No. 8/2018
Copenhagen, 03 May 2018
- EBITDA and profit in Q1 2018 at highest level ever.
- Cost level in Q1 2018 reduced significantly compared to last year, showing the way to a new leaner organization with ability to deliver strong earnings
- Core business Auction Turnover down by 4 percent in Q1. Auction Turnover amounted to DKK 177.1m (191.5), corresponding to a decrease of 8 percent. Hereof 2 percent is due to the depreciation of the Swedish krone, and 2 percent is due to QXL.
- Revenue amounted to DKK 29.0m (56.1), corresponding to a decrease of 48 percent of which DKK 18m (32 percent) relates to fees from sale of new partnership agreements in 2017, and 10 percent relate to sold auction houses.
- Average knockdown price amounted to DKK 2,563 (2,333), and number of knockdowns excluding QXL was 66,971 (78,030).
- Gain from sale of Stockholms Auktionsverk's Fine Art business DKK 40.0m is included in other income.
- EBITDA amounted to DKK 36.4m (15.0), corresponding to an increase of 243 percent.
- Auction Turnover Margin1 amounted to 20.6 (7.8) percent.
- Profit amounted to DKK 27.8m (4.3) an increase of 646 percent, and earnings per share amounted to DKK 52.28 (8.02).
- The property at Rovsingsgade 68 was sold.
- Lauritz.com A/S complies with applicable financial covenants at 31 March 2018.
EBITDA and profit in the first quarter of 2018 is the highest ever in the history of Lauritz.com.
The core business EBITDA has improved over last year driven by lower cost, as the operating costs have been reduced significantly compared to last year. Further cost reductions has been implemented in Q1 2018 driving cost to an even lower level going forward.
In Q1 the core auction turnover was down by 4 percent in local currency. The stabilization in auction turnover is a result of the commercial actions taken during 2017 in order to address the increased and more aggressive competition and maintain Lauritz.com's position as the biggest auction house in the Nordics.
Further offerings to customers are being developed and will be introduced during 2018 to make the auctioning process even more convenient for both sellers and buyers, hereby attracting more items for sale from local sellers and more buyers to Lauritz.com.
During the first quarter of 2018 the group has concluded the sale of the property in Rovsingsgade 68 and the sale of Stockholms Auktionsverk's Fine Art business. Both transactions are part of the transformation process initiated in 2017 in order to concentrate on Lauritz.com's core business of selling art, design and antiquities on online auction in the middle price segment. These divestments has contributed positively to liquidity and earnings in Q1 2018.
The strategic as well as the financial review are ongoing with an aim to develop a long-term strategy that secures long-term growth and profitability and a financing situation with suitable headroom to our financial obligations and room for maneuverability in achieving long-term growth.
Development and financial results in Q1 2018
Auction turnover in Q1 decreased 8 percent. Hereof 2 percent is due the depreciation of the Swedish kronor and 2 percent due to a planned downgrade of QXL, excluding this the auction turnover in Q1 was down by 4 percent compared to last year.
The stabilization of auction turnover, following the strong decline in 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 services (i.e. Book an expert at home' concept) and improved transport services (i.e. Free Pick-up at seller's home' concept).
Revenue was 48 percent lower in Q1 2018 compared to last year, and amounted to DKK 29.0m (56.1m). The decrease is mainly explained by the lower income from sale of partnership agreements DKK 0m (18.0m) and lower auction turnover. Furthermore, revenue is reduced due to revenue in sold and acquired auction houses leading to a reduction of DKK -5.7m primarily due to one big auction house owned in Q1 2017 that was not owned in Q1 2018.
The sale of Stockholms Auktionsverk's Fine Art business has resulted in a gain of DKK 40.0m positively affecting EBITDA in Q1. The sale of the property at Rovsingsgade 68 has not impacted the result in Q1 as the property was sold at book value.
EBITDA amounted to DKK 36.4m in Q1 compared to DKK 15.0m the same period last year. The 243 percent increase is primarily explained by the sale of the Fine Art business as well as the reduced cost level resulting from the cost reductions that was initiated in the beginning of 2017. Furthermore, the change in accounting for leases is impacting the EBITDA positively by DKK 3.5m compared to last year. These improvements have been partly offset by the reduction in revenue.
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.
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.
In Q1 2018 management, focus on the business has been strengthened, most visibly through the CCO position in the Group Management team, and 4 new Branch Managers in Sweden.
Furthermore the sale of Stockholms Auktionsverk's Fine Art business will contribute to higher focus by the Online teams towards driving the online business in the middle segment market, and at the same time a higher focus by the Fine Art team on the exclusive high end segment of the Swedish and international auctioning world.
The financial analysis initiated in Q4 2017 is ongoing. Different options to ensure both refinancing of the current debt, as well as securing additional equity to strengthen the financial position of the Group to achieve future growth are being considered. The target is to achieve a reduction and extension of the interest bearing debt and a raise in the equity level to a minimum target level of 20 percent.
To achieve this a number of options to raise new capital are being investigated, amongst others for instance a rights issue to existing shareholders or a targeted emission to one or a few new investors. In March 2018, the company has also obtained a Share Issue Arrangement Agreement where it can issue 50m new shares to be sold on the market to any investors over time and thereby raise a substantial amount of new equity.
We are confident that the above financing initiatives will materialize within the second half of the fiscal year 2018 to ensure a strong long-term capital situation combined with a reasonable debt level.
The search for a new CEO is ongoing.
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
Auctions to the people!
Lauritz.com is an international online platform selling art, design, antiquities and home luxury to international buyers. It is our vision to democratize the international auction world by making auctions accessible to everyone. Lauritz.com was the first traditional auction house in the world to convert to online auctions. An early disruption of a very traditional market. As a first mover Lauritz.com has become a game changer driving the paradigm shift from physical to online auctions through digitalization, internationalization and industrialization of the auction industry.
Lauritz.com in figures
- 26 auction houses in 6 countries
- Over 3 million customer registrations
- Over 11.000 new customer registrations monthly
- Up to 5 million visits monthly
- Up to 1.8 million unique visitors monthly
- Visitors from approx. 200 countries
- Over 300.000 lots sold yearly
- Typically over 10.000 lots on auction
- Approx. 1.500 new auctions starting daily
- Lot value from DKK 800 to 15 million
This is how it works
Lauritz.com sources items locally to sell globally! Lauritz.com has 26 physical auction houses in 6 countries. Here local sellers can consign items for auction. Sellers can also interact with the local house by getting an online evaluation, by booking an expert for a home visit or by booking Lauritz.com's pick-up service to transport items from the seller to the auction house. All items are estimated, described and photographed objectively by Lauritz.com's experts. Each lot is put up for an individual timed auction for 7 days, sold to the highest bid and shipped to the buyer. All items are presented on physical viewing in the given local auction house during the auction period. Major collections or more expensive items are high-lighted on special theme actions. Lauritz.com offers an