Lauritz.com Group A/S - Year-end 2016 financial report

No. 02/2017
Copenhagen, 27 February 2017

The auction turnover in Q4 2016 increased by 16 percent to DKK 363.4m (312.4) compared to Q4 2015. The auction turnover for the full year 2016 ended up stable compared to 2016 and amounted to DKK 1,074m (1,084).

Revenue increased in Q4 to DKK 73.1m (70.7), but decreased to DKK 219.4m (225.2) for the full year. The decrease in revenue is mainly explained by DKK 8m lower one-off fees from sales of partnership agreements in 2016 compared to 2015. Lauritz.com is a chain 27 of auction houses - some are owned by Lauritz.com, others by a local partner on a franchise like basis. Sometimes Lauritz.com sells an owned auction house to a new partner. Thus one-off fees from sales of partnership agreements is now and then generated.

When looking isolated at the core business, revenue related to auction commissions and fees showed an increase in 2016 and was DKK 2.2m higher compared to 2015.

On EBITDA level, we have historically every year tried to improve the EBITDA of the previous year. Again in 2016, we delivered the best EBITDA result ever in the history of Lauritz.com. EBITDA in Q4  increased by 19 percent to DKK 27.6m (22.7) and 10 percent, to DKK 46.3m (41.8), for the full year. This is in line with our EBITDA growth guidance communicated on 19 January 2017, but lower than previously expected. The main reason for the deviation was lower than expected commission levels in the fourth quarter.

In spite of the stable auction turnover and the highest ever EBITDA, the lack of growth in auction turnover and the lower than expected profitability for the full year 2016 is disappointing.

We now take the measures needed to strengthen the foundation to leverage on our strong position on the online auction market. As part of our goal to increase revenue growth and profitability as well as to prepare ourselves for accelerated expansion, we are looking into all business areas. Doing this we will prioritize our core business within used quality items on online auctions, and thereby focus less on other secondary areas such as the peer-to-peer market as well as less valued items.

On the short term basis, several initiatives have been taken in Q1 2017 to adapt the organisation to the existing revenue level. A cost cutting plan has been executed, including both reduction of 15 % of our staff at the headquarter and reduction of other spendings. The initiatives will have an impact on profitability during 2017.

We have revised our action plan for 2017. The plan focuses primarily on how to secure long term growth in auction turnover, but also on how to further develop processes to optimize customer satisfaction, efficiency and increase earnings.

The biggest challenge in the auction business is to attract more sellers and items on auction. Our capability to establish new auction houses and attract more sellers to our current branches is therefore key to our success.

We establish new auction houses either by buying traditional auction houses with physical auctions and convert them to online auctions, or by starting up with local Lauritz.com partners. In 2016, we acquired Karlstad-Hammarö Auktionsverk in Sweden and closed a small auction house in Örebro, which showed unsatisfactory performance.  At present, we negotiate with several sellers and potential partners to start up in both our current and in new geographical markets. We expect to open more auction houses in 2017.

As to auction turnover in existing branches, the action plan 2017 presents a long list of initiatives towards existing and potential selling customers, among others an improved pick-up service at seller's home, an elaboration of our CRM program to inspire buyers in Lauritz.com's massive database to also sell on auction, an optimized flow for our online evaluations and a new incentive package for sellers to consign.

As to organisation development, Lauritz.com will in 2017 upgrade our commercial management resources.  On HQ level, country managers will be appointed and responsible for securing a local sales focus to acquire items. On branch level, we have changed the cast of the branch manager profile and have initiated recruitment of several new high level branch managers with a more commercial sales director profile. Finally, we have initiated a leadership programme to further develop management capabilities among our existing branch managers.

In 2017 we will moreover introduce a palette of new features to further improve the customer experience for bidding and buying customers online. We will among others launch a new design of Lauritz.com's very popular app, a new credit card payment system for buyers, a more intelligent search engine, and add additional flexibility to our shipping services.

In 2016, the number of online visits at Lauritz.com increased to around 6.2 million per month, hereof around 2 million unique visitors. Around 13,000 new customers were registered every month. We have a total of 3 million customer registrations.

This is a fantastic platform to build on and leverage with regards to both reaching more buyers internationally and expanding our base for supply of items by adding new local auction houses.

We will continue to explore and build the large middle-market segment which positions Lauritz.com between peer-to-peer platforms with high volume at low prices and the fine art market with low volume and high prices. This is where we continue to see the highest potential.

2016 was in several ways a challenging year, but we believe to take the right measures for continued and profitable success. We thank our many motivated and loyal customers for taking part in our online revolution in the auction industry. I am proud of Lauritz.com's strong culture and our ability to take a new breath in our democratisation of the auction world, making auctions accessible to everyone, everywhere.

Mette Rode Sundstrøm

CEO

Lauritz.com - a pioneer in the auction industry

Lauritz.com is the biggest auction group in the Nordics, with buyers in 200 countries that trade online.

Lauritz.com has created a paradigm shift in the auction industry. Our vision is to democratise the auction world by inspiring consumers to sell and buy on online auctions, making art, design and antiques accessible for everyone worldwide.

Our first mover advantage, combined with expertise and knowledge within valuations, secure payments services and distribution of sold items, has since the start constituted the foundation for sustainable and profitable expansion.

Lauritz.com registers around 6.2 million online visitors and around 2 million unique visitors each month. Approximately more than 13,000 new customers are registered every month.

We have shown a yearly average auction turnover growth of over 25% since the start in 1999 with an auction turnover in 2016 of over DKK 1,000 m. During the same period, EBITDA has shown a strong and consistent development.

Business model

Lauritz.com capitalizes on the trend of digitalization and online trading by consolidating the fragmented and mainly physical auction house market in Europe and converting it into online auctions.

We focus on the large middle-market segment with a value between DKK 800 and 50,000. This segment positions Lauritz.com between peer-to-peer platforms with high volume at low prices and the fine art market with low volume and high prices.

Sourcing of items from local sellers is achieved through a combination of acquiring traditional physical auction houses, starting new auction houses and establishing partner-run auction houses within a franchise-like model.

Currently, Lauritz.com has 27 auction houses located in Denmark, Sweden, Norway, Germany and Belgium and further growth is expected to come from consolidation in current and new markets.

Revenue model

Lauritz.com charges buyers and sellers a commission and a fixed fee on the knockdown.

Owners

Lauritz.com Group A/S is since 22 June 2016 listed on Nasdaq First Premier Stockholm with the ticker LAUR. The largest shareholders of Lauritz.com Group A/S are founder Bengt Sundström, Bure Equity AB, Swedbank Robur Fonder, Catella Fondförvaltning AB, Rite Internet Ventures Holdings AB and CEO Mette Rode Sundstrøm.

1 October - 31 December 2016

Auction turnover

Auction turnover amounted to DKK 363.4m (312.4), corresponding to an increase of 16 percent. The increase was mainly driven by a strong quarter within Fine Art.

The number of knockdowns excluding QXL amounted to 81,668 (90,545) and average knockdown price amounted to DKK 4,343 (3,366).

Revenue

Revenue amounted to DKK 73.1m (70.7), corresponding to an increase of 3 percent.

1 partnership agreement was signed which means that as of 31 December 1 less auction house (net) was fully owned by Lauritz.com and 1 additional owned by partners compared to 30 September 2016.

EBITDA and Auction Turnover margin

EBITDA amounted to DKK 27.6m (22.7), corresponding to an increase of 19 percent. The increase is mainly explained by the increase in revenue from auction turnover.

The Auction Turnover Margin amounted to 7.6 (7.4) percent. The increase is mainly explained by the increase in auction turnover with limited impact on costs.

Operating profit

Operating profit for the period amounted to DKK 23.7m (19.0).

