MARGINAL GROSS PROFIT GROWTH IN THIRD QUARTER

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

THIRD QUARTER, JULY – SEPTEMBER 2019

• Net sales decreased by 1.1% to MSEK 55.4 (56.0)
• Gross profit increased by 1.0% to MSEK 41.6 (41.2)
• EBIT was MSEK -13.9 (-3.4)
• Earnings after tax was MSEK -12.7 (-3.6)
• Earnings per share was, basic SEK -1.61 (-0.51), diluted SEK -1.61 (-0.50)
• Impact of restructuring in the USA impacted EBIT by MSEK -2.0 in the third quarter and is expected to give annual cost savings om MSEK 13.0.

NINE MONTHS, JANUARY – SEPTEMBER 2019

• Net sales increased by 7.9% to MSEK 192.5 (178.5)
• Gross profit increased by 11.5% to MSEK 148.0 (132.7)
• EBIT amounted to MSEK -17.6 (-9.6)
• Earnings after tax amounted to MSEK -16.7 (-11.0)
• Earnings per share amounted to, basic SEK -2.12 (-1.54), diluted SEK -2.12 (-1.51)

IMPORTANT EVENTS

DURING THE PERIOD      

• Marie Audier D’Alessandris, formerly Global Chief of Marketing and e-Commerce for Coach and senior marketing leader at L’Oréal started as an advisor to the board of Nepa.
• We restructured the US business and appointed Erik Enecker as Managing Director of subsidiary Nepa USA Inc. We also incurred cost reductions within sales and marketing in the US with expected annual savings of MSEK 13.0.

AFTER THE PERIOD ENDED

• The Norwegian operations will be combined with the Swedish organisation, leading to cost efficiencies and annual cost reductions of MSEK 2.8 from January 1, 2020. We will continue to service our Norwegian clients with Nepa’s traditional high standards.
• Global marketing department moves from the US to Sweden.

A WORD FROM OUR CEO

Our key target, gross profit, was in the third quarter MSEK 41.6, an increase of 1.0 percent compared to the third quarter of 2018. In the same period EBIT was MSEK -13.9 (-3.4). Our performance in Q3 was substantially weaker than expected.

The low growth is due to weak sales in the US and lower than expected project-based revenues in the Nordic market, in which our gross profit has been flat. In the UK our growth rate was 12% which was lower than our expectations.

With lower sales we have worked with improving our sales strategy and have also started to implement a cost reduction program:

• In September we began a restructuring of our US sales company Nepa USA. Erik Enecker was promoted to Managing Director. We have adapted the sales organization after making the decision that the US will become profitable in 2020 and to reduce the sole focus on revenue growth. As a consequence of this we are moving our global marketing function from the US to Sweden. Expected cost reductions in 2020 compared to 2019 amount to approximately MSEK 13.0. The one-time costs in the period was MSEK 2.0.
   

• In November we decided to manage our Norwegian operations from Sweden. The action is expected to result in an annual cost saving of MSEK 2.8 from year 2020, with unchanged revenues and maintaining our high standards of client service.

We are currently working on finalizing our strategy for the period 2020-2024, aiming at making Nepa profitable in 2020. We intend to present the strategy in the upcoming full-year report.

We are pleased to see that sales in the fourth quarter are strengthening, especially for our subscription-based revenues. We expect growth in the fourth quarter and a favorable position to start next year.

Fredrik Östgren
CEO

This is a translation of the Swedish interim report. If there should be any discrepancies, the Swedish language version governs. The Swedish version is information that Nepa AB (publ) 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 below, at 08:00 CET on November 21, 2019.

Link to financial reports: https://nepa.com/investor-relations/reports/

www.nepa.com

Fredrik Östgren
CEO
Maria Skolgata 83, 118 53 Stockholm, Sweden
+46 733 345 069 fredrik.ostgren@nepa.com

P-O Westerlund
Deputy CEO, CFO
Maria Skolgata 83, 118 53 Stockholm, Sweden
+46 706 404 824 p-o.westerlund@nepa.com

Headquartered in Stockholm, Sweden, and with local presence in Denmark, Finland, India, Norway, UK and USA, we help some of the world's most reputable brands in more than 50 countries to optimize customer experience investments and get more effect out of their marketing and sales. Nepa has been awarded DI Gasell's award for organic fast-growing companies in 6 of 7 years since 2011 The company is publicly traded at the Nasdaq First North Growth Market since 2016. Erik Penser Bank (tel: +46 8-463 83 00, e-mail: certifiedadviser@penser.se) is Nepa’s Certified Adviser.