CEO’s review

2015 – A year of continuous growth and improvement

2015 was yet another year of record sales and profit for Amer Sports, as we completed our 6th consecutive year of profitable growth in line with our Sustainable Growth Model. We also generated strong cash flow improvement, and further strengthened our balance sheet. In short, the company is healthy, and we continue to improve across virtually all areas.

The growth was again driven primarily by our strategic focus areas: Footwear, Apparel, Business to Consumer, digitally connected devices and services, and geographically especially China and the United States. Also our established core businesses continued to improve. Ball Sports returned to healthy profitable growth in the key focus areas, especially performance tennis and baseball, and Winter Sports Equipment continued to drive profitability and working capital efficiency. In Sports Instruments, Fitness and Cycling we focused on renewal and restructuring for faster future growth behind scalable platforms, and we built an exciting pipeline of growth initiatives already for 2016.

In 2015 we also started to accelerate through selective acquisitions, enabled by our strong balance sheet. We acquired Louisville Slugger for Baseball acceleration, and Sports Tracker for building a scalable Amer Sports online sports service. We also acquired Queenax, a functional training systems provider, to close a gap in our Fitness offering versus an important consumer trend. These acquisitions follow our strategic priorities, providing us platforms and scale for further acceleration.

Turnaround completed, sustainable growth model established

Following the strategy put in place in 2010, the company is now firmly on a sustainable growth path, as we have built sales from EUR 1.5 billion (2009) to EUR 2.5+ billion, and EBIT from EUR 44 million to EUR 212 million. The growth and improvement have been based on strategic renewal and sustainable fundamentals, illustrated by a few examples:

  • Footwear and Apparel growth from approximately EUR 300 million to EUR 900 million
  • Company gross margin improvement from 40% to 45%
  • Business to Consumer growth from 1% of the Group sales to 7%, with a global footprint of over 290 retail stores, and a global multi-brand e-commerce
  • China sales up by 5x
  • Digitally connected devices and services from zero toward 7% of the Group sales

Accelerating toward 2020

Following the successful completion of the 2010 five-year strategic glidepath, we have now put in place a new five-year “2020 glidepath” with focus on accelerating profitable growth.

The new strategy prioritizes five areas where we see the highest growth potential and where we have built a repeatable business model: Apparel and Footwear, United States, China, Business to Consumer (own retail and e-commerce), and digitally connected devices and services.

In conjunction to the new strategic glidepath, we introduced new financial targets toward 2020:

  • Net sales: At least EUR 3.5 billion translating into minimum 6.5% CAGR, with minimum mid-single digit organic, currency-neutral annual growth
  • Profit: Annual EBIT growth (excl. non-recurring items) ahead of net sales growth
  • Cash flow conversion: Free cash flow / net profit at least 80%
  • Net debt / EBITDA: Year-end net debt / EBITDA ratio max 3x

Compared to the previous financial targets set in 2010, the new targets emphasize accelerated growth, both organic and through acquisitions, and continuously improving profitability. The new cash flow conversion target is aligned to the need to increase our working capital and investment to support the higher growth objective.

New glidepath already in execution

During 2015 we already ramped up our investment and capability injection to enable the acceleration. We continued to strengthen our retail opening pipeline, fueled investment into digital products and services, invested into Go to Market integration especially in Fitness and Cycling, and recruited critical talent into the acceleration areas. We also continued to monitor strategic M&A opportunities and intensified strategic collaboration with external partners such as various start-ups and universities.

Positive shareholder returns

For the shareholders, the ongoing Amer Sports performance improvement has been positive. In 2015 Amer Sports share price increased by 68%. Following the new dividend policy of 2015, and enabled by our strong positive cash flow, the Board of Directors is again proposing an increased dividend of EUR 0.55 per share, an increase of 22% versus the previous year.

From a longer term perspective, since the beginning of the new strategy in 2010, Amer Sports share price has increased by 285% (Jan 1, 2010–Dec 31, 2015), with a total shareholder return of 352%.

Delighting the consumer, collaborating with our partners, sustainably

Our company aims to improve the consumers’ sports and fitness performance, and inspire active life and lifestyle. Innovation and deep consumer engagement are the cornerstones of the company, and we continue to make great progress. For example, our innovations have again received a multitude of industry awards and recognitions, and our consumer engagement attracts an increasing number of consumers through inspiring solutions and stories. Our web traffic and captive consumer database continue to grow day by day and we reach tens of millions of people around the world.

Moreover, our innovation and concepts bring us commercial success and ultimately profitable growth. We continue to improve our strategic collaboration with our retail partners to delight the shopper, and to drive joint commercial value with our business partners. As we pursue our strategy, we focus on operating responsibly and sustainably, seeking to improve across all areas from sourcing to manufacturing to social responsibility and beyond.

Taking the company to the next level

We have now delivered six consecutive years of profitable growth and overall performance improvement. This solid performance is the foundation for our faster future growth. Changing consumer needs, digitalization and new business models and logic open up market opportunities, which we will capitalize on. We proceed with confidence and with improving capabilities and excellence in strategy execution. Amer Sports is ready for the next match.

Heikki Takala
PRESIDENT AND CEO