€ 56 mio

€ 56 mio

11

Performance per region

Central			Benelux
-10,3%		+5,0%
250		122	128
225
2019		2019
	2020		2020
H1			H1

• March & April lockdowns affected sales H1	•	COVID-19 impact was only limited as
•	Strong recovery after lockdown		shops remained open
•	Stock of German brands have been sold in	•	Growth driven by Batavus thanks to strong
	Nordics and UK during lockdown		portfolio and activation

• Flyon fully in production and rolled out
• Order book MY 2021 looks promising

Dach renamed into Central as Eastern European countries are also included

	Other
+5,5%
135	143
	2019
	2020
	H1

• Growth in Nordics and UK very strong driven across brands thanks to growth bike market
• France sales slightly down due to lockdown from March into 2nd week of May

Net sales numbers in € mio, based on geographical location of customer. P&A and Velosophy excluded.

12

Performance Velosophy and Parts & Accessories

	Velosophy
22.3%
	21
17	2019
	2020
	H1

• Cargo bike sales continued strongly also thanks to D2C model in various countries
• Growth held back by lockdowns in France & Germany
• Next generation e-cargo bike Carqon successfully launched in June

P&A
+27.3%
161
127	2019
	2020
H1

• Excellent growth of P&A driven by:
• • Indoor trainer sales during lockdown
  • Strong growth from repair shops
  • Additional business through (new) online customers
• XLC brand grows 29%

Net sales numbers in € mio

13

Growth track continues

		Net sales H1 2013 - H1 2020				Comments
							+4.0%	• Average growth over last 7 years 6.8%
								677
				+6.8%		651		• 2020 growth below 7-year average
					598
				580			due to sales impact of lockdowns,
			559
							particularly in Germany and France
		495
428	443
2013	2014	2015	2016	2017	2018	2019		2020
2013-2017 core (Accell Group excl. North America); 2018 - 2020 continuing operations

14

Change in mix due to strong growth P&A and stable e-bikes

Categories as % of net sales	% Growth H1 vs PY	Comments
	598	651	677			• Traditional bikes down 9% in line with
Cargo	0%	3%	3%
		historical average
20%
Parts	19%
24%	Cargo		22%
Traditional	20%	16%				• Cargo bikes now at +3% of business;
14%			majority of cargo bikes are e-bikes
				Parts		27%
						• Parts up 27% growth due to online and
				Traditional	-9%	repair shops
E-bikes	61%	62%	60%
		• E-bikes continue to grow in every
					-1%	country except Germany due to
				E-bikes	lockdown
	2018 H1	2019 H1	2020 H1

15

Added value down to 27.6%

			Added value % H1 2013 - H1 2020
								Actuals
33%	32.5%		32.4%
32%		31.5%		31.4%			31.2%
						30.8%
31%
30%					29.5%
29%
28%								27.6%
27%
26%
1%
0%	2013 H1	2014 H1	2015 H1	2016 H1	2017 H1	2018 H1	2019 H1	2020 H1

2013-2017 core (Accell Group excl. North America); 2018 - 2020 June continuing operations.

2018 Added value is restated by excl. the IC deliveries towards North American operations, 30.8% vs 30.9% in H1 2019 presentation.

Comments

• COVID-19breaks added value trend
• Margin down 359 bps due to:
• • Mix effects
  • Discounts
  • Higher supply chain costs as a result of COVID-19 combined with adverse forex

16

Opex reduced by € 5.5 mio
		Opex H1 2019 - H1 2020			Comments
							•	Opex reduced by € 5.5 mio from € 147.3 to € 141.8 mio.
								As % of net sales, Opex decreased 170 bps
			2				•	Excluding one-offs Opex decreased € 7.9 mio (195 bps)
		147		-5
							with main movements
	2				2
145
							• One-offs € 2.4 mio:
						-5
								1) € 3.0 mio charge due to impairment (IT
							142	related) plus some restructuring effects
							2) € 0.6 mio benefit government support mainly
								in Germany, France and Turkey
								• Variable costs down € 2.6 mio:
								1) Lower spend of € 4.8 mio in production as
								reduced need for flexible labor due to
								lockdowns
								2) Distribution increase of € 2.2 mio attributable
								in full to P&A volume growth with underlying
								improved average dropsize
2019 Core	Allocated	2019 Discontinued	One-off 20	Production	Distribution	Other savings	2020A
	Charges US							• Other cost reduction of € 5.3 mio in marketing and
22.3% of net		22.6% of net					20.9% of net
					overheads as part of the COVID-19 measures
sales		sales					sales

