Half year report for 1 January – 30 June 2018

NEW STRATEGY FOCUSING ON THREE INDEPENDENT COMPANIES

SECOND QUARTER[1]

• Net sales increased to SEK 807.0 (805.3) million
• The gross margin increased by 0.9 percentage points to 25.0 (24.1) percent
• Operating income before depreciation, amortization and impairment amounted to SEK 7.7 (27.5) million
• Operating income amounted to SEK -10.3 (9.0) million
• Profit after tax including discontinued operations amounted to SEK -91.7 (-5.3) million including tax and interest expenses of SEK 70 million attributable to CDON Alandia year 2012
• Basic and diluted earnings per share including discontinued operations amounted to SEK -0.61 (-0.04)

FIRST SIX MONTHS[1]

• Net sales increased by 1 percent to SEK 1,523.2 (1,510.5) million
• The gross margin increased to 22.2 (22.1) percent
• Operating income before depreciation, amortization and impairment was SEK -35.1 (24.7) million
• Operating income amounted to SEK -69.1 (-10.4) million
• Profit after tax including discontinued operations amounted to SEK -0.7 (-28.2) million
• Basic and diluted earnings per share including discontinued operations amounted to SEK 0.0 (-0.19)
• Cash and cash equivalents increased to SEK 646.3 (495.3) million by the end of the second quarter

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

NEW STRATEGY TO FOCUS ON THREE INDEPENDENT COMPANIES
Our new strategic focus is to run Qliro Financial Services, CDON Marketplace and Nelly as three independent companies. Given the maturity of the companies and the strong underlying growth, standing on their own two feet will give the companies the best prospects for strengthening their competitiveness. We have already begun the work to evaluate a listing or sale of Nelly and potential structural transactions for CDON Marketplace to strengthening its position as the leading Nordic marketplace.  

Qliro Financial Services increases profitability
Qliro Financial Services has a strong position for continuing its profitable growth. The company is broadening its offering with new services to consumers and merchants across the Nordics. The company has now reached a new level of maturity with over 1.8 million customers and over 40 percent of the business volume from e-merchants that are not owned by the Group. This gives us the right foundation to roll out new services to consumers and merchants, such as personal loans.

The loan book grew by 53 percent in the quarter to more than SEK 1.2 billion with the fastest growth in personal loans. Operating income increased by 36 percent while the increase in the total operating expenses was limited to 27 percent. At the end of the quarter, the organization had the same number of employees as at year-end.

CDON Marketplace accelerates its transformation
CDON Marketplace has achieved a strong position as the leading Nordic online marketplace. The transformation to a marketplace and sales directly from suppliers’ warehouses, so-called dropshipment, provide conditions for growth with lower stock levels and thus less tied-up capital over time. At the same time, we continue to invest in technology, logistics and branding to build a profitable company.

CDON Marketplace increased the number of visits and customers in the quarter. We accelerated the transformation to a marketplace and the external merchants increased their sales by 15 percent. Meanwhile, we have begun to phase out our own sales of mainly low-margin home electronics products. This is a natural part of the transformation to a marketplace and will continue in the coming quarters with a negative impact on sales, while creating conditions for higher margins going forward. Consequently, the gross margin rose to 12.2 percent and sales decreased. Operating income was somewhat better than last year.

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

Nelly’s efforts to grow led to an increase of 8 percent in visits, 14 percent in the number of orders and 11 percent in the number of customers. Net sales increased 11 percent in the quarter, which is the highest growth since the second quarter of 2015. An important driver was that almost half of all sales were our own designs. The number of returns stabilized during the quarter but remained higher than in 2017. Operating income before depreciation and amortization totaled SEK 29 million.

Financial flexibility
Qliro Group’s net sales increased to SEK 807 million and the gross margin strengthened to 25 percent in the quarter. Initiatives increased marketing costs by SEK 11 million. After this, operating income before depreciation and amortization amounted to SEK 7.7 million. We are pleased with developments in Qliro Financial Services and Nelly, as well as with the transformation of CDON Marketplace.

