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2018-02-22 09:00 CET
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Lauritz.com Group A/S interim report January - December 2017

  No. 4/2018

Copenhagen, 22 February 2018

  • Auction Turnover amounted to DKK 283.4m (363.4), corresponding to a decrease of 22 percent. Excluding a unique extraordinary art collection sold in Q4 2016 the decrease, compared to Q4 last year, is 5 percent.
  • Revenue amounted to DKK 59.9m (73.1), corresponding to a decrease of 18 percent. Excluding a unique extraordinary collection sold in Q4 2016 the decrease is 6 percent. Revenue of DKK 7.2m (5.1) relates to fees from sales of partnership agreements.
  • Number of knockdowns excluding QXL amounted to 78,146 (91,671) and average knockdown price to DKK 3,579 (3,821).
  • EBITDA amounted to DKK 9.7m (27.6).
  • Auction Turnover Margin amounted to 3.4 (7.6) percent.
  • One-off Impairment loss of DKK 23.2m (0.0m).
  • Loss (Profit) for the period amounted to DKK -18.0m (9.0). Excluding the impairment losses and costs related to changes in the management team the Profit/loss for the period is DKK 1.7m above the same period last year. Earnings per share amounted to DKK -0.442 (0.222).
  • 1 (1) partnership agreements was signed.
  • Strategic and financial review is ongoing.
  • In connection with the approval of the Q4 report, the Board decided on a more cautious estimate of the value of certain assets. This change in accounting estimate has resulted in the group not reaching the guidance of an EBITDA margin of 20-25 percent. The realised EBITDA margin is 16 percent.

2017 has been a year with many changes in and around Lauritz.com.

Online trade and trading of used items is growing rapidly, driven by the digitalization and a customer focus on sustainability. Many new offerings to customers are being developed to serve these demands.

Lauritz.com has a unique position between online market places and traditional auction houses. The core concept, being an international online auction marketplace for design, art and antiques - with a high degree of expertize and service - is a successful formula, also with great future potential.

The competitive landscape is increasingly competitive with traditional auction houses as well as new online platforms increasing their efforts to reach Lauritz.com's unique position.

Development and financial results in 2017

Auction turnover in Q4 decreased 22 percent. The decrease is mainly due to a unique extraordinary art collection sold in Q4 2016, excluding this the auction turnover in Q4 was down 5 percent. For the full year the decline is 17 percent, and 12 percent excluding the unique art collection.

The signs of stabilisation, following the strong decline is the first half of 2017 is partly an effect of several measures we have taken to improve the customer experience, among others more convenient valuation services and improved services.

Revenue was 18 percent lower in Q4 2017 compared to last year, and amounted to DKK 59.9m. Excluding the unique art collection mentioned above revenue is down 6 percent. The decrease is mainly explained by the lower auction turnover, and a negative net effect on revenue from sold and acquired auction houses DKK -3.1m primarily due to one big auction house owned in Q4 2016 that was not owned in Q4 2017.

For the full year Revenue is 11 percent lower than last year, 7 percent excluding the unique auction mentioned above. The decrease is primarily due to lower auction turnover and a negative net effect on revenue from sold and acquired auction houses DKK -12.5m, partly offset by income from sale of partnership agreements +DKK 16.9m.

EBITDA amounted to DKK 9.7m in Q4 compared to DKK 27.6m the same period last year. The difference is primarily explained by reduction in revenue due to lower auction turnover and high costs related to changes in the management team, partly offset by new partnership agreements and the effects of the cost cutting plan that was initiated in the beginning of 2017.

For the full year EBITDA is DKK 32.1m compared to DKK 46.3m last year. The reduction is mainly due to lower auction turnover, the unique art collection sold in 2016, extraordinary cost related to changes in the management team. This is  partly offset by higher fees from sale of partnership agreements and the effects of the cost cutting plan that was initiated in the beginning of 2017.

In connection with the approval of the Q4 report, the Board decided on a more cautious estimate of the value of certain assets. This change in accounting estimate has resulted in the group not reaching the guidance of an EBITDA margin of 20-25 percent. The realised EBITDA margin is 16 percent.

The operating result for the year is not satisfactory, and we have initiated a number of cost reductions in January 2018, to match costs to the lower Revenue.

Further, we have decided to actively pursue the sale of the property at Rovsingsgade, and expect to sell it during the next 12 month. As a result, the property is now classified as Assets held for sale, and is valued at the expected Net realisable value based on a sale without a sale/lease-back. The change in valuation principle has resulted in an impairment loss of DKK 18.9m related to the property.

Transformation process

Our dedicated employees and partners in combination with high user engagement among our customers, and a well functioning marketplace for online auctions, are true strengths for our business. Significant volumes of items are being sold at Lauritz.com every day and we have a strong position in the online auction industry.

To maintain our position in the market we need to address the changing consumer behaviors and the increasing pace in the digital transformation.

