Message from the CEO
The year 2018 was very much a year of contrasts for Accell Group. On the one hand, our core operations (excluding North America) recorded solid turnover growth of 6.1% with an EBIT margin of 5.2% and an operating result of € 54 million. At the same time, 2018 was also a year of transition, in which we made numerous adjustments and changes in line with our refined strategy ‘Lead global. Win local’, to enable us to generate more growth and create more value in the years 2019-2022.
At the end of 2018, we decided to focus on Europe and run our North American operations (around 6% of our group turnover) as a separate business. We made this decision in response to the persistently disappointing results and the fact that we do not expect to realise any marked improvement in North America in the near future. In 2018, as a group we ultimately realised a total added value of 29.7% (2017: 28.3%). Working capital also declined to 26.4% last year (2017: 29.5%).
The trend on the e-bike front was once again very positive in 2018. E-bikes accounted for 71% of overall bicycle turnover in 2018 (63% in 2017). This constitutes a 17% increase in e-bike sales compared to 2017. The e-MTBs in German-language countries and France (Haibike, Ghost and Lapierre) made particularly strong contributions to this growth. The bicycle parts and accessories operations in Europe also performed well in 2018 and recorded a solid improvement in turnover.
Accell the Netherlands recorded markedly lower turnover than in 2017. This was largely due to the fact that we chose to bid farewell to a key internet player in June 2018, and to a number of delayed innovations at Koga and at Sparta/Batavus. At the same time, we are now seeing a gradual improvement in our relationship with the specialist retail trade in the Netherlands. For instance, the order intake based on signed contracts was up 10% as per year-end 2018.
Due to developments in North America and in the Netherlands, group volume once again declined in 2018, to 1.1 million bicycles sold. This decline pertains primarily to regular bikes.
Following the announcement of the strategy refinement in March 2018, we began implementing the new, centralised organisational structure, primarily for the commercial and supply chain processes and functional areas. We also put together a new senior management team that comprises a mix of our own people with the right expertise and newly hired talents from outside the company, primarily in the field of commerce and e-commerce. Following the arrival of Ruben Baldew as our new CFO on 1 November 2018, our team is now at full strength.
We acquired the mobile bicycle service Beeline in North America in March 2018 and Dutch (e-)cargo bike specialist Velosophy (known for Babboe) in August 2018. Both strategic acquisitions made an immediate contribution to the realisation of our growth targets for 2022. Velosophy recorded strong sales in 2018 at margins well above the group average.
In May, we launched the centralisation of the management of our activities in the field of bicycle parts and accessories and continued the expansion of our own rapidly growing XLC brand. We also integrated our bicycle parts and accessories activities with our bicycle activities (marketing, sales and support) in all regions.
In the summer of 2018, we made a start on the implementation of a new regional division. We have defined a strategic brands portfolio for each region based on our selection of 11 strategic brands. We also refined the positioning of our brands on the basis of consumer surveys and this now provides much clearer direction for the innovation, communication and distribution of each brand. The key task for the new regions is the perfect execution of the annual plans without any distractions from their own local and independent innovation funnels, their own production facilities or their own export strategies.
In the summer of 2018, we also made a start setting up our omnichannel environment with our own e-commerce platforms, experience centres and the mobile bicycle service of Beeline. This is typically, something we always do in close cooperation with and via our dealers.
The primary driver behind all these major changes is our ambition to grow into a truly consumer-driven e-commerce and marketing company in the years ahead. This means that all our innovations in the coming years will be increasingly driven by and developed on the basis of real consumer needs. Innovations will focus primarily on e-bikes, smart technology and clean, healthy urban mobility solutions aimed at creating more sustainable cities. In short, nothing inspires us more than highly satisfied consumers and dealers!
Finally, we aim to generate savings of more than € 60 million in the coming years, especially in the supply chain, by reducing complexity (40% reduction of all models and stock keeping units as of end 2019), the standardisation of platforms (bicycle frames) and the rationalisation of our supply chain footprint. We launched the first initiatives on this front in 2018 and we will continue on this path in 2019. The first results of these efforts will be clearly visible from 2019 onwards, in a further increasing added value, lower working capital and a higher return on invested capital. The efficiency and sustainability of our own organisation will also contribute to this effort, through measures such as devoting continuous attention to the reduction of our energy consumption and the reduction of packaging, especially the use of plastic.
As a company, we have now reached the stage at which in 2019 we will be able to harvest the first fruits of all the initiatives we launched in 2018 in the context of our refined strategy. I would therefore like to thank all our staff for their commitment, their contribution and their loyalty in what was certainly not always an easy transitional phase we are going through as a company It is only by working together that we will ultimately make the difference and actually realise our ambition to be an international, professional, trendsetting consumer and dealer-driven, omnichannel marketing company in bicycles, bicycle parts and accessories.
Chairman of the Board