Our three companies have strong positions in dynamic and growing segments of e-commerce, which we combine with a strong financial position. The Group’s cash amounted to SEK 646 million and the net cash in the e-commerce business amounted to SEK 389 million. This provides good opportunities for us to further invest in our companies.  

Stockholm, 13 July 2018
Marcus Lindqvist, President and CEO

LONG-TERM FINANCIAL TARGETS
CDON Marketplace 

• Attain a level of organic growth in gross merchandise value of an average of 10 per cent per year
• Generate operating income before depreciation, amortization and impairment of 1 – 2 per cent of gross merchandise value

Nelly (including NLYMan) 

• Attain a level of organic growth of an average of 8 per cent per year
• Generate an operating margin before depreciation, amortization and impairment of at least 6 percent

Qliro Financial Services 

• Reach operating income before depreciation, amortization and impairment of at least SEK 150 million in 2019

SIGNIFICANT EVENTS DURING AND AFTER THE SECOND QUARTER
Qliro Group commented on Nelly and CDON Marketplace
On April 5, Qliro Group announced that Nelly’s order intake increased during the first quarter, but that sales growth was limited due to delayed deliveries and increased returns, and that earnings were affected by increased investments. It was also announced that the CDON Marketplace adjusted its organization.  

Management changes
During the quarter, Anna Ullman Sersé was appointed Interim Head of Nelly and Lena Hackelöer was appointed Interim Head of Qliro Financial Services.

Qliro Group issued and repurchased C shares
On April 27, Qliro Group completed an issue and immediate repurchase of 4,550,000 C shares for distribution to participants in the long-term incentive program. On 30 June, the number of shares was 154,994,779, of which 149,694,779 common shares and 5,300,000 C shares. The C shares are held by Qliro Group.

Helsinki Administrative Court mainly rejected CDON Alandia’s claims in Finnish taxation case
On January 5, 2016, Qliro Group announced that the tax administration in Finland decided to place an additional tax on CDON Alandia (a Qliro Group company in Åland) for the 2012 fiscal year. CDON Alandia appealed against the decision to the Helsinki Administrative Court, which announced on May 18, 2018, that it mainly rejected CDON Alandia´s claims. Consequently, a tax expense of SEK 57 million and an interest expense of SEK 13 million were recognized in the second quarter of 2018. The amount had been paid in advance. CDON Alandia is considering appealing to the Finnish Supreme Administrative Court.

Qliro Group concluded CEO and CFO participation in 2016 and 2017 incentive programs
On May 31, 2018, Qliro Group announced that CEO and CFO participation in the 2016 and 2017 incentive programs (PSP 2016 and 2017) did not comply with the rules applicable in a consolidated situation (see below). To dismantle these programs, the CEO was issued 264,479 shares and the CFO was issued 155,987 shares. The CEO now holds 449,479 shares and the CFO holds 235,987 shares.  

New strategic focus on three independent companies to increase shareholder value
On June 7, 2018, it was announced that Qliro Group had decided to focus on running Qliro Financial Services, CDON Marketplace and Nelly as three independent companies. Work to evaluate a listing or sale of Nelly and potential structural transactions for CDON Marketplace has begun. Qliro Financial Services has the right conditions to continue growing in its present form. The process was expected to be completed within 2 years. 

Consolidated situation
A consolidated situation arises when subsidiary Qliro AB (credit market company under the supervision of Finansinspektionen) constitutes the main business of the Group. At the end of the quarter, Qliro AB accounted for more than half of the Group’s total assets. The Group assesses that this implies a consolidated situation, which have been reported to Finansinspektionen. The consolidated situation involves the parent company Qliro Group AB and Qliro AB, which means that certain rules for the credit market company also apply to the parent company, such as the Capital Requirements Directive. The consolidated situation (parent company and Qliro AB) was well-capitalized as of June 30, 2018. 

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 +46 8 5033 6574
UK +44 330 336 9105
US +1 646 828 8156
PIN code to participate: 8635179 

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: +46 736 511 363
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 and the Swedish Securities Markets Act. The information was released for publication through the agency of the above-mentioned contacts at 8:00 a.m. on July 13, 2018. 

Tags: