Interim report for 1 January – 31 March 2018

FIRST QUARTER[1]

• Net sales increased by 2 percent to SEK 716.1 (705.3) million 
• Gross profit amounted to SEK 135.3 (140.1) million 
• Operating income before depreciation, amortization and impairment was SEK -42.7 (-2.7) million 
• Operating income amounted to SEK -58.8 (-19.4) million 
• Profit after tax including discontinued operations amounted to SEK 91.0 (-22.9) million 
• Basic earnings per share including discontinued operations amounted to SEK 0.61 (-0.15) 
• Diluted earnings per share including discontinued operations amounted to SEK 0.60 (-0.15)  
• Cash and cash equivalents increased to SEK 601.9 (156.9) million at the end of the quarter

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

Qliro Group’s net sales increased 2 percent, and the gross margin was 18.9 percent for the quarter. Operating result before depreciation, amortization and impairment decreased to SEK -43 million. The operating result included initiatives that increased marketing spend with SEK 9 million and personnel costs with SEK 14 million. As previously communicated, the result was also affected by a reorganization in CDON Marketplace with SEK 7 million and by increased returns in Nelly with SEK 16 million. The sale of HSNG resulted in earnings including discontinued operations of SEK 0.60 per share (fully diluted) for the quarter. We are pleased with the development in Qliro Financial Services and with the transformation of CDON Marketplace, but Nelly’s results are below our expectations.  

Qliro Financial Services increased profitability
Qliro Financial Services increased its operating income by 38 percent, while growth in total operating expenses was limited to 29 percent. This shows the scalability of the business. Operating income before depreciation, amortization and impairment improved by 79 percent. At the end of the quarter, lending to the public was SEK 1,019 million. Personal loans in Sweden grew the fastest and conditions are ripe for continuing to grow this business. Qliro Financial Services’ organization has a sufficient scale to handle a considerable increase in the loan book with current offers without significantly increasing the number of employees.

CDON Marketplace reorganized
CDON Marketplace has achieved a strong position as the leading Nordic digital marketplace. Although Easter took place in the end of the quarter, external merchants increased their sales by 13 percent. As part of its transformation into the marketplace model, CDON was reorganized, which affected about ten administrative positions. This affected earnings by about SEK 7 million in the quarter but will help lower costs in the long-term. We continue to invest in technology, logistics and branding. CDON also launched a new site tailored to corporate customers.

Nelly reported a weak quarter
Nelly accelerated its marketing, which contributed to an increased total order value of 15 percent in the first quarter. However, revenue growth was limited to 3 percent due to delayed deliveries around Easter, unexpectedly high utilization of extended returns from campaigns in the fourth quarter 2017 and increased returns in the first quarter.

Orders for approximately SEK 13 million were delayed by Easter and were delivered in the second quarter. Compared to the same period last year, earnings were adversely affected by approximately SEK 16 million due to the increased returns. Half of this amount was a one-off effect from extended returns from campaigns in the fourth quarter 2017, and the rest was due to generally higher return rate during the quarter. In addition, Nelly increased its marketing initiatives by SEK 8 million. Operating loss before depreciation, amortization and impairment was SEK 15 million for the quarter. This was below our expectations and we are intensifying our efforts for profitable growth. On April 17, Anna Ullman Sersé was appointed Interim Head of Nelly. Anna has led the strategy development for Nelly as Head of Business Development and is a member of Qliro Group’s management team since 2016. She replaced Jan Wallsin who left the group.

Financial flexibility
CDON Marketplace and Nelly have strong positions in dynamic segments of e-commerce. Their growth drives increasing volumes to Qliro Financial Services that extend our relationship with consumers, enabling the offer to be expanded with low customer acquisition costs. 

The group’s cash position amounted to SEK 602 million and the net cash position in our e-commerce business to SEK 324 million. This provides us with good opportunities to invest in our business areas and grow the loan book in Qliro Financial Services.  

Stockholm, April 2018
Marcus Lindqvist, President and CEO
 
FINANCIAL TARGETS
Qliro Group’s long-term financial targets are:

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 FIRST QUARTER OF 2018

Changed accounting policies for Qliro Financial Services
On January 1, new rules for the reporting of financial instruments, IFRS 9, were introduced. They primarily affect Qliro Group through Qliro Financial Services’ credit loss reserves. According to IFRS 9, reserves for credit losses shall be made directly when a credit is issued, instead of as previously when there is an indication of increased credit risk. This results in earlier and higher recognition of the reserves for credit losses than before, but it will not affect cash flow or underlying credit risk. In the opening balance of 2018, the reserves increased by SEK 24 million due to the transition to IFRS 9. These provisions affect the balance sheet items equity and lending to the public but do not affect the income statement. From January 1, 2018, provisions for projected credit losses will be made directly at the time of lending with the effect recognized in earnings.

Sale of Health and Sports Nutrition Group HSNG AB
On January 30, the sale of Health and Sports Nutrition Group to Orkla was completed. HSNG remains a partner with Qliro Financial Services and CDON Marketplace after the transaction. HSNG is recognized as a discontinued operation. The capital gain from the divestment excluding transaction costs amounted to SEK 140 million and was recognized as profit from discontinued operations in the first quarter.

CDON Marketplace launched a corporate offering
On March 20, CDON.COM launched a new B2B site targeted to small and medium-sized companies in Sweden. The product range consists initially of IT equipment and office supplies. The ambition going forward is to offer a broad and attractive range of products to corporate customers across the Nordic region.  

Qliro Group commented on Nelly and CDON Marketplace
On April 5, Qliro Group published a press release announcing 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 in marketing and organization. It was also announced that CDON Marketplace adjusted the organization as part of its transformation to a marketplace.

Anna Ullman Sersé appointed Interim Head of Nelly
On April 17, Qliro Group announced that Anna Ullman Sersé had been appointed Interim Head of Nelly. Anna has been Head of Business Development and a member of Qliro Group’s management team since 2016. She replaced Jan Wallsin who left the group. A search process for Jan´s successor will be undertaken.
 
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 (0)8 5033 6574
UK +44 330 336 9105
US +1 646 828 8156
PIN code to participate: 3160593 

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
Mathias Pedersen, CFO
Telephone: +46 (0)10 703 20 00

Niclas Lilja, Head of Investor Relations 
Telephone: +46 (0)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 the leading Nordic online marketplace CDON.COM, 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. The information was released for publication through the agency of the above-mentioned contacts at 8:00 a.m. CET on Friday, April 20, 2018. 

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