Year-End Report 1st January - 31st December 2015, Zinzino AB (publ)

"Investments in new IT systems and new products - an investment for the future"

Dag Bergheim Pettersen, CEO of Zinzino AB

1st JANUARY– 31st DECEMBER 2015 (compared with the same period in the previous year, 2014)

• Total income amounted to SEK 435.0 (254.5) m, which represents a growth in sales of +22%. (+ 41%)
• Gross profit amounted to SEK 140.4 (102.4) m and the gross profit margin amounted to 32.3% (28.6%).
• EBITDA amounted to SEK 25.6 (21.4) m and the operating margin before depreciation and amortisation amounted to 5.9% (6.0%).
• Depreciation and amortisation amounted to SEK 7.1 (4.0) m, of which 5.1 (0.5) was attributable to the amortisation of goodwill.
• Operating profit amounted to SEK 5.6 (18.6) m and the operating margin to 4.3% (4.9%).
• Pre-tax profit amounted to SEK 17.6 (18.4) m. Pre-tax profit per share amounted to SEK 0.6 (0.6) (basic).
• The year's reported tax expense amounted to SEK 7.9 m, of which SEK 7.3 m was not affecting liquidity.
• Profit after tax amounted to SEK 9.7 (32.7) m.
• The Board proposes that for the fiscal year 2015 dividend of SEK 0.25 (0.25) per share.

KEY EVENTS DURING THE PERIOD 1st JANUARY - 31st DECEMBER 2015

• Zinzino established operations in Canada during the third quarter of 2015.
• A new IT system and web shop has been implemented in 2015, which enables Zinzino to continue its geographic expansion, product development, create better margins and lower costs.
• Zinzino increased its participation in Faun Pharma AS in the first quarter of 2015 by 13.8 percent and now owns 98.8 percent of the company.
• Zinzino launched the meal replacement LeanShake in two flavours, chocolate and berry. The product is rich in protein, essential amino acids and dietary fibre. It contains 25 vitamins and minerals. Both flavours are gluten-free and berry is also lactose-free.
• Zinzino launched the fibre supplement ZinoBiotic, a complement to LeanShake, which contributes to a good digestive process and a good bacterial flora in the stomach.
• Zinzino launched Health Challenge linked to the new products LeanShake and ZinoBiotic.
• Zinzino launched five new coffees under its own brand name: Zinzino Italian Espresso, Zinzino Columbian Espresso, Zinzino Fairtrade Espresso, Zinzino Brazilian Espresso and Zinzino French Espresso.
• The subsidiary Faun Pharma AS is working to be certified to ISO9001: 2008, which is quality certification that opens up new sales channels and ensures high quality of the goods produced.
• Bioactive Foods completed a three-year EU-funded research study on the balance between omega-3 and omega-6 in the body, together with a research network in Europe. The results can be divided into three parts: Increased knowledge of the market, product development, physical and mental effects of using the products and usability.

FOURTH QUARTER, Q4, 2015, (compared with the same period in the previous year, 2014)

• Total income amounted to SEK 113.2 (114.6) m, which amounted to a negative growth of -1% (+39%).
• The gross profit margin amounted to 35.6% (31.2%), which is a margin improvement of 4.4 percentage points from the previous year.
• EBITDA amounted to SEK 3.6 (7.3) m and the operating margin before depreciation and amortisation amounted to 3.2% (6.4%).
• Pre-tax profit tax amounted to SEK 1.5 (5.2) m. Pre-tax profit per share amounted to SEK 0.09 (0.14).

Service interruptions during the change of IT platform implemented during the third quarter have also affected operations during the fourth quarter and have been a major contributor to the short but sharp deceleration in sales growth during the quarter. For the fourth quarter, it is calculated that the effect will be a drop in income against the budgeted income of SEK 20 m and a decrease in EBITDA corresponding to SEK 5 m against the budgeted results.