17

EBIT-margin down at 6.7% due to lower added value

EBIT% H1 2013 - H1 2020

Strat Target

12%																				Actuals/Plan
						10,4%	10,4%
10%		8,3%	8,9%					8,9%			8,6%
8%										8,1%
															6,7%	7,0%
6%
4%
2%
0%
			2014	2015	2016	2017	2018	2019	2020			2020 excl.
2013

One-offs

Comments

• EBIT down € 10.6 mio and 189 bps versus H1 2019
• Decrease driven by:
• • Lower added value -359 bps
  • Partly compensated by lower Opex as percentage of net sales (-170 bps)
• EBIT excluding one-offs at 7.0%

2013-2017 core (Accell Group excl. North America); 2018, 2019 and 2020 continuing operations

18

Net profit declines to € 28.6 mio due to added value shortfall

Profit & Loss H1 2020 - H1 2019
			EBIT excl. one-offs H1 2020 - H1 2019

Comments

•	Growth 4% versus 8.8% last year while added value
	decreased 359 bps
•	Opex reduced by		5.5 mio leading to EBIT excluding
	one-offs at € 48	mio
		€

• Interest costs up due to higher borrowings

• Income tax down due to lower profit

• Previous year discontinued were operating losses of the divested non core North American operation

19

Trade working capital improved due to inventory reductions

	June - Periodic				June - Average
		+0.3%					+2.6%
						+3.7%
		-2.4%					33,1%
	34,2%			30,5%	31,5%
	32,2%			29,4%
29,4%		29,7%
				Inventory				33.0%
27,6%	29,2%	30,7%	27,9%	Debtors	28.8%	30.4%	29.4%
				Creditors
				TWC%
16,7%	17,7%	17,1%	17,3%		15.0%	14.9%	14.7%	15.1%
-14,9%	-12,6%	-15,6%	-15,5%		(13.3%)	(13.9%)	(14.7%)	(15.0%)
2017	2018	2019	2020		2017	2018	2019	2020
2013-2018 core (Accell Group excl. North America); 2019 -2020 continued operations		2013-2018 core (Accell Group excl. North America); 2019 -2020 continued operations
				Comments

June Periodic

• Working capital at end of June down 243 bps at 29.7% of net sales, driven by lower inventory (-272 bps)
• Reduction driven by strong May and June sales
• Focus in H2 2020 and Q1 2021 is to ensure right availability whilst continuing strong governance on working capital

June Average

• Average at +368 bps driven by inventory +360 bps
• High inventory position in Q4 2019
• Inventory increased further till May due to:
• • Normal season build up Jan/Feb into March
  • Lockdowns hampering sales March and April

20

TWC regular seasonal patterns. Cash conversion from Q2 to Q3

Rec Inv

Lia

Trade working capital avg 2018-2019(% on net sales)

Production peak	Delivery peak	Orders new year	Inventory new
									season
	Cash out		Cash in		Cash in	Cash out
36.1%
			33.1%					29.5%
19.6%
				28.2%
			17.4%					12.2%
						12.2%
34.6%		30.0%		29.0%		33.0%

		-12.9%
-18.1%	-14.2%		-15.7%
Q1	Q2	Q3	Q4

21

TWC patterns distorted due to lock down. Reductions as of May

			Trade working capital avg 2018-2019(% on net sales)			Trade working capital H1 2020(% on net sales)
Production peak	Delivery peak	Orders new year	Inventory new	Production peak	Delivery peak
									season
												Cash out		Cash in
	Cash out		Cash in		Cash in	Cash out
											38.6%
36.1%
			33.1%							18.6%		29.7%
							29.5%
19.6%
				28.2%
			17.4%					12.2%					17.3%
						12.2%
											40.9%
34.6%		30.0%		29.0%		33.0%					27.9%

		-12.9%
-18.1%	-14.2%		-15.7%	-20.8%	-15.5%
Q1	Q2	Q3	Q4	Q1	Q2

Rec Inv

Lia

22

Strong cash generation due to focus on cash, costs and TWC

Cash flow H1 2020

								297
		129		122			181
		-8		116
			-6
	70
59
Cash from	Cash from	Cash flows from	Interest	Cash from	Cash from	Free cash flow	Cash from	Net Cash
profits	working capital	operations	& Taxes	operating	investing		financing	Increase
				activities	activities		activities

				Cash flow H1 2019
58
	-69
								1
		-11	-10				29
				-21	-7
						-28
Cash from	Cash from	Cash flows from	Interest	Cash from	Cash from	Free cash flow	Cash from	Net Cash
profits	working capital	operations	& Taxes	operating	investing		financing	Increase
				activities	activities		activities

Comments

Operating cash flow € 129.1 mio driven by:

• Profit corrected for depreciation, amortization, finance costs and tax
• • 58.8 mio
• Change in working capital € 66.9 mio
• Provision, employee benefit and deferred revenue € 3.4 mio

