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TODAY’SSTORE FRONT
RETAIL IS GOING ONLINE. COME ALONG.
Verkkokauppa.com Oyj Q4/2014, 13.2.2015, Samuli Seppälä, CEO
Questions during presentation - [email protected]
Continuing strong sales growth - boosted by good development in December while retail sector and more product categories are going online.
Verkkokauppa.com Q4 sales +15.3%
Retail is going online - Q4 sales +15.3%
E-commerce is natural development andevolution of retail business .
Why are consumers buying online?
• E-commerceofferscustomerslower prices enabledbylowerfixedoperatingcosts.
• Wider selection, without need to keep everything in stock and needing less capital.
• Quicker and easier way of purchasing andfindinginformation.
• Notallretailbusinesscanbeprofitableonline. €>0?
”15€ avg. savings
per 100€”
• Revenue was 86.6 (75.1) million euros, +15.3%• Grossprofitwas13.2(11.9)millioneuros,+10.4%• Grossmarginwas15.2%(15.9%)ofrevenue
• Personnelexpenses5.7(4.6)million,+22.7%• Depreciationandamortiz.0.3(0.2)million,+11.7%• Otheroperatingexpenses4.5(3.8)million,+18.7% • EBITDAwas3.0(3.5)millioneuros,-15.2%• Operatingprofitwas2.7(3.3)millioneuros,-17.0%• Operatingprofitwas3.2%ofnetsales(4.4%)
• Netprofitwas2.1(2.0)millioneuros,+6%• Earningspersharewere0.28(0.38)euros
• Board of directors proposes dividend of 0.85euro(0.04)persharetoAGM.
Verkkokauppa.com Q4 sales +15.3%
• Revenuewas275.8millioneuros,+15.9%• Grossprofitwas42.6(37.4)millioneuros,+14.0%• Grossmarginwas15.4%(15.7%)ofrevenue
• Personnelexpenses18.8(16.4)million,+14.4%• Depreciationandamortiz.1.0(0.9)million,+8.3%• Otheroperat.expenses15.5(13.5)million,+14.6% • EBITDAwas8.4(7.5)millioneuros,+12.0%• Operatingprofitwas7.5(6.6)millioneuros,+12.5%• Operatingprofitwas2.7%ofnetsales(2.8%)
• Netprofitwas4.5(4.2)millioneuros,+6.8%• Non-recurring items relating to the IPO decreasednetprofitby1.9millioneuros.• Earningspersharewere0.64(0.80)euros
Verkkokauppa.com 1-12/2014 +15.9%
Verkkokauppa.com Q4/2014main sales growth drivers
• Retail going online• Appliances, phones and televisions• Bolder, growth oriented pricing
• 22yearsofexperienceandvisibility• NASDAQ First North -publicity• Brand marketing increased
Once again, nearly all main categories hadsalesincreaseduringQ4,withoutany new main categories being launched during this quarter.
Finnish consumer electronics market was veryweakinQ4,change-3.8%(GfK),butalsowholeretail sector (w/o cars) continued to decline,being -1.6% in December (Statistics Finland).
Q4 +15.3%
Q1/13Q2/13Q3/13Q4/13Q1/14Q2/14Q3/14Q4/14
60.6mEUR
60.6mEUR
75.1mEUR
57.1mEUR
57.0mEUR
48.8mEUR
Revenue
68.0mEUR
86.6mEUR
Verkkokauppa.com’s sales margin and fixed costs
Verk.com 2013
(sales +6%)
Verk.com 2014/Q1
(sales +6%)
30
25
20
15
10
5
0
15.7%
12.6%
16.7%
12.9%
Verk.com 2014/Q2
(sales+24%)
15.5%
13.6%
EBITDA 3.2%
EBITDA 2.0%
EBITDA 3.9%
Verk.com 2014/Q3
(sales+19%)
14.6%
11.8%
EBITDA 2.8%
Verk.com 2014/Q4
(sales +15%)
15.2%
11.8%
EBITDA 3.4%
Verk.com 2014
(sales +16%)
15.4%
12.4%
EBITDA 3.1%
”Long term low prices enabledbylowfixedcosts”
Sales margin% Fixed costs% of sales
Sources: Statistics Finland, Soliditet and D&B. Numbers are presented as percentages of the total revenue (including sales and other revenue). Sales margin includes changes in the inventory and outside services.
Verkkokauppa.com’s sales margin and fixed costs
Retail in Finland(w/o cars) 2013(39B€)
29.1%
25.7%
Sales margin% Fixed costs% of sales30
25
20
15
10
5
0Verk.com 2014
(sales +16%)
15.4%
12.4%
EBITDA 3.1%
EBITDA 3.5%
Stockmann (FIN), 2014
46.6% 47.2%
Amazon (USA) etailer,2014
29.5% 29.3%
Qliro Group (SWE),etailer,2014
14.2% 14.3%
33.5%47.3%
Anttila (FIN), 2013
”we see additional opportunities particularly in consumer electronics retail as department stores are discontinuing
their sales of consumer electronics in Finland”
Verkkokauppa.com’s Q4/2014 fixed costs development
• Longtermlowpricesenabledbylowfixedcostsisoneofthekey growth elements for any e-commerce, including Verkkokauppa.com.
• Verkkokauppa.com’sfixedcosts%(otheroperatingcosts+personnel costs)increased+20.9%inQ4being11.8%ofrevenue(11.2%).
• Increases in personal costs, because of new personnel for planning of newproductcategories,consumerfinancingservicesandincreasesin personnelatIT-department.Q4personnelcosts+22.7%.
• Brand marketing and premises costs increased.
• Full2014fixedcosts%was12.4%compared 12.6%in2013-stilllowfixedcosts%compared to other etailer or retailers.
Verkkokauppa.com Q4 balance sheet• Inventory30.9(23.2)millioneuroson31.12.2014.• Cashflow1-12/2014was+19.1(-2.2)millioneuros.• Capex1-12/2014was0.7(0.3)millioneuros.
• Cash35.3(22.7)millioneuroson31.12.2014.• Interestbearingdebt2.0(7.2)millioneuroson31.12.2014.• Banklimits7.25millioneuros(notbeingutilizedon31.12.14).
The board of directors proposes dividend of 0.85 euro (0.04) per share to annual general meeting.
• Total7510855shares*0.85euro=6.4millioneurosindividends.• Distributablefunds(31.12.14)were36.5millioneuros.• Earningspersharewere0.85(0.91)eurosin2014, excludingnon-recurringitems(mainlyIPO).
Finnish e-commerce visit comparison
Largest 2015 (public) projects• CompanyiscurrentlyrecruitingmanagerforC2C(consumer-to- consumer)marketplace.C2Cisallaboutattractingmoretraffic, increasing add-on and sales of new products and improving customerloyaltyandexperience.
• Current logistics development is mainly focusing in adding possibility to add more (leased) warehouses or direct shipments from suppliers. Flexibilityisthekey.Firstdirectshipmenttrialsarebeingdone.
• Ownconsumerfinancingandcreditscoringservicesarestillbeing developed. First focus is in credit scoring and fraud detection services.
• Development of better sales, inventory and availability forecasting engines,bothforinternal(purchasing)andexternaluse. Newend-useravailabilityforecastingenginelaunchedinJanuary 2015.
New categories in 2015• ”Probablyalwayscheaperprices”,efficientslogisticsandleading lowfixedcostsbasearethefoundationforourplansfor introducingnewproductcategoriesduring2015.
• LaunchedthreenewmaincategoriesinJanuary2015- babies and family, tools (diy) and luggage and travel. GPS/Sports -category has been renamed as Sports and Nutrition.
• Nowtotal25maincategoriesandover50000articles.
• Newcategorieswillnothavesignificantshorttermimpactonsales orprofitability.
• Looking also for stronger sales growth in our own brands and products (private labels) -typicallyofferingbettersalesmargin.
Industry average product margins Fixed costs% of sales
Sales margin%• MobilePhone5%• Tablet Computer 10%• Television20%• WashingMachine25%• HammersandDrills25%• SportingEquipment/Watches25%• Protein Bars 30%• BabyStrollersandSafetySeats40%• Private Label Cable 50%• Clothing 50%
->Changeinourproductsalesmixhasaneffectinsalesmargin%.-> Financing Services typically increase sales margin% by 3-6%-> Verkkokauppa.com has its own ”positive payment behavior” database
->Vendorssupportlargeofflineormultichannelretailerswithestim.2-10%kickbackcomparedpureonlineplayers.
Retail in Finland(w/o cars) 2013(39B€)
29.1%
25.7%
30
25
20
15
10
5
0Verk.com 2014
(sales +16%)
15.4%
12.4%
EBITDA 3.1%
EBITDA 3.5%
Medium-term targetsThecompanyretainsitsexistingtargets:
• The company strives to grow faster than its operating market and targets an annual revenue growth of over 10 per cent in the medium-term.
• The company’s objective is to improve its EBITDA margininthemedium-termcomparedtothelevelin2013.
•Thecompanystrivestosecureasufficientequityratiotofinancegrowthofitsbusinessandtargetstomaintainanequityratioofover25percenttakinginto consideration the nature and seasonality of the company’s business.
Business outlookTheCompanyexpectsnetsalesandoperatingprofittogrowduring2015comparedtopreviousyear.
Largest owners on 31.1.2015 Shares %1SeppäläSipiSamuli 3747916 49,9002RiteVenturesFinlandAb 769596 10,2463KeskinäinenEläkevakuutusyhtiöIlmarinen 384788 5,1234KeskinäinenTyöeläkevakuutusyhtiöVarma 344322 4,5845Op-Delta-Sijoitusrahasto 235278 3,1336Keva 168000 2,2377SkogbergVilleJohannes 105711 1,4078HartwallCapitalOyAb 82710 1,1019SijoitusrahastoDanskeInvestSuomenPieny. 82000 1,09210Op-SuomiPienyhtiöt 76000 1,01211SijoitusrahastoEvliSuomiPienyhtiöt 70829 0,94312SrDanskeInvestSuomiYhteisöosake 60000 0,79913FonditaEquitySpicePlaceringsfond 45000 0,59914KeskinäinenVakuutusyhtiöKaleva 44000 0,58615ThominvestOy 39000 0,519
Share development (8.2.2015)
Q&AUpcoming events:• AGM,Wednesday18thofMarch2015• Q1/2015,Friday24April2015• Q2/2015,Friday7August2015• Q3/2015,October232015
Quick links:• Investors English Summary - www.verkinvest.com• Company Releases mailing list in English - www.joinverk.com• Company Investor Webcasts - www.verklive.com
Contacts:• Samuli Seppälä, CEO, [email protected]• Jussi Tallgren, CFO, [email protected]• [email protected]
TODAY’SSTORE FRONT
RETAIL IS GOING ONLINE. COME ALONG.
Thank you!
