Chain Reaction Cycles' profits down 91%

Turnover rises but investment hoovers up profits
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Revenue has grown but profits have decreased for online bike retail goliath Chain Reaction Cycles (CRC).
Investment in expansion is thought to be the reason for the pre-tax profit reduction – down 91 per cent from £10 million in 2011 to £861,000 in 2012.

It was a markedly different story for revenue, which jumped up 14 per cent from £136.4m in 2011 to £155.6 million.

CRC's wage bill grew in 2012 with a significant rise in employees – up to 614 from 465 (365 in 2010). Reports indicate CRC's overdraft and liabilities also grew in 2012. Gross margins were maintained at 32 per cent.

"The Group incurred substantial additional overhead which has had a detrimental impact on operating profits in the current year. The directors deem this an acceptable performance as they are satisfied the outlay is necessary to build the foundations for future growth.

"The underlying fundamentals that have provided positive momentum to participation in cycling remain strong – advances in technology and materials, political incentive to improve public health and reduce traffic congestion, and increased media exposure from high-profile events. This resilience supports indications that suggest the market will continue to expand for the next five years."

While not covering exactly the same period as these CRC financials (which include the 12 months of 2012), Evans Cycles' year till November finances told a similar story – turnover rose 11 per cent, but pre-tax profits were down 70 per cent. Evans also cited investment – and 2012's weather – for the results.

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