Net financials

Net financials was DKK -7.2m (-15.4). The decrease is explained by lower bond interest due to the partial redemption of the bond debt in July and the currency exchange rate losses on the bond debt issued in SEK.

Tax

Tax amounted to DKK -7.5m (-0.8), corresponding to an effective tax rate of 45.5 percent (22.8). The increase is mainly explained by the impact from the unrealized currency exchange rate gains on the bond debt issued in SEK.

Profit for the period and earnings per share

Profit for the period was DKK 9.0m (2.8).

Earnings per share amounted to DKK 0.222 (0.078).

Cash flow

Cash flow from operating activities was DKK 34.6m (24.6). The strong cash flow for the quarter is due the positive development in auction turnover in Q4 2016.

Financial position, cash and cash equivalents

Equity at the end of the quarter was DKK 62.0m (13.3) and the group's total assets were DKK 496.5m (501.6). The equity/assets ratio increased to 12.5 percent (2.8).

Cash and cash equivalents amounted to DKK 78.5m (46.3).

Investments

Investments amounted to DKK 8.9m (5.6).

Human resources

The average number of full-time employees in Lauritz.com Group A/S and its subsidiaries (FTE) was 203 (204) in the period.

Shares

The number of shares registered is 40,666,667.

Risks and uncertainty factors

Significant operating, external and financial risks and uncertainty factors are described in detail in the prospectus for Lauritz.com that was signed by the Board of Directors 14 June 2016 on page 48-49 and 54-65. Lauritz.com does not consider that any significant risks additional to those described in the prospectus have arisen.

Event after the end of the period

No events have occurred after the balance sheet date that could have a material influence on the company's financial position.

Future prospects

In 2017 the Group expects to obtain an increased net revenue and an EBITDA margin between 20-25 percent.

Lauritz.com

On occasion, Lauritz.com Group A/S is referred to as Lauritz.com. In this Report, such references are to Lauritz.com Group A/S's consolidated financial statements, unless clearly stated otherwise.

Finance

The Group is partly funded by a bond debt, which amounted to DKK 241.8m (338.1). The bond is a senior secured bond of SEK 325m listed on Nasdaq in Stockholm with an 3M Stibor + 7.5 % interest 2014/2019.

The conditions of the bond includes two covenants on Lauritz.com A/S financials.

One covenant is Net interest bearing debt/EBITDA, which as at 31 December 2016 must not be greater than 4.00. The ratio was 3.10.

The second covenant is EBITDA/Net finance charges, which as at 31 December 2016 must exceed 1.75. The ratio was 2.04.

The covenants for the bonds are described in detail in the terms and conditions for the bond available on www.lauritz.com.

Seasonality

Lauritz.com's net revenue and profitability are affected by the nature of operations, and accordingly, its seasonality where Q2 and Q4 are historically strong quarters.

Parent company

Lauritz.com Group A/S, being the parent company, is listed on Nasdaq First North Premier in Stockholm and the company is a holding company owing 100 % of Lauritz.com A/S group whose operations primarily are online auctions.

1 January - 31 December 2016

Auction turnover

Auction turnover amounted to DKK 1,073.4m (1,084.1) corresponding to a decrease of 1 percent. The minor decrease was mainly explained by the decrease in auction turnover from new items and from the peer-to-peer platform, QXL.

The number of knockdowns excluding QXL amounted to 314,154 (351,490) and average knockdown price amounted to DKK 3,324 (2,976).

Revenue

Revenue amounted to DKK 219.4m (225.2), corresponding to a decrease of 2.5 percent. The minor decrease was mainly explained by a decrease in one-off fees from sale of partnership agreements.

1 auction house was acquired and 3 partnership agreements were signed. As of 31 December 2016 one less auction house (net) was fully owned by Lauritz.com and 2 additional owned by partners compared to 31 December 2015.

EBITDA and Auction Turnover margin

EBITDA amounted to DKK 46.3m (41.8), corresponding to an increase of 10 percent. The increase is mainly explained by lower expenses compared to 2015.

The Auction Turnover Margin amounted to 4.3 (3.9) percent.

Operating profit

Operating profit for the period amounted to DKK 31.9m (29.7).

Net financials

Net financials was DKK -16.2m (-40.4). The decrease is explained by lower bond interest due to the partial redemption of the bond debt in July and the currency exchange rate gains on the bond debt issued in SEK.

Tax

Tax amounted to DKK -5.1m (2.3), corresponding to an effective tax rate of 32.3 percent (20.9). The increase is mainly explained by the impact from the unrealized currency exchange rate gains on the bond debt issued in SEK.

Profit for the period and earnings per share

Profit for the period was DKK 10.7m (-8.5).

Earnings per share amounted to DKK 0.262 (-0.236).

Cash flow

Cash flow from operating activities was DKK 3.1m (-12.7).

Financial position, cash and cash equivalents

Equity at the end of the quarter was DKK 62.0m (13.3) and the group's total assets were DKK 496.5m (501.6). The equity/assets ratio increased to 12.5 percent (2.8).

Cash and cash equivalents amounted to DKK 78.5m (46.3).

Investments

Investments amounted to DKK 27.6m (22.8).

Human resources

The average number of full-time employees in Lauritz.com Group A/S and its subsidiaries (FTE) was 204 (204) in the period.

Shares

The number of shares registered is 40,666,667.

Risks and uncertainty factors

Significant operating, external and financial risks and uncertainty factors are described in detail in the prospectus for Lauritz.com that was signed by the Board of Directors 14 June 2016 on page 48-49 and 54-65. Lauritz.com does not consider that any significant risks additional to those described in the prospectus have arisen.

Event after the end of the period

No events have occurred after the balance sheet date that could have a material influence on the company's financial position.

Future prospects

In 2017 the Group expects to obtain an increased net revenue and an EBITDA margin between 20-25 percent.

Lauritz.com

On occasion, Lauritz.com Group A/S is referred to as Lauritz.com. In this Report, such references are to Lauritz.com Group A/S's consolidated financial statements, unless clearly stated otherwise.

Finance

The Group is partly funded by a bond debt, which amounted to DKK 241.8m (338.1). The bond is a senior secured bond of SEK 325m listed on Nasdaq in Stockholm with an 3M Stibor + 7.5 % interest 2014/2019.

The conditions of the bond includes two covenants on Lauritz.com A/S financials.

One covenant is Net interest bearing debt/EBITDA, which as at 31 December 2016 must not be greater than 4.00. The ratio was 3.10.

The second covenant is EBITDA/Net finance charges, which as at 31 December must exceed 1.75. The ratio was 2.04.

The covenants for the bonds are described in detail in the terms and conditions for the bond available on www.lauritz.com.

Seasonality

Lauritz.com's net revenue and profitability are affected by the nature of operations, and accordingly, its seasonality where Q2 and Q4 are historically strong quarters.

Parent company

Lauritz.com Group A/S, being the parent company, is listed on Nasdaq First North Premier in Stockholm and the company is a holding company owing 100 % of Lauritz.com A/S group whose operations primarily are online auctions.

The presentation can be viewed live from 10.05 am via https://www.facebook.com/Lauritzcom/

Best regards
Lauritz.com Group A/S
Mette Rode Sundstrøm
CEO

For press enquiries, please contact:
Astrid-Louise W. Lidforsen  
astrid-louise@lauritz.com
+45-26898737

For other enquiries, please contact:
Claus Boysen
CFO
Claus@lauritz.com

Certified advisor: Erik Penser Bank, Stockholm

This information is information that Lauritz.com Group A/S is obliged to make public pursuant to the EU Market Abuse Regulation. The information was submitted for publication through the agency of the contact person set out above, at 10.00 am CET on 27 February 2017.