Verkkokauppa.com Oyj - Interim report (unaudited) 22 April 2016, 8:00 a.m.
1 January - 31 March 2016 in brief
|Revenue, € thousands||83,496||72,856||15 %||343,682|
|Gross profit, € thousands||13,062||11,747||11 %||51,783|
|Gross margin, % of revenue||15.6 %||16.1 %||15.1 %|
|EBITDA excluding non-recurring items, € thousands||2,678||2,144||25 %||12,258|
|EBITDA excluding non-recurring items, %||3.2 %||2.9 %||3.6 %|
|Operating profit excluding non-recurring items, € thousands||2,371||1,882||26 %||11,087|
|Operating margin excluding non-recurring items, % of revenue||2.8 %||2.6 %||3.2 %|
|Net profit excluding non-recurring items, € thousands||1,906||1,058||80 %||8,814|
Verkkokauppa.com Oyj's business operations are estimated to develop positively within a medium term time frame. The management believes that the company will succeed in further growing its market share in its chosen segments. The strong balance sheet enables the company to continue expanding its operations in accordance with its strategy. Nevertheless, the business outlook includes uncertainties, especially due to macroeconomic developments. The Finnish Ministry of Finance estimated on 18 December 2015 that the Finnish GDP will grow by 1.2% during 2016.
In 2016 the company revenue and operating profit excluding non-recurring items are expected to exceed the level of 2015.
CEO SAMULI SEPPÄLÄ'S REVIEW
Verkkokauppa.com continued to have steady sales and profit growth during the first quarter of the year. While the retail market remains tough, the company will continue to look for additional sales growth opportunities especially in recently launched categories, while also launching new categories and developing B2B and wholesale businesses. Nearly 80% of all Finns have already conducted online purchases based on TNS Gallup's latest release. This development supports the company's growth plans.
In the first quarter, EBITDA excluding non-recurring item grew by 25 percent to 3.2 percent of revenue. If needed, the company is willing to accept a slightly lower EBITDA in short term to maintain suitable sales growth and to match competitors' prices, thereby offer even lower prices for its customers. However, the company expects to improve its EBITDA margin in the medium term by increasing the share of higher margin categories and private label products in the sales mix as well as the penetration of the Apuraha consumer financing services.
The company continues to investigate new retail and logistics opportunities within Helsinki, Vantaa, Turku and Oulu regions to support sales growth. Efforts with major projects such as the C2C marketplace and the responsive (mobile) website, both essential for the full customer journey, will be continued.
Verkkokauppa.com's revenue will continue to grow during 2016 and in the medium term, even though the general situation and demand in the retail business remains very weak in Finland.
|KEY RATIOS AND PERFORMANCE INDICATORS||1-3/2016||1-3/2015||1-12/2015|
|Revenue, € thousands||83,496||72,856||343,682|
|Gross profit, € thousands||13,062||11,747||51,783|
|Gross margin, % of revenue||15.6%||16.1%||15.1%|
|EBITDA, € thousands||2,079||-1,268||8,846|
|EBITDA excluding non-recurring items, € thousands||2,678||2,144||12,258|
|EBITDA excluding non-recurring items, %||3.2%||2.9%||3.6%|
|Operating profit, € thousands||1,772||-1,530||7,676|
|Operating margin, % of revenue||2.1%||-2.1%||2.2%|
|Operating profit excluding non-recurring items, € thousands||2,371||1,882||11,087|
|Operating margin excluding non-recurring items, % of revenue||2.8%||2.6%||3.2%|
|Net profit, € thousands||1,427||-2,402||5,354|
|Net profit excluding non-recurring items, € thousands||1,906||1,058||8,814|
|Equity ratio, %||44.3%||43.5%||45.2%|
|Return on investment, % rolling 12 months||36.8%||18.1%||20.9%|
|Net gearing, %||-68.8%||-50.3%||-86.5%|
|Earnings per share (EPS) revised by share split, €||0.03||-0.05||0.12|
|Earnings per share (EPS) revised by share split excluding non-recurring items, €||0.04||0.02||0.20|
|Earnings per share (EPS) revised by share split (diluted), €||0.03||-0.05||0.12|
|Earnings per share (EPS) revised by share split excluding non-recurring items (diluted), €||0.04||0.02||0.20|
|Number of shares at end of period||45,065,130||7,510,855||45,065,130|
|Average number of shares at end of period revised by share split||45,065,130||45,065,130||45,065,130|
|Number of shares at end of period revised by share split||45,065,130||45,065,130||45,065,130|
|Number of personnel* at end of period||557||516||561|
*The number of personnel includes both full- and part-time employees.