The strategic review aimed at developing a long-term strategy that secures long-term growth and profitability initiated in Q4 2017 is ongoing. We are closely reviewing how to develop our business model, value proposition and product experience, and define our future position on the digitized market for auctions, as well as further develop our efficiency.

The financial analysis initiated in Q4 2017 is ongoing, and we are evaluating different financing options to create a situation where we have suitable headroom to our financial obligations and room for manoeuvrability in achieving long-term growth.

The management team for the Group has seen several changes during the year. The search for a new CEO is ongoing, a new CFO has been appointed and a CCO position has been created as part of in the Group Management team in January 2018.

Short-term focus on financial KPI's during the year has taken management time and focus away from the business. Furthermore, four Branch Manager positions in Sweden has been vacant for a large part of 2017. Management focus on the business is now being strengthened again, most visibly through the CCO position in the Group Management team, and the 4 vacant Branch Manager positions in Sweden has recently been filled.

The current strategic review and financial analysis are creating the foundation for our future, and we feel confident that the measures we now initiate will drive the future growth of Lauritz.com.

Bengt Sundström, Chairman of the board

Preben Lindgaard, CFO

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 5 million online visitors and around 1.8 million unique visitors each month.

We have shown a yearly average auction turnover growth of over 25% from the start in 1999 until 2016, in 2017 the auction turnover growth is negative. During the same period, EBITDA has shown a strong and consistent development, although 2017 EBITDA is impacted negatively by the lower auction turnover.

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 26 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 North Premier Stockholm with the ticker LAUR. The largest shareholders of Lauritz.com Group A/S are founder Bengt Sundström, Bure Equity AB and Rite Internet Ventures Holdings AB.

1 October - 31 December 2017

Auction turnover

Auction turnover amounted to DKK 283.4m (363.4), corresponding to a decrease of 22 percent. Excluding a unique extraordinary art collection sold in Q4 2016, with auction turnover of DKK 64m the decrease is 5 percent. The 5 percent decrease was due to a lower number of sold items partly offset by higher average knockdown prices in Q4 2017 compared to Q4 2016.

The number of knockdowns excluding QXL amounted to 78,114 (91,671) and the average knockdown price amounted to DKK 3,579 (3,821). In Q4 2016 the average knockdown price excluding the unique art collection was DKK 3,130.

Revenue

Revenue amounted to DKK 59.9m (73.1), corresponding to a decrease of 18 percent. Approximately DKK 12m of the decrease is explained by the lower auction turnover during the period, hereof approximately DKK 9m due to the unique art collection sold in Q4 2016 not being repeated in 2017. The negative net effect on revenue from sold and acquired auction houses amounted to approximately DKK 3.1m. The decrease was partly offset by higher fees from sales of partnership agreements that increased by DKK 2.1m compared to Q4 2016.

1 (1) new partnership agreement was signed during Q4 2017.

Two auction houses were sold in Q4, which means that as of 31 December the number of auction houses owned by Lauritz.com has decreased from 9 to 7 compared to last quarter.

EBITDA and Auction Turnover margin

EBITDA amounted to DKK 9.7m (27.6). The reduction in EBITDA is primarily explained by reduction in revenue due to lower auction turnover and extraordinary costs related to changes in the management team. This is partly offset by income from new partnership agreements, and the effects of the cost cutting plan that was initiated in the beginning of 2017.The Auction Turnover Margin amounted to 3.4 (7.6) percent.

Operating loss/profit (EBIT)

Operating loss/profit (EBIT) for the period amounted to DKK -17.8m (23.7).

The Operating loss for 2017 is impacted by Impairment losses of DKK 23.2m recognized in connection with reclassifying the property at Rovsingsgade to Assets held for sale, and impairment of software and acquired rights.

The net realisable value for Rovsingsgade is based on a sale without a sale/lease-back.

Net financials

Net financials was DKK 0.2m (-7.2). Net financials consists mainly of interest on the issued bond. The currency exchange rate gains on the bond debt issued in SEK amounted to DKK 4.7m (1.2 loss).

Tax

Tax expenses amounted to DKK 0.4m (7.5), corresponding to an effective tax rate of 2.5 percent (45.5).

Loss (Profit) for the period and earnings per share

Loss (Profit) for the period amounted to DKK -18.0m (9.0).

Earnings per share amounted to DKK -0.442 (0.222).

Cash flow

Cash flow from operating activities was DKK 32.5m (26.3). The cash flow in Q4 2017 was positively affected by the seasonality in auction turnover.

Financial position, cash and cash equivalents

Equity at the end of the quarter amounted to DKK 35.0m (62.0) and the group's total assets were DKK 445.0m (496.5). The equity/assets ratio decreased to 7.9 percent (12.5).

Cash and cash equivalents amounted to DKK 60.1m (78.5).

Investments

Investments amounted to DKK 0.9m (2.9).

Human resources

The average number of full-time employees in Lauritz.com A/S and its subsidiaries (FTE) was 174 (203) in the period.

Other events

On 1 December 2017, it was mutually agreed that CEO Erik Norberg ended his employment at Lauritz.com Group A/S.

1 January - 31 December 2017

Auction turnover

Auction turnover amounted to DKK 886.5m (1073.4), corresponding to a decrease of 17 percent. Excluding a unique extraordinary art collection sold in Q4 2016, the decrease is 12 percent. The 12 percent decrease was primarily due to a lower number of sold items during the year compared to 2016.

The number of knockdowns excluding QXL amounted to 305,402 (331,563) and the average knockdown price amounted to DKK 2,820 (3,089). In 2016, the average knockdown price excluding the unique art collection was DKK 2,895.

Revenue

Revenue amounted to DKK 195.7m (219.4), corresponding to a decrease of 11 percent. Approximately DKK 28m of the decrease is explained by the lower auction turnover during the period, hereof approximately DKK 9m due to the unique art collection sold in Q4 2016 not being repeated in 2017. Furthermore, the negative net effect from sold and acquired auction houses amounted to approximately DKK 12.5m. The decrease was partly offset by higher fees from sales of partnership agreements that increased by DKK 16.9m compared to 2016.

Four partnership agreements were signed during the period and four auction houses were taken over during the year, which means that as of 31 December the number of auction houses owned by Lauritz.com is unchanged at 8 compared to 1 January 2017.

EBITDA and Auction Turnover margin

EBITDA amounted to DKK 32.1m (46.3), corresponding to a decrease of 31 percent. The decrease is primarily explained by reduction in revenue due to lower auction turnover and extraordinary costs related to changes in the management team. This is partly offset by higher fees from sales of partnership agreements, and a decrease in costs in line with Lauritz.com's cost cutting plan initiated in January 2017 of approximately DKK 14m.

The Auction Turnover Margin amounted to 3.6 (4.3) percent.

Operating profit (EBIT)

Operating profit (EBIT) for the period amounted to DKK -7.1m (31.9).

The Operating profit for 2017 is impacted by Impairment losses of DKK 23.2m made in connection with reclassifying the property at Rovsingsgade to Assets held for sale, and impairment of software and acquired rights.

The net realisable value for Rovsingsgade is based on a sale without a sale/lease-back.

Net financials

Net financials amounted to DKK -12.9m (-16.2). Net financials consists mainly of interest on the bond issued by Lauritz.com A/S. The currency exchange rate gains on the bond debt issued in SEK amounted to DKK 6.9m (13.4). 

Tax

Tax expenses amounted to DKK 0.9m (5.1), corresponding to an effective tax rate of 4.3 percent (32.3).

Loss (profit) for the period and earnings per share

Loss (profit) for the period amounted to DKK -20.9m (10.7).

Earnings per share amounted to DKK -0.513 (0.278).

Cash flow

Cash flow from operating activities was DKK -4.4m (-5.2). The impact from lower EBITDA is primarily offset by lower interest payments in 2017 compared to 2016. Furthermore, 2016 was affected by financial costs related to the partial redemption of the bond of DKK 3.1m.

Financial position, cash and cash equivalents

Equity at the end of the year amounted to DKK 35.0m (62.0) and the group's total assets were DKK 445.0m (496.5). The equity/assets ratio decreased to 7.9 percent (12.5).

Cash and cash equivalents amounted to DKK 60.1m (78.5). The high balance at the end of 2016 is partly due to the large auction of a unique art collection in Q4 2016.

Investments

Investments amounted to DKK 13.0m (21.5).

Human resources

The average number of full-time employees in Lauritz.com A/S and its subsidiaries (FTE) was 183 (204) in the period.

Shares

The number of shares registered is 40,792,542.

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.

Events 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.

In January 2018, a number of cost reductions has been initiated.

Future prospects

In 2018, the Group expects a small decrease in net revenue. The reduction is partly due to the negative impact on revenue from purchased/sold auction houses and due to not including any sale of partnership agreements, partly offset by a small increase in Auction Turnover.

EBITDA margin is expected to be between 20 and 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 237.0m (241.8). 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 2017 must not be greater than 3.00. The ratio was 2.54.

The second covenant is EBITDA/Net finance charges, which as at 31 December 2017 must exceed 2.50. The ratio was 2.60.

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 from 9.05 am via https://www.facebook.com/Lauritzcom/

Best regards

Lauritz.com A/S
Preben Vinkler Lindgaard
CFO

For press enquiries, please contact:
Susanne Sandsberg Klubien,
+45 26891909  
E-mail: press@lauritz.com

For other enquiries, please contact:
Preben Vinkler Lindgaard
CFO
Preben@lauritz.com

Certified advisor: Erik Penser Bank, Stockholm
Market place: Nasdaq First North Stockholm

This information is information that Lauritz.com 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 09.00 am CET on 22 February 2018.

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