COMMENTS FROM CEO DAG BERGHEIM PETTERSEN:

Investments in new IT systems and new products - an investment for the future

“In 2015 we have made a number of significant investments for the future that we strongly believe in. With a new IT system and new products, we have now laid the foundation for the coming years – investments essential for achieving our goals. We have also grown significantly and can show a good result for the past year. 2015 gave us a growth of 22 percent against the previous year. We have also improved our gross profit margin to 32.3 percent, which is 3.7 percentage points better than in 2014. An important parameter for our continued growth is our increased EBITDA, which increased from SEK 21.4 m in 2014 to SEK 25.6 m in 2015. For me this is a proof that we are right when we invest in our business and continue to develop our own health brands, which are produced in our own ISO-certified factory.

However, we have had a fourth quarter that is slightly weaker than the previous year. The reason for this is our substantial investments in a new IT system, which will enable the product development and geographic expansion we are planning. Moreover, it will create better margins and lower costs already in 2016. I am quite sure that the investments were made at the right time for meeting our long term growth plans. We are now confident in our IT systems, our new web shop and we can already see that the work has become more efficient and easier.

We are now strongly positioned for growth and expansion. In 2016, we will be able to increase our geographic expansion further than we had previously planned. We have developed an aggressive expansion plan that includes several new markets and it will be initiated during the first and second quarters. The first market that we will enter into in 2016 is Germany – Europe’s largest market for direct sales. It is an affluent market that we naturally have high expectations for and we believe that our health products will be successful there.

Over the past 18 months we have been working actively with our product development and thanks to that, we have launched several new products. Now we are further increasing the pace and will launch several strong product concepts at various points during 2016. I see product development as one of the decisive success factors for us and I am therefore proud that, thanks to our own research and factory, we can always be a step ahead. New products make us an attractive company for our customers and distributors. I am pleased to say that 2016 will be a very exciting year.

We continue to have great confidence in our ambitious target of 20 percent growth over the next three years and improved results for each year.

We have a vision to inspire change in the lives of our customers and distributors. This is by being the most customer-friendly direct sales company in the world. In order to affirm this, we have also previously communicated our vision of having a million customers by 2020.”

Dag Bergheim Pettersen, CEO, Zinzino AB

For the full report, please refer to the attached PDF.

This information comprises information that Zinzino AB must disclose under the Securities Market Act and/or the Financial Instruments Trading Act. The information was released for publication on 29th February 2016. 

Certified Adviser for Zinzino AB is Erik Penser Bankaktiebolag

   
INFORMATION ABOUT THE COMPANY Zinzino was founded under the name Zinzino Holding in autumn 2007. In 2009, the company acquired 93% of the equity and 97% of the votes in Zinzino Nordic AB, partly by means of a non-cash issue and partly by means of a private placement. Zinzino Nordic is a sales company that uses independent distributors to market and sell products for commission via so-called direct sales.

FINANCIAL CALENDAR
Interim report Q1 2016, published on 20/05/2016.
Interim report Q2 2016, published on 31/08/2016.

For further information:
Dag Bergheim Pettersen, CEO, Zinzino, Tel. +47(0) 93 22 57 00
Fredrik Nielsen, CFO, Zinzino, Tel. +46 (0) 707 900 174
Photos for publication free of charge:
Anders Ekhammar, Tel. +46 (0) 707 462 579
www.zinzino.com

Zinzino AB is a leading direct sales company, represented in Sweden, Norway, Denmark, Finland, Iceland, Lithuania, Latvia, Estonia, Poland, the Netherlands, Germany, the USA and Canada. Zinzino markets and sells products within two product lines; Zinzino Health, with a focus on long-term health, and Zinzino Coffee, consisting of espresso machines, coffee, tea and accessories. Zinzino offers customers products with a focus on quality, the environment, health and a feeling of everyday luxury. Our values are characterised by our high quality, proximity to customers and focus on active product development. The products are marketed via direct sales. Zinzino owns the Norwegian knowledge company BioActive Foods AS, and the research and production unit Faun Pharma AS. Since 2005 Zinzino has been a general agent for the French-Belgian coffee house Rombouts & Malongo. Today Zinzino has around 90 employees in the Group Zinzino is headquartered in Gothenburg, with a factory in Oslo and offices in Oslo, Florida and Helsinki.

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