REVENUE AND PROFITABILITY DEVELOPMENT
In January-March, Verkkokauppa.com Oyj's revenue grew by 15% year on year. Revenue grew by 10.6 million euros, totalling 83.5 million euros (72.9). Revenue increased particularly in mobile phones, computers, televisions, smart watches and small (SDA) domestic appliances.
According to GfK, the demand for consumer electronics declined by 4.5% during January-February in Finland.
As in the previous quarter, a part of the sales increase was due to good wholesale to customers who export the goods, as well as B2B sales. This development in sales mix decreased the gross margin year on year. The volumes of these sales are typically difficult to estimate and their profitability is usually low. However, these sales increase the company's purchasing volumes and thus improve the company's position in relation to its suppliers.
Personnel costs increased by 22.7% to 6.6 million euros (5.4). Personnel costs include a 0.6 million euros non-recurring holiday pay accrual, which resulted from the company's internal audit identifying technical errors in the company's holiday pay accounting. Headcount grew at a slower rate than revenue. Personnel costs excluding non-recurring items grew by 12.0% to 6.0 million euros (5.4).
During the reporting period, other expenses decreased to 4.4 million euros (7.6). Other expenses in the comparison period included a non-recurring compensation of 3.4 million euros paid to Teosto. Other expenses excluding non-recurring items grew by 3.8% to 4.4 million euros (4.2).
Operating profit in January-March 2016 was 1.8 million euros (-1.5) and net profit 1.4 million euros (-2.4).
Operating profit excluding non-recurring items in January-March 2016 was 2.4 million euros (1.9) and net profit 1.9 million euros (1.1).
Earnings per share were 0.03 euros (-0.05).
The comparison period included non-recurring items of 4.3 million euros related to a legal dispute lost against Teosto ry regarding levies for private copying. Of these non-recurring items, 3.4 million euros is included in other expenses and the interest of 0.9 million euros in financing expenses.
Earnings per share excluding non-recurring items were 0.04 (0.02) euros.
FINANCE AND INVESTMENTS
Operating cash flow was -4.2 million euros (-12.5) in January-March 2016. In the reporting period, the improvement of the operating cash flow mainly resulted from the positive development of operations. In addition, the cash flow of the comparison period was affected by non-recurring items related to the Teosto legal dispute.
Ordinary seasonal fluctuations are reflected in cash and cash equivalents, cash flow and accounts payable, which usually reach the highest point at year-end and the lowest point at the end of the second quarter. Verkkokauppa.com has utilized the maximum amount of cash discounts.
In addition, during the reporting period the company invested in the development of new ERP features, which resulted in the activation of 0.1 million euros in the IT department's salary expenses and external technology consulting fees. The company also invested in ordinary store equipment and furniture. The net capital expenditures were 0.2 million euros (0.4) in January-March 2016.
The comparison period included financing expenses totalling 0.9 million euros of non-recurring penalty interest relating to the Teosto legal dispute.
On 31 March 2016, Verkkokauppa.com had a revolving credit facility of 15 million euros, which had not been utilized.
The company strives to grow faster than its operating market and targets an annual revenue growth of over 10 per cent in the medium term. The company's objective is to improve its EBITDA margin in the medium term when compared to the level of 2013. The company strives to secure a sufficient equity ratio to finance the growth of its business and aims to maintain an equity ratio of over 25 per cent taking into consideration the nature and seasonality of the company's business.
SHARES AND SHARE TRADING
The total number of shares in the company was 45,065,130 on 31 March 2016.
Over the reporting period 786,290 shares were exchanged on the NASDAQ OMX First North Finland market, representing 1.7% of all shares in the company. The highest share price was 8.20 euros and the lowest 6.60 euros. The average price in share trading was 7.20 euros. The total of the share trading was 5.7 million euros. The closing price was 7.74 euros, and the market value of all shares was 348.8 million euros at the end of the period.
The company does not own any of its own shares.
PERSONNEL, THE BOARD AND ADMINISTRATION
During the reporting period, the number of employees increased by 41, and the total number of employees was 557 (516) at the end of March 2016. The number of employees includes both full- and part-time employees.
The election of the Board of Directors is explained below in the section on Annual General Meeting 2016.
Authorized Public Accountant PricewaterhouseCoopers Oy was elected as auditor with Authorized Public Accountant Ylva Eriksson as Principal Auditor in an Annual General Meeting held on 15 March 2016.
RISKS AND UNCERTAINTIES
Verkkokauppa.com Oyj's risks and uncertainties reflect the market and general economic trends, for example, demand for consumer electronics, wholesale trade business, the business environment and competition. The company's business operations are also influenced by risks and uncertainties relating to, for example, business strategy, investments, procurement and logistics, information technology, and other operative aspects of the business. The aforementioned risks and uncertainties may affect the company's operations, financial position and performance both positively and negatively. Risks and uncertainties have been presented in more detail in the Annual Report for year 2015.
Verkkokauppa.com received a permission to appeal to the Supreme Court regarding the use of the domain name veneilijanverkkokauppa.com on 3 September 2014. The Supreme Court gave its decision on 11 March 2016 regarding the veneilijanverkkokauppa.com trademark issue. The Court of Appeals judgement was overruled and Oy Waltic Ab was denied the use of the veneilijanverkkokauppa.com trademark. Oy Waltic Ab was also obliged to pay 10,000 euros with penalty interest and a total of approximately 60,000 euros in Verkkokauppa.com's legal costs on different court instances.
ANNUAL GENERAL MEETING 2016
The Annual General Meeting was held in Helsinki on 15 March 2016. The financial statements for the year 2015 were approved and the Board Members and the CEO were discharged from liability with respect to financial year 2015. It was decided to pay a dividend of 0.15 euros per share, totalling 6,759,769.50 euros.
At the Annual General Meeting held on 15 March 2016 the following board members were re-elected: Christoffer Häggblom, Mikael Hagman, Minna Kurunsaari, Kai Seikku, Antti Tiitola, Henrik Weckström and Samuli Seppälä. The board elected Christoffer Häggblom as the Chairman of the Board. Samuli Seppälä is the company's Chief Executive Officer.
The Authorized Public Accountant PricewaterhouseCoopers Oy was elected as the auditor, with Authorized Public Accountant Ylva Eriksson acting as the Principal Auditor.
OTHER EVENTS DURING THE REPORTING PERIOD
Corporate sales and export director Matti Harjunen left Verkkokauppa.com on 11 January 2016.
There are no subsequent events that differ from usual business events, after the reporting period.
A press conference for analysts, investors and media will be held in Finnish at the Jätkäsaari premises in Helsinki at Tyynenmerenkatu 11, 6th floor, at 10:00 a.m. (EET) on Friday, 22 April 2016, in which Verkkokauppa.com Oyj's CEO Samuli Seppälä will present the developments in the reporting period.
A press conference in English will be held by LiveStream webcast on Friday, 22 April 2016 at 11:00 a.m. (EET). Questions can be sent beforehand or during the presentation via e-mail to firstname.lastname@example.org .
COMPANY RELEASES IN 2016
Verkkokauppa.com Oyj will publish its quarterly reports as follows:
Helsinki, Finland, 22 April 2016
Board of Directors
Samuli Seppälä, CEO
Telephone +358 10 309 5555
Jussi Tallgren, CFO
Telephone +358 10 309 5555
Certified Adviser Nordea Bank Finland Plc
Telephone +358 9 5300 6785
NASDAQ OMX Helsinki
The financial statements release has been prepared in accordance with Finnish Accounting Standards and local legislation, and in compliance with the accounting principles in the financial statements of 31 December 2015. The company applies the new Accounting Act, effective from 1 January 2016, in the preparation of this interim report. The new Accounting Act has had no significant impact on the accounting principles; therefore, figures for the comparison periods have not been adjusted. The quarterly report has not been audited. The financial statements are audited at year-end.
Numbers presented in the quarterly report have been rounded and therefore columns or rows do not necessarily add up to the total amounts presented.
|Cost of goods and services||-70,434||-61,109||15.3%||-291,899|
|Depreciation and amortization||-306||-262||16.8%||-1,171|
|Other operating expenses||-4,369||-7,621||-42.7%||-20,630|
|Financial income and expenses||11||-872||-101.3%||-882|
|PROFIT BEFORE APPROPRIATIONS AND TAXES||1,783||-2,402||-174.2%||6,794|
|Intangible assets total||1,185||1,068||1,179|
|Tangible assets total||1,691||2,123||1,788|
|NON-CURRENT ASSETS TOTAL||3,128||3,241||3,218|
|Receivables carried forward||2,164||5,573||2,847|
|Cash and cash equivalents||20,823||15,772||30,770|
|CURRENT ASSETS TOTAL||67,520||62,570||78,108|
|Invested non-restricted equity fund||25,493||25,493||25,493|
|Profit (loss) for the period||1,427||-2,402||5,354|
|Current liabilities total||39,497||36,417||44,842|
|Cash flow from operating activities|
|Profit before appropriations and taxes||1,783||-2,402||6,794|
|Depreciation and amortization||306||262||1,171|
|Change in provisions||0||-35||95|
|Interest paid and received||-11||872||882|
|Non-current receivables, increase (-), decrease (+)||0||2||2|
|Current receivables, increase (-), decrease (+)||1,171||-2,597||-490|
|Inventory increase (-), decrease (+)||-530||-5,201||-7,884|
|Non-interest-bearing debt, increase (+), decrease (-)||-6,582||-2,282||6,492|
|NET CASH FROM OPERATING ACTIVITIES BEFORE FINANCING AND TAXES||-3,863||-11,381||7,061|
|Interest paid and other operational financial expenses||-8||-955||-1,050|
|Interest received from operations||21||83||168|
|NET CASH FLOW FROM OPERATING ACTIVITIES||-4,154||-12,545||5,096|
|Intangible and tangible investments||-194||-391||-1,075|
|NET CASH FLOW FROM INVESTMENTS||-194||-391||-1,276|
|Cash flows from financing activities|
|Current interest-bearing debt, increase (+), decrease (-)||0||-220||-879|
|Non-current interest-bearing debt, increase (+), decrease (-)||0||0||-1,099|
|NET CASH FLOW FROM FINANCING ACTIVITIES||-5,600||-6,604||-8,362|
|NET INCREASE (+) / DECREASE (-) IN CASH AND CASH EQUIVALENTS||-9,947||-19,540||-4,543|
|CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE PERIOD||30,770||35,312||35,312|
|CASH AND CASH EQUIVALENTS AT THE PERIOD END||20,823||15,772||30,770|
|STATEMENT OF EQUITY CHANGES|
|€, thousand||Share capital||Invested unrestricted equity fund||Retained earnings||Profit (loss) for the period||Total|
|SHARE CAPITAL 1.1.2016||100||25,493||9,999||0||35,591|
|Profit (loss) of the period||0||0||0||1,427||1,427|
|SHARE CAPITAL 31.3.2016||100||25,493||3,239||1,427||30,258|
|SHARE CAPITAL 1.1.2015||100||25,493||11,029||0||36,622|
|Profit (loss) of the period||0||0||0||-2,402||-2,402|
|SHARE CAPITAL 31.3.2015||100||25,493||4,645||-2,402||27,836|
|SHARE CAPITAL 1.1.2015||100||25,493||11,029||0||36,622|
|Profit (loss) of the period||0||0||0||5,354||5,354|
|SHARE CAPITAL 31.12.2015||100||25,493||4,645||5,354||35,591|
CALCULATION PRINCIPLES FOR THE COMPANY'S KEY RATIOS
1) Fixed costs = Personnel expenses + other operating expenses
2) Fixed costs, % = (Personnel expenses + other operating expenses) / Revenue x 100
3) Gross profit = Revenue - Cost of goods and services
4) Gross margin, % = (Revenue - Cost of goods and services) / Revenue x 100
5) EBITDA = Operating profit before depreciation
6) EBITDA, % = Operating profit before depreciation / Revenue x 100
7) Operating margin, % = Operating result / Revenue x 100
8) Operating margin excluding non-recurring items, % = Operating result excluding non-recurring items / Revenue x 100
9) Equity ratio = (Equity + depreciation difference x (1 - tax rate)) / (Total sum of the balance sheet - advances received) x 100
10) Return on capital employed (ROCE), rolling 12 months, % = (Net profit + financial expenses + taxes) / (Average equity + interest-bearing debt) x 100
11) Net gearing, % = (Interest-bearing debt - cash and cash equivalents - interest-bearing receivables) / Equity x 100
12) Earnings per share = Profit for the financial period / Monthly average number of shares adjusted by share issues
13) Earnings per share excluding non-recurring items = Profit for the financial period excluding non-recurring items / Monthly average number of shares adjusted by share issues
14) Earnings per share (diluted) = Profit for the financial period / Monthly average number of shares adjusted by share issues + number of shares according to subscription rights
15) Earnings per share excluding non-recurring items (diluted) = Profit for the financial period excluding non-recurring items / Monthly average number of shares adjusted by share issues + number of shares according to subscription rights
16) Average number of shares at end of the period revised by share split = Monthly average number of shares at the end of the period revised by share split
17) Number of employees at the end of the period = Average number of employees on the last week of the period