European Stock Story of the Month – Accell

January is always an important month in global markets, but it’s not always a strong one. Over the past 20 years, global equities have delivered negative returns during 11 out of the past 20 Januarys. True, there are currently areas of real concern on the geopolitical front with the threat of Russian incursion into Ukraine, and underlying economic ‘health’ concerns such as inflation, debt and a supply chain squeeze post covid. If we are to take forecasts from the World Economic Forum, there is another cost burden coming round the corner. Our need to move to a net zero carbon emission economy will cost $3.5 trillion a year. According to the WEF and McKinsey that’s around half of all global corporate profits[1]. That needs to be funded. In my opinion, that means taxes, as governments can’t just continue printing money.

January is a dark and often ‘dreich’ month and it is easy to succumb to its vicissitudes, so our stock story this episode comes on the back of some good news for one of our holdings. Accell Group, the Netherlands based bicycle manufacturer, has been in the fund since launch. The investment case was based on a company undergoing transition. Accell had slightly lost its way with an over complex supply chain, little discipline in terms of manufacturing, a tired management team who never quite dealt with the cost base with enough energy, and the staggeringly huge challenge of cheap Chinese imports flooding the European market with ersatz, and often low-quality products.

Listed in Amsterdam since 1998. Accell is the European market leader in e-bikes and second largest in bicycle parts and accessories. With leading brands including Haibike, Winora, Ghost, Batavus, Koga, Lapierre, Raleigh, Sparta, Babboe and Carqon, Accell boast of having invented the e-bike in 2004 and the e-mountain bike in 2010. Bikes, bicycle parts and accessories are sold to dealers and consumers in over 80 countries globally[2]. Shortly after the launch of the fund, CEO Ton Anbeek took over the management of the ship and teaming up with CFO Ruben Baldew a year later, they have made significant impact in terms of how the company operated. They took very tough decisions on manufacturing and supply chains and were not afraid to make calls on big brand names in various geographies. 

Leadership is one of the real keys to success of any organisation. Around two and a half years ago this is what I wrote: “Ton Anbeek has a very different feel about him to his predecessor. His manner is sharper, less easy going, even edgy. His toughness comes from his previous role at a bed company. Think the bike business is tough? There’s nothing soft about the mattress business… He has a reputation as a strategic thinker and a swift cost cutter. He made a rapid decision about the US, and investors appreciated the clarity.” Anbeek and Baldew have made some very clear and very sensible decisions since then, so it was a slight surprise to us when the company announced the takeover bid by the behemoth privateer KKR in consort with existing shareholder Teslin for a 26% premium to the share price of the previous day.

There is no doubt that this is a good outcome for shareholders. Of course, there will always remain a nagging curiosity of whether the duo, with new chief supply chain officer Francesca Gamboni, might have created more value without KKR, but I have to say that I trust their judgement here. Anbeek and his team will remain at the company, so they will be incentivised to peddle hard for some time longer.

You don’t need us to tell you the benefits of cycling rather than other transport. It may not seem an attractive option in the wintery winds of January, but I suspect that the humble bicycle may well make a significant contribution to future transport solutions in the urban environment. There are corollary products including the e-cargo bike for the swift dispatch of online deliveries. If my personal view of taxation isn’t totally off beam, I feel that society’s access to cheap ‘motoring’ may well be a thing of the past as less of us are able to afford cars. The ‘current 26 week wait’ for an EV car is I think rather a ‘short’ time given the future demand and supply situation. From a personal perspective I might trade in my old mountain bike, now that 52-year-old knees and hips are creaking and get myself an e-bike. Too many hills in Edinburgh, compared to a nice flat cityscape in Amsterdam, but then again, unlike Amsterdam we aren’t 2 metres below sea level. Yet...

Written by Rory Hammerson

[1] https://www.weforum.org/videos/the-cost-of-net-zero-is-in-the-trillions-according-to-new-mckinsey-report

[2] https://www.accell-group.com/en/about-us/profile/profile.htm

Information is accurate as at 01.02.2022. Opinions constitute the fund manager’s judgement as of this date and are subject to change without warning. The officers, employees and agents of CIP may have positions in any securities mentioned herein. This material may not be distributed, published or reproduced in whole or in part. With investment capital is at risk.