Tandem slides as it warns over bicycle division

Shares in AIM-listed Tandem Group slid as the company said its bicycles and mobility division was in for a challenging year.

Tandem, which designs, develops and distributes sports and leisure products, said it has produced a strong range of cycles for this year, but warned the mid-tier independent cycle market was "saturated and highly competitive".

This, along with the fact that it does not have a large cycle promotional contract in 2016, means the group expects its bicycles and mobility division to have a challenging year.

Tandem also cautioned over the risks of the recent strengthening of the US dollar.

“Although we continue to mitigate this risk where possible by the use of various foreign exchange derivative contracts, should the dollar remain at current rates it has the potential to have a negative impact on the second half of the year.”

In its trading update for the year to the end of December, Tandem said revenue was around 10% ahead of the previous year at £34.4m. On a like-for-like basis, group revenue for the year was up around 5%.

In the bicycles and mobility division, however, revenue was down around 4%. Tandem said that despite a strong performance from its corporate bicycles division, including a significant promotional contract with a large national supermarket, the independent cycle dealer business remained challenging.

Notwithstanding the decline in revenue, profitability was ahead of last year, thanks to careful margin management and control of overheads.

In the sports, leisure and toys division, revenue including the contribution from the acquisition of ESC, was up around 24% but profitability was below the previous year due to margin pressure and investment in the group’s direct to consumer operations.

At 1000 GMT, Tandem shares were down 32% to 121p.