Increase cash at bank € 297.3 mio driven by

• Free cash flow € +115.9 mio
• Financing activities € +181.5 mio
• • Accordion € +50 mio
  • GO-Cfinancing € +60 mio
  • Facility A € +70 mio
  • Other € +1.5 mio

23

Additional headroom secured and adjusted covenants

Financing

Financing Q1:

1. Term loan € 125 mio (incl. € 50 mio drawn in March under the Accordion)
2. Revolving Facility A € 175 mio
3. Revolving Facility B € 100 mio seasonal facility running from 1 December to 15 July

Additional financing Q2:

1. GO-Cbank loan € 115 mio until 30 June 2022. Government backed loan (80%)
   -> Drawings: € 60 mio H2 2020 and € 55 mio in Q1 2021 (if needed)
2. France government bank backed (90%) loan of € 5 mio

Other conditions during GO-C and before back to original covenants:

• No dividend distribution
• Limitations on disposals and acquisitions; approval needed above certain thresholds
• Margin increase of 30 bps (10 bps permanently on seasonal facility)

Covenants 2020

1. Term loan leverage: N/A
Relevant Period ending	Outstandings/EBITDA
	30-Sep-21	4.64:1
	31-Dec-21	3.11:1
	Each Relevant Period thereafter	2.50:1

2. Solvency ratio:	Relevant Period ending	Solvency Ratio
Q2 2020 = 23.4%	30-Jun-20	15.0%
31-Dec-20	15.0%
(cash and borrowings
30-Jun-21	16.2%
netted = 32.3%)
31-Dec-21	18.6%
	Each Relevant Period thereafter	25.0%

3. LTM Normalized EBITDA:
Relevant Period ending	LTM EBITDA (EUR)
Q2 2020 = € 58.1 mio	30-Jun-20	-30,000,000
	31-Sep-20	-58,900,000
	31-Dec-20	-70,600,000
	31-Mar-21	-51,400,000
	30-Jun-21	5,600,000

4. Minimum liquidity: € 416 mio (not less than € 25 mio)

5. Borrowing reference: headroom € 255 mio (remains unchanged)

24

Strong € 70.6 mio reduction of net debt

		Total group return on capital and net debt H1 2020
ROCE	Net debt	Net debt / rolling
			EBITDA

9.1%	€ 154 mio	2.0
9.0%	€ 123 mio	1.9
Excl. IFRS 16 & one-offs	Excl. IFRS 16	Excl. IFRS 16 & one-offs

H1 2019: 10.2%	H1 2019 € 224 mio	H1 2019: 3.1
Excl. IFRS 16, one-offs 10.9%	Excl. IFRS 16 € 195 mio	Excl. IFRS 16 & one-offs 2.8

Comments

• ROCE at 9.1%; decreased versus previous year due to lower EBIT
• Net debt reduced by € 70.6 mio versus end- June 2019 and € 112 mio vs year-end 2019. Main driver reduced working capital
• Net debt / rolling EBITDA at 2.0 (1.9 excl. one-offs and IFRS 16). Decrease due to cash management and working capital reduction

25

Balance sheet

	Assets				Equity & Liabilities

• Decrease in TWC versus December 19 and June 19
• Higher overall balance sheet driven by higher cash and borrowings. Will be optimized in H2

26

Financial summary

Main conclusions H1 2020

• Net sales growth 4.0%
• Added value % decreasing due to higher supply chain costs, negative mix and prioritising cash over margin %
• Opex decreased underlying by € 8 mio driven by reduction of costs in factories and overheads
• EBIT at € 45 mio, excluding one-offs € 48 mio
• Working Capital reduction 243 bps driven by inventory decrease, average working capital still up due to higher Q4 inventory and high inventory during lockdown
• Positive cash flow of € 129 mio. Net debt/rolling EBITDA at 2.0
• Additional headroom secured to deal with uncertainty and depth of COVID-19

27

Ton Anbeek - CEO

28

2020 Priorities

1. Health and safety employees
2. Deliver positive cash flow
3. 1. Strict expenses control
   2. Strict working capital management
4. Drive product availability as much as possible both for H2 2020 as well as for H1 2021
5. Continue improving demand planning/forecasting
6. Continue improvements in time in full innovation delivery
7. Continue complexity reduction (business/assortment/platform/components)
8. Drive cargo/urban mobility solutions

29

2020 Outlook

• Market momentum driven by electrification trend, investments in infrastructure and tax benefits. Recent events have further propelled this
• However supply chain disruption as a result of COVID-19 has led and will continue to lead to lower availability and higher costs. We therefore expect EBIT in 2020 to be lower than in 2019

30