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    Interim report for 1 January – 30 September 2018

    2018-10-19 08:00 - Regulatory press release
    STRONG UNDERLYING GROWTH AND NEW FINANCIAL TARGETS

    THIRD QUARTER[1]

    • Net sales amounted to SEK 665.1 (686.4) million
      • CDON Marketplace increased sales from external merchants with 22 percent and gross profit with 19 percent, while continuing the phaseout of low-margin own inventory sales
      • Qliro Financial Services increased total operating income by 36 percent and the loan book by 51 percent
      • Nelly grew by 11 percent for the second quarter in a row
    • The gross margin increased by 2 percentage points to 26.3 (24.3) percent
    • Operating income before depreciation, amortization and impairment increased to SEK 19.0 (12.9) million
    • Operating income improved to SEK 0.7 (-4.4) million
    • Profit after tax including discontinued operations amounted to SEK -1.8 (-2.0) million
    • Basic and diluted earnings per share including discontinued operations amounted to SEK -0.01 (-0.01)

    FIRST NINE MONTHS[1]

    • Net sales amounted to SEK 2,188.3 (2,196.9) million
    • The gross margin increased to 23.4 (22.8) percent
    • Operating income before depreciation, amortization and impairment was SEK -16.1 (37.6) million
    • Operating income amounted to SEK -68.5 (-14.8) million
    • Profit after tax including discontinued operations amounted to SEK -2.5 (-30.2) million, including tax and interest expenses of SEK 70 million attributable to CDON Alandia 2012
    • Basic and diluted earnings per share including discontinued operations amounted to SEK -0.02 (-0.20)
    • Cash and cash equivalents increased to SEK 577.2 (433.8) million by the end of the period
    SEK million  2018
    July-Sep 
    2017
    July-Sep 
    2018
    Jan-Sep 
    2017
    Jan-Sep 
    Net sales  665.1  686.4  2,188.3  2,196.9 
    Gross profit  175.3  166.5  512.7  501.0 
    Gross margin, %  26.3%  24.3%  23.4%  22.8% 
    Operating income before depreciation, amortization and impairment   19.0  12.9  -16.1  37.6 
    Operating margin before depreciation, amortization and impairment, %  2.9%  1.9%  -0.7%  1.7% 
    Operating income   0.7  -4.4  -68.5  -14.8 
    Operating margin, %  0.1%  -0.6%  -3.1%  -0.7% 

    [1]Lekmer and HSNG are recognized as discontinued operations in the consolidated accounts. 

    STRONG UNDERLYING GROWTH AND NEW FINANCIAL TARGETS
    The third quarter shows strong underlying growth. CDON Marketplace increased sales from external merchants by 22 percent, while continuing the phaseout of low-margin own inventory sales. Qliro Financial Services increased total operating income by 36 percent and the loan book by 51 percent. Nelly grew net sales by 11 percent for the second quarter in a row, and the proportion of own brands was 44 percent of sales. In addition, the Group's gross margin increased by 2 percentage points to 26.3 percent.

    Since June 2018, our strategy has been to operate Qliro Financial Services, CDON Marketplace and Nelly as three independent companies. The intention is to create the best conditions for the companies’ development and thus increase shareholder value. The work with potential structured deals, divestments or a stock listing is proceeding according to plan. We have set new financial targets for the subsidiaries and appointed new CEOs to both CDON Marketplace and Nelly.

    Qliro Financial Services continues to grow
    Since its inception, Qliro Financial Services has built its offering of financial services to consumers and merchants. Going forward, the primary aim is to utilize economies of scale and capitalize on the existing service offerings. The focus is on attracting more merchants and rolling out the consumer services launched in Sweden, to the other Nordic countries as well. The company has over 30 merchants connected to its platform and more than half of the business volume comes from online merchants not owned by the group. Over the past year, 1.9 million consumers have used the company’s digital financial services. The loan book grew by 51 percent to over SEK 1.2 billion with the fastest growth in personal loans. Total operating income increased by 36 percent and total operating expenses increased by 32 percent, including new commercial initiatives and recruiting of personnel working with attracting and onboarding new merchants. The new initiatives are key to strengthen the position as an independent company.

    The transaction volumes are currently negatively impacted by CDON Marketplace phasing out of sales from own inventory. The financial development is dependent on the e-commerce volumes and thereby the recruitment of new merchants. Qliro Financial Services new financial target is to achieve an operating income before depreciation and amortization of SEK 100 – 125 million in 2019. This target may be complemented with longer-term targets when the new CEO has joined.

    CDON Marketplace accelerates transformation
    To strengthen its position as an independent company, CDON Marketplace accelerated its transformation into a marketplace for external merchants, complemented by sales from own inventory. The marketplace model and dropshipment (selling directly from suppliers’ inventory) set a foundation for growth with lower stock levels and capital requirements over time.

