Interim report for 1 January – 30 September 2016

Third quarter (1)

•  Net sales for continuing operations decreased by 1%, and amounted to SEK 917.1 (930.3) million 
•  Gross margin for continuing operations, excluding items affecting comparability, rose by 3.0 percentage points to 17.8 % (14.8 %) 
•  Operating earnings before depreciation and amortization (Ebitda) for continuing operations, excluding items affecting comparability, improved to SEK -12.7 (-18.5) million 
•  Operating earnings (Ebit) for continuing operations, excluding items affecting comparability, amounted to SEK -31.8 (-28.3) million  
•  Items affecting comparability affected operating earnings (Ebit) by SEK -20.0 (-13.0) million 
•  Net income after tax amounted to SEK -45.8 (-32.0) million 
•  Earnings per share excluding discontinued operations amounted to SEK -0.30 (-0.21) before and after dilution 
•  Earnings per share including discontinued operations, before and after dilution, amounted to SEK -0.31 (-0.21)
•  Cash flow from continuing operations amounted to SEK -109.1 (-111.3) million 

First nine months (1)

•  Net sales for continuing operations amounted to SEK 2,945.1 (2,943.0) million 
•  Gross margin for continuing operations, excluding items affecting comparability, rose by 1.3 percentage points to 17.0% (15.7%) 
•  Operating earnings before depreciation and amortization (Ebitda) for continuing operations, excluding items affecting comparability, amounted to SEK -30.0 (-34.2) million 
•  Operating earnings (Ebit) for continuing operations, excluding items affecting comparability, amounted to SEK -76.8 (-60.9) million 
•  Items affecting comparability affected operating earnings (Ebit) by -35.4 (-30.9) million 
•  Net income after tax amounted to SEK -206.4 (-72.2) million 
•  Earnings per share excluding discontinued operations amounted to SEK -0.64 (-0.49) before and after dilution 
•  Earnings per share including discontinued operations, before and after dilution, amounted to SEK -1.38 (-0.48) 
•  Cash flow from continuing operations amounted to SEK -338.3 (-376.1) million 

(1) Qliro Group’s sale of subsidiary Tretti AB was completed in the third quarter. Thus, continuing operations exclude Tretti, which is recognised under Discontinued operations in the consolidated income statement. Comparative figures in the consolidated income statement and cash flow statement have been adjusted correspondingly. The table below also presents continuing operations. 

Doubled operating revenue in Qliro FS and significantly improved profitability in Nelly 

During my first two months at Qliro Group, I have focused on getting to know the organisation better, and together with our new CFO, taken a more detailed look at our operations. In general, I am impressed by the growth and opportunities within Qliro Financial Services, the standard of operations within Gymgrossisten as well as by the significant earnings improvements in Nelly. CDON continues to grow its sales to external merchants on CDON Marketplace, but we will need to focus on the balance between this growth and profitability. Lekmer still has clear challenges linked to its warehouse operations, affecting growth as well as earnings, which we are adressing. In summary, we have a very strong plattform to build from, but with challenges and opportunities relating to operational efficiency.

Our review of operations has also resulted in the decision to reduce operational risks in the group by introducing a more conservative approach to several aspects of financial accounting policies, i.a. capitalization of development expenditures and inventory management. This has resulted in a negative impact of SEK 20 million in the quarter. We are confident that this approach will provide a clearer picture of our underlying earnings going forward, and enable more efficient governance, tie up less capital and generate improved cash flow.

In parallel, we have initiated a strategy review which we expect to conclude by year-end. We are reviewing each segment and their respective challenges and opportunities, while also conducting a review of the operational structure to evaluate synergies, optimise scalability and highlight the potential of Qliro Financial Services.  

Operational efficiency
Qliro Group’s sales decreased by one percent in the third quarter, while the gross margin increased by three percentage points to 17.8 percent. The increase was driven by Qliro Financial Services’ continued earnings improvement and Nelly’s successful efforts in improving its assortment strategy and continued focus on private label. On an overall level, our e-commerce businesses’ sales are not growing in line with the market. This, however, is partly reflecting a conscious decision to focus on profitability rather than growth. 

A foundation for future growth will be set through more efficient operations, driven by a structured approach focusing on continuous improvement.

As it stands today, Lekmer is not profitable. However, Lekmer has a strong offering towards a segment with high growth potential and the company has also regained high customer satisfaction, showing that the underlying business model is attractive. In order to realise this potential, we will continue to invest time and resources into Lekmer. We have started by strengthening the company’s management team and initiated projects focusing on strengthening customer exerience, IT-innovation and warehouse efficiency. 

Significant potential in financial services 
Qliro Financial Services continued to grow strongly, and total revenues increased by 113% in the quarter. Earnings have continuously improved and reached break-even before tax in the quarter. The company remains focused on product development to further broaden and strengthen the offer to both consumers and merchants. Regarding the license application to operate as a credit market company, we expect that the Swedish FSA, Finansinspektionen, will revert with their decision before the end of the year.  

Overall, my initial observations are that Qliro Group has well established brands, a strong product portfolio as well as highly skilled and dedicated employees. In a rapidly changing environment, it is necessary to understand and adapt to customer needs and thus to develop a corporate culture that promotes simplicity, speed and innovation. We still have some challenges to overcome within our businesses, but I confidently look forward to working with all employees to create shareholder value by developing a more competitive and stronger group. 

Stockholm, October 2016 

Marcus Lindqvist, CEO

For additional information, please visit www.qlirogroup.com or contact:
Marcus Lindqvist, Chief Executive Officer
Tel: +46 10 703 20 00

Mathias Pedersen, Chief Financial Officer                    
Tel: +46 10 703 20 00

Questions from media, investors and research analysts:
Erik Löfgren, Head of Communications                            
Tel: +46 700 80 75 06
E-mail: press@qlirogroup.com, ir@qlirogroup.com

About Qliro Group
Qliro Group is a leading e-commerce group in the Nordic region. Since the start in 1999, the Group has expanded and broadened its product portfolio and is now a leading e-commerce player in consumer goods and lifestyle products through CDON.com, Lekmer, Nelly (Nelly.com, NLYman.com, Members.com) and Gymgrossisten (Gymgrossisten.com/Gymsector.com, Bodystore.com, Milebreaker.com and Fitness Market Nordic). The group also comprises the payment and consumer financing solution Qliro. In 2015, the group generated over 4.4 billion SEK in revenue. Qliro Group’s shares are listed on Nasdaq Stockholm’s Mid-cap list under short name “QLRO”. 

This information is information that Qliro Group AB is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication, through the agency of the contact persons set out above, at 08:00 CET on 20 October 2016.

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