INTERIM REPORT for 1 January – 31 March 2021: Verkkokauppa.com’s revenue grew and profitability improved along with strong online sales

INTERIM REPORT for 1 January – 31 March 2021: Verkkokauppa.com’s revenue grew and profitability improved along with strong online sales

Verkkokauppa.com Oyj – Interim report 23 April 2021, 8:00 a.m.

Verkkokauppa.com arranges two news conferences today. News conference in Finnish is held at 10:00 am Finnish time. Another news conference for analysts and institutional investors is in English is at 11:00 am Finnish time. Details of the events can be found at the end of this release.

The complete report is attached to this release and also available at https://investors.verkkokauppa.com/en

Unless otherwise stated, the comparison figures in brackets refer to the corresponding period in the previous year (reference period). Figures are unaudited.

1 January – 31 March 2021 in brief

• Revenue was 134 million euros (125)

• Gross profit was 21.7 million euros (19.4) or 16.2% of revenue (15.5%)

• Operating profit was 5.2 million euros (3.4) or 3.9% of revenue (2.7%)

• Comparable operating profit was 5.2 million euros (3.8) or 3.9% of revenue (3.0%)

• Profit for the period was 3.9 million euros (2.4)

• Earnings per share was 0.09 euros (0.05)

• Investments were 0.4 million euros (0.3)

• Operating cash flow was -9.1 million euros (3.7)

• The Board of Directors decided, according to authorization, to pay the 1^st dividend installment of
  EUR 0.057 per share on 4 May 2021.
  
  

KEY RATIOS	1-3/2021	1-3/2020	Change, %	1-12/2020
Eur million
Revenue	134.0	125.3	7.0%	553.6
Gross profit	21.7	19.4	11.9%	88.4
Gross margin, %	16.2%	15.5%		16.0%
EBITDA	6.4	4.6	38.4%	24.6
EBITDA, %	4.8%	3.7%		4.4%
Operating profit	5.2	3.4	52.2%	19.6
Operating margin, %	3.9%	2.7%		3.5%
Comparable operating profit	5.2	3.8	38.5%	20.4
Comparable operating margin, %	3.9%	3.0%		3.7%
Net profit	3.9	2.4	57.6%	14.6
Investments	0.4	0.3	62.9%	1.4
Operating cash flow	-9.1	3.7	-348.9%	16.9

FINANCIAL GUIDANCE FOR 2021 REMAINS UNCHANGED

The company expects the revenue to be between 570–620 million euros (554 million euros) and comparable operating profit to be between 20–26 million euros (20.4 million euros) in 2021.

CEO PANU PORKKA’S REVIEW

Verkkokauppa.com’s year kicked off strongly. Our revenue grew by 7.0 percent year on year to EUR 134.0 million. The company was able to utilize the transition of retail to online channels well and to respond to consumer demand with a broad product range and versatile delivery options. During the first quarter, Verkkokauppa.com’s online sales, excluding Export, increased by 33 percent year on year, already representing 64 percent of total sales.

Growth came from multiple sectors. B2B sales, a strategic focus area for Verkkokauppa.com, increased by 12 percent as expected. Also, the sales of major and small domestic appliances continued to grow. In addition, demand for evolving categories, like sports gear, home & lighting and baby products was good. As for Verkkokauppa.com’s export business, sales decreased due to the pandemic situation and restrictions on traveling. The revenue from our basic operations, i.e. revenue excluding exports, increased in January–March by 16.4 percent year on year.

Verkkokauppa.com’s profitability saw strong improvement in the first quarter; gross profit increased by 11.9 percent to EUR 21.7 million, representing 16.2 percent of revenue. Profitability improved especially thanks to the increased share of product categories with higher profit margins in total sales. Our comparable operating profit increased by 38.5 percent year on year to EUR 5.2 million, representing 3.8 percent of revenue.

We announced our refined strategy in February. The implementation of the strategy has been started during the spring and we have been concentrating on the further improving the following strategic focus areas: our efficient fulfilment processes and our excellent customer experience. The implementation of our strategy is also bolstered by the biggest investment in our history, which will raise our warehouse throughput and cost efficiency to a new level. This summer we will commence the construction of a fully automated warehouse for small items in connection with our Jätkäsaari logistics center and store. Scheduled to be completed in early 2022, the new warehouse will enable even faster deliveries and better product availability, with considerably more efficient warehouse space utilization. The logistics automation investment is on important step which support us on our journey towards our target of a revenue of one billion euros by the end of 2025.

