Annual profits slump 40% after London firm invests heavily in new factory and its ‘montrously unique’ electric model

This article is more than 3 years old

This article is more than 3 years old

The maker of the Brompton fold-up bike is hoping the launch of an electric model this year will kickstart growth after a 40% fall in annual profits.

Underlying profits at Brompton Bicycle slumped to £1.3m in the year to 31 March 2016, after costs rose by £1.8m. The London-based business has invested heavily in developing an electric bike with Formula One group Williams, renting a new factory and investing in a New York office.

However, sales rose 3.4% to £28.4m as it sold 2% more bikes, recovering from a 4% fall in 2015.

Will Butler-Adams, the chief executive, said growth had been lower than expected amid a global slump in bicycle sales, partly prompted by the rise of electric bikes in northern Europe. Issues with smog in Singapore, changing trends in the US and economic difficulties in South Korea had also dampened demand. Sales in the UK remained steady.

Brompton, which moved to new premises in west London in 2015, aims to produce 100,000 bikes a year by 2020. The company has invested £2.5m in the facility and expects to spend £2m on developing its electric bike.

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Butler-Adams said: “We are a little company going through growing pains. There are periods in manufacturing where you have got to take a big risk. We went to shareholders before we took them on this rollercoaster … they knew it was coming.”

Despite the profits squeeze, the company paid a £485,656 dividend to its shareholders, who include members of the Sainsbury supermarket family, founder Andrew Ritchie and Luke Johnson, the Pizza Express entrepreneur who bought a 5% stake in Brompton in 2015.

Ritchie, who developed the Brompton bike in 1975, holds a 20% stake in the company and remains its biggest shareholder, despite stepping down from the board last year amid a dispute with Butler-Adams over the pace of expansion.

Butler-Adams said Brompton was now past its “killer year” and expected to see improved profits and sales in 2017 through increased efficiency at its new factory. Sales in the UK have also strengthened after a tough 2015.

He said he hoped the launch of the electric bike at the end of 2017 would kickstart sales, especially in northern Europe. In Germany, the electric bike market has ballooned from about €20m (£17m) 12 years ago to €1.2bn. “We don’t have an electric bike and so we are missing out on that,” Butler-Adams said.

The bike has taken four years to develop, but Butler-Adams said it was “monstrously unique” because the folding model had to be light, compact and simple.

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He said he expected the UK’s exit from the EU to be positive for the company. Brompton, which sells nearly 80% of its bikes overseas, has reduced its prices by 7% outside the UK, exploiting the fall in the pound’s value against the euro and the dollar.

Butler-Adams said concerns about relations with Europe were “completely irrelevant” when compared with the scale of opportunity in the US and China.

“[The debate over trade negotiations with Europe] is mostly gubbins for our business,” he said.