Interim Report Nepa AB (publ) Q3 2016

CONTINUED GROWTH AND INVESTMENTS THAT LAY THE FOUNDATION FOR INCREASED GROWTH.

(This is a translation of the original interim report in Swedish. If there should be any discrepancies, the Swedish language version governs.)

THIRD QUARTER, JULY – SEPTEMBER 2016 

• Net sales increased by 16.3% to MSEK 38.4 (33.0)
• Gross profit increased by 17.2% to MSEK 27.2 (23.2)
• EBIT amounted to MSEK -3.5 (-1.1)
• Earnings after tax amounted to MSEK -2.7 (-1.2)
• Earnings per share amounted to SEK -0.38 (-0.95)                        

NINE MONTHS, JANUARY – SEPTEMBER 2016 

• Net sales increased by 17.0% to MSEK 129.3 (110.5)
• Gross profit increased by 17.4% to MSEK 96.5 (82.2)
• EBIT amounted to MSEK 0.1 (-0.1)
• Earnings after tax amounted to MSEK -1.6 (-1.0)
• Earnings per share amounted to SEK -0.20 (-0.77)

IMPORTANT EVENTS 

DURING THE PERIOD

• Nepa’s wholly owned US subsidiary, Nepa USA, Inc. started operations according to plan. The office in New York is led by personnel transferred from the Stockholm headquarters. The recruitment of local key people has begun.

AFTER THE PERIOD ENDED

• On October 31, 2016, Nepa acquired outstanding 9.9 per cent of the UK subsidiary Nepa UK Ltd, which then became a wholly owned subsidiary.
  • Lindsay Parry (formerly Cowan) today became MD of Nepa UK.

A WORD FROM OUR CEO 

After the IPO and rights issue in the second quarter and a generally strong first half year of 2016, in the third quarter we began – with great dedication and conviction – to realize our growth plans:

• Continue to grow the home market Sweden and to drive growth in existing international markets Norway, Finland, Denmark and India.
• Invest further in the rapidly growing UK business aiming at further increase growth in Europe’s largest and the world’s second largest market.
• Establish Nepa’s first office in the USA, driven by current clients’ demand of presence on the world’s largest market.
• Increase investments in Nepa’s proprietary product platform ActionHub® in order to achieve increased scalability and allow for further growth.

I am proud to present the first initiatives on this growth journey: 

• In the UK market, we have worked on creating the right conditions for driving the already rapid growth even further. As a first step, we have today named Lindsay Parry (formerly Cowan) as MD of Nepa UK. Parallel to the shift in management, Nepa acquired the outstanding 9.9 percent of Nepa UK, which is now a wholly owned subsidiary. With Lindsay as MD and with the ownership structure in place, we have all the right prerequisites for making the UK one of Nepa’s strongest markets.
• On November 1 we started manning our first office in the USA, in New York, headed by Ali Piltan. Ali has worked at Nepa since 2010 as globally responsible for product development within retail and consumer packaged goods and also as key account manager for several global clients. Next phase for Nepa in the USA is to build a local organization for serving current clients in the USA and to attract new clients.
• In order to effectively execute our expansion plan, Nepa has invested in an expansion team that provides the necessary resources to drive Nepa’s internationalization through efficient structures, processes and scalability.
• During the third quarter we have increased investments in personnel for our system development and data science teams with the purpose of continuing to develop the ActionHub® - Nepa’s fastest growing product. We can already see that the additional resources increase the development pace of the ActionHub®, which allows us to keep driving the development within our field on a global basis.

Despite the fact that focus has been to create the right conditions for future growth, Nepa grew according to plan in the third quarter. Nepa shows a growth in sales and gross profit of 16.3 and 17.2 percent respectively, meaning that we have now grown for 42 consecutive quarters. Growth has been particularly strong in Finland, the UK and India. I would like to take the opportunity to welcome all new clients.

The third quarter EBIT amounted to MSEK -3.5, which is due to the fact that the third quarter is seasonally weaker in sales combined with our investments in growth and scalability, i.e. that we according to plan are expanding in the USA, the UK and investing in the development of the ActionHub®.  In a comparison between the third quarter of 2016 and the corresponding quarter in 2015, Nepa has substantially higher personnel costs, which is explained by investments in personnel for the expansion in the USA and the UK as well as personnel for system develop­ment for the ActionHub®.

Lastly, I can point out that on our largest market in terms of sales, our home market Sweden, Nepa shows continued growth and in addition gradually increasing contribution margins, which provide a solid base for the continued internationalization of Nepa.

Fredrik Östgren
CEO

Nepa is one of the fastest growing companies in Swedish history, enabling organisations to improve their business performance by becoming customer centric at their fingertips. By merging behavioural data with customer feedback data in our ActionHub® platform, our clients can turn the voice and the footprints of the consumer into financial KPI’s and provide it to the right stakeholder in real-time.

Nepa serves some of the world’s most reputable brands in 50+ countries with local presence in China (rep), Denmark, Finland, India, Norway, Singapore (rep), Sweden, the UK and the US.

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