    The number of visits and active customers to CDON Marketplace increased in the quarter. External merchant sales increased by 22 percent. Meanwhile, the phase out of sales from own inventory continued, especially in the consumer electronics segment with low-margins. This provides the right long-term conditions for a strong market position with higher margins and profitability, while having a negative effect on sales during the transformation. Consequently, the gross margin rose sharply from 10.1 percent to 14.8 percent in the quarter and it is expected to continue to increase along the transformation.

    To reflect the transformation, the new financial targets are based on the sales growth of external merchants and on the traditional operating margin before depreciation and amortization. We estimate that operating income before depreciation and amortization will be positive for the full year 2019. 

    Nelly increases sales and profit
    Nelly is one of the most well-known online fashion brands among women aged 18 to 29 in the Nordics. At its core is its own brand, complemented by a well-curated portfolio of approximately 200 external brands.

    Nelly’s focus on profitable growth led to an increase of 7 percent in number of visits, 12 percent in number of orders, 15 percent in number of customers and 5 percent in average shopping basket size for the quarter. Thus, sales rose 11 percent. 44 percent of all sales were our own brand. Operating income before depreciation and amortization improved somewhat to SEK 24 million. This was, however, a significant improvement in underlying profitability since last year’s operating income was positively affected with SEK 6 million due to the divestment of Members.com. Nelly has a successful growth strategy, and we are now raising the target for growth while maintaining the operating margin target.


    Financial flexibility
    Qliro Group’s gross profit and operating income before depreciation and amortization increased during the quarter. Our three companies have strong positions in dynamic and growing segments of e-commerce. In addition, we have a strong financial position. The Group’s cash amounted to SEK 577 million and the net cash of the e-commerce business amounted to SEK 301 million. Our companies have strong markets positions and are driving forces in the shift to online commerce.

    Stockholm, October 19, 2018
    Marcus Lindqvist, President and CEO

    SIGNIFICANT EVENTS DURING AND AFTER THE THIRD QUARTER

    Consolidated situation
    A consolidated situation arose when the subsidiary Qliro AB (a credit market company under Finansinspektionen’s supervision), in accordance with the Capital Requirements Regulation, was considered to be the main business of the group, which occurred at the end of Q2 when Qliro AB accounted for more than half of the Group’s total assets. The consolidated situation consists of the parent company Qliro Group AB and Qliro AB and has been assigned a special institution number. Certain rules for the credit market company therefore also apply to the parent company, such as the capital adequacy regulations. The consolidated situation (parent company and Qliro AB) was well-capitalized as at September 30, 2018.

    Kristoffer Väliharju CEO of CDON Marketplace
    On September 13, 2018, it was announced that Kristoffer Väliharju has been appointed CEO of CDON Marketplace. Kristoffer was Chief Operating Officer at CDON Marketplace since June 2017 and replaced Magnus Fredin who chose to leave after three years. Kristoffer has previous experience from working for Dustin and Dell.

    Anna Ullman Sersé CEO of Nelly
    On October 9, it was announced that Anna Ullman Sersé had been appointed permanent CEO of Nelly. Prior to that, she was Interim Head of Nelly since April 2018 and Head of Business Development at Qliro Group since 2016. Anna was formerly a management consultant at Accenture Interactive.
     

    New financial targets
    The Board of Qliro Group resolved on October 18 to set new financial targets of the subsidiaries. For further information, see the separate press release and page 3 of this report.


    Conference call

    Analysts, investors and the media are invited to a conference call today at 10 a.m. To participate in the conference call, please dial:
    Sweden 08 5033 6574
    UK +44 330 336 9125
    US +1 929 477 0324
    PIN code to participate: 8827683. The presentation material and webcast will be published at www.qlirogroup.com. 

    For additional information, please visit www.qlirogroup.com or contact:
    Marcus Lindqvist, President and CEO
    Niclas Lilja, Investor Relations
    Telephone: +46736511363
    ir@qlirogroup.com

    About Qliro Group
    Qliro Group is a leading Nordic e-commerce group in consumer goods and related financial services. Qliro Group operates CDON.COM, the leading Nordic online marketplace, the fashion brand Nelly and Qliro Financial Services, offering financial services to merchants and consumers. In 2017 the Group had sales of SEK 3.4 billion. Qliro Group’s shares are listed on the Nasdaq Stockholm MidCap segment under the ticker symbol QLRO. 

    This information is information that Qliro Group AB is required to disclose under the EU Market Abuse Regulation. The information was released for publication through the agency of the above-mentioned contacts at 8 a.m. on Friday, October 19, 2018.

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