Head NV reported that sales for the first three months of 2014 increased 1.6 percent to €70.4 million ($97mm) compared to the prior year as a surge at its Winter Sports division more than offset declines or flat sales at its other three divisions. The Amsterdam, Netherlands-based company said sales increased 3.5 percent in currency-neutral terms.
While Winter Sports sales increased 9.8 percent to €14.6 million ($20mm) compared to the same period in 2013, the company noted the first quarter is a low volume period for the division and should not be seen as indicative of the full year. While some Southern parts of Europe and the United States experienced good snowfall, the weather in Central and Northern Europe was unseasonably warm and this will impact our winter sports orders in 2014.
Racquet Sports sales slipped 2.6 percent to €41.2 million ($57mm) compared to the first quarter of 2014 primarily due to a decline in the volume of Penn balls in addition to adverse currency movements. Diving equipment sales fell 3.3 percent to €12.6 million ($17mm) as European markets remain challenging. Sportswear sales for the three months were broadly flat at €1.8 million ($4mm).
Gross margins for the three months ended March 31 improved from 400 basis points to 46.0 percent mainly due to higher licensing revenues, lower cost of sales in the tennis ball business and an improved mix in diving.
The adjusted operating loss for the three months decreased by €1.5m as a result of the improved gross profit (€3.3m) offset by increased costs of €1.8m mainly due to higher advertising in Diving and Sportswear and higher selling costs.
Net interest for the period was broadly unchanged, the foreign currency movements caused a positive swing of €0.6m in our non-operating expenses and improved profitability caused a decline in the income tax benefit resulting in a reduction in the net loss from €6.1m in the first three months of 2013 to €3.4m for the first three months of 2014.
Net cash provided by operating activities increased by €7.6m in the first three months to 31st March 2014 driven by the lower net loss and positive working capital movement.
Net debt increased slightly by €1.7m from a year earlier due to the positive operating cash flows being more than offset by the payments for acquisitions in the period.
Head sells alpine skis, ski bindings, ski boots, snowboard and protection products, tennis, racquetball, paddle and squash racquets, tennis balls and tennis footwear, sportswear and swimming products under the Head brand; tennis balls and racquetball balls under the Penn brand; Tyrolia ski bindings and Mares and SSI diving brands.