Last year, we took a major leap forward in sustainability by defining and publishing our sustainability focus areas, which include, among others, a smaller environmental impact, our community, a coaching leadership style and valuing differences. This year, we will set measurable and monitored goals for each focus area.

FINANCIAL DEVELOPMENT

REVENUE AND PROFITABILITY

January-March 2021

EUR million	1-3/2021	1-3/2020	Change, %	FY 2020
Revenue	134.0	125.3	7.0%	553.6

In January-March 2021, Verkkokauppa.com’s revenue grew by 7.0% year on year, totaling 134.0 million euros (125.3). Especially the sales of major domestic appliances, small domestic appliances, office & supplies, gaming & entertainment and sports continued strong.

The shift of retail to online channels continued. Verkkokauppa.com’s online sales increased 33 percent year on year, already representing 61 percent of total sales (46%). Visits to the Verkkokauppa.com website increased by 17.6 percent year on year. Sales for corporate customers (B2B) increased 12 percent. As for Verkkokauppa.com’s export business, sales decreased due to the pandemic situation and restrictions on traveling and represented 7 percent of total sales (15 %). The revenue from our basic operations, i.e. revenue excluding exports, increased in January–March by 16.4 percent year on year.

Share of sales, %

	1-3/2021	1-3/2020	FY 2020
Customer segments
Consumer	72%	68%	74%
B2B	22%	22%	18%
Export	6%	10%	8%
Sales channels*
On-line	64%	49%	56%
Off-line	31%	32%	36%
Website visits, million	19.9	16.9	87.0
Sales includes orders and deliveries in transit. *) Online and offline sales exclude export sales.

The company-financed customer financing proceeds were 1.0 million euros (0.9) including both interest income and fee income. The credit loss allowance was increased by 0.1 million euros (0.0) in the first quarter.

Personnel costs increased in January-March by 5.0% to 9.1 million euros (8.6). The increase resulted mainly from IT administration, purchasing, logistics and customer service. During the reporting period, other operating expenses increased slightly to 6.4 million euros (6.3). The increase resulted mainly from higher outsourced logistics service fees and increased credit loss allowance.

Operating profit increased 52.2% and was 5.2 million euros (3.4) and 3.9% of revenue (2,7%). Comparable operating profit was 5.2 million euros (3.8) and profit for the period 3.9 million euros (2.4).

	1-3/	1-3/		1-12/
EUR million	2021	2020	Change, %	2020
Operating profit	5.2	3.4	52.2%	19.6
Operating margin, %	3.9%	2.7%		3.5%
- advisory costs related to transfer to official list of Nasdaq Helsinki	0.0	0.3	-100.0%	0.8
Comparable operating profit	5.2	3.8	38.5%	20.4
Comparable operating margin, %	3.9%	3.0%		3.7%

Earnings per share were 0.09 euros (0.05) in January-March.

FINANCE AND INVESTMENTS

Operating cash flow was -9.1 million euros (3.7) in January–March 2021. Operating cash flow was impacted by change in working capital. Drivers for change in working capital were mainly growth in inventories when preparing for high season sales and campaigns, as well as a decline in accounts payable.

Ordinary seasonal fluctuations are reflected in cash and cash equivalents, cash flow and accounts payable, which usually reach the highest point at the end of the fourth quarter and the lowest point at the end of the second quarter.

Investments totaled 0.4 million euros (0.3) in January–March 2021. During the reporting period the company invested and capitalized 0.0 million euros (0.1) in salary costs and external technology consulting fees related to new IT systems and the development of new ERP features.

Verkkokauppa.com has revolving credit facilities totaling 20 million euros, which have not been utilized. Of these credit facilities, 15 million euros are for three years, and 5 million euros for five years as of 1 July 2019.

DIVIDEND

The Annual General Meeting 2021 resolved to pay dividend 0.056 euros per share and an additional dividend 0.22 euros per share (12,345,341.17 euros in total). The dividend payment date was 7 April 2021.

The Board resolved on 23 April 2021 to pay a dividend of 0.057 euros per share (2,549,581.33 euros in total). The dividend payment date is 4 May 2021.

Verkkokauppa.com’s Annual General Meeting authorized the Board of Directors to decide in its discretion on the distribution of dividends not exceeding 0.174 euro per share to be paid in three instalments during 2021.

REFINED STRATEGY FOR VERKKOKAUPPA.COM

On 12 February 2021, the company announced its refined strategy and long-term financial targets (for the period of 2021–2025). With the refined strategy, Verkkokauppa.com targets a revenue of one billion euros and a 5 percent EBIT margin by the end of 2025. At the same time, Verkkokauppa.com will continue its policy of distributing a quarterly growing dividend to shareholders.

Verkkokauppa.com’s vision is to remain as a pioneer of ecommerce also in the next decades through continuous innovation and development.

SHORT-TERM RISKS AND BUSINESS UNCERTAINTIES

Verkkokauppa.com Oyj’s risks and uncertainties reflect the market and general economic trends, for example, demand for consumer electronics, wholesale trade business, the business environment and competition. The company’s business operations are also influenced by risks and uncertainties relating to, for example, business strategy, investments, procurement and logistics, information technology, and other operative aspects of the business. The aforementioned risks and uncertainties may affect the company’s operations, financial position and performance both positively and negatively. Risks and uncertainties have been presented in more detail in the Annual Report.

Uncertainty in the development of the economy and the financial markets in Finland, Europe and the world may have a negative impact on the business and growth opportunities of Verkkokauppa.com. The COVID-19 pandemic affects people’s lives and the operation of businesses in Finland and globally alike. The COVID-19 pandemic continues, and its overall impacts on the Company’s business are difficult to assess.

BUSINESS OUTLOOK FOR 2021

Verkkokauppa.com Oyj’s business operations are estimated to develop positively in the future. The company believes that it will succeed in further growing its market share in the chosen categories. The strong balance sheet enables the company to continue expanding its operations in accordance with its strategy.

The company has benefited from the shifting consumer behavior accelerated by the COVID-19 pandemic, as the sales in the online sales channel have shown strong growth. The company expects this trend to continue the longer the COVID-19 pandemic persists.

At the same time, the COVID-19 pandemic continues to have a negative impact on spending on travel and service sectors. This has positively affected the consumer demand for goods, but on the other hand, it has limited the lower-margin wholesale business. The COVID-19 situation may have an impact on the company’s operations and its ability to safely serve customers in the brick-and-mortar stores.

The uncertainties concerning the future business outlook remain and relate to macroeconomic developments and the prevailing COVID-19 situation. The pandemic may still cause unforeseen impacts on the overall economic development, consumer demand as well as consumer purchase behavior and B2B sales in the future. Nevertheless, the company believes that it is well positioned and will be a relative winner in the “new normal” business environment of the future.

FINANCIAL GUIDANCE FOR 2021 REMAINS UNCHANGED (published on 12 February 2021)

The company expects the revenue to be between 570–620 million euros (554 million euros) and comparable operating profit to be between 20–26 million euros (20.4 million euros) in 2021.

NEWS CONFERENCES

A press conference for analysts, investors and media will be held in Finnish by LiveStream webcast on Friday, 23 April 2021 at 10:00 a.m. (EEST), in which Verkkokauppa.com Oyj’s CEO Panu Porkka will present the developments in the reporting period.

A press conference in English will be held by LiveStream webcast on Friday, 23 April 2021 at 11:00 a.m. (EEST). Questions can be sent beforehand or during the presentation via e-mail to investors@verkkokauppa.com.

Presentation materials for both events are available at https://investors.verkkokauppa.com/en/presentations. For both press conferences, a LiveStream is available at www.verklive.com.

COMPANY RELEASES IN 2021

Verkkokauppa.com Oyj will publish its financial reports as follows:

• Half-year Report January–June 2021, Friday 16 July 2021

• Interim Report January–September 2021, Friday 22 October 2021

Helsinki, Finland, 23 April 2021

Verkkokauppa.com Oyj

Board of Directors

More information:

Panu Porkka, CEO
panu.porkka@verkkokauppa.com

Mikko Forsell, CFO
mikko.forsell@verkkokauppa.com
Tel. +358 50 434 2516

Marja Mäkinen, Head of Investor Relations
marja.makinen@verkkokauppa.com
Tel. +358 40 671 2999

Distribution:

Nasdaq Helsinki
Key media
www.verkkokauppa.com

Verkkokauppa.com – Probably always cheaper

Verkkokauppa.com is Finland’s most popular and most visited Finnish online retailer, with the aim to sell to products to its customer at probably always cheaper prices. Depending on the season, the Company markets, sells, and distributes some 60,000–70,000 products in 26 different main product categories through its webstore, retail stores, and network of pick-up points. The Company has four megastores: in Oulu, Pirkkala, Raisio, and Helsinki, in addition to which products can be collected at more than 3,000 pick-up points. Verkkokauppa.com was founded in 1992 and it is headquartered in Jätkäsaari, Helsinki. The Company’s shares are listed on the official list of Nasdaq Helsinki under the ticker symbol VERK.

Attachment

• Verkkokauppa.com Oyj_Interim Report January-March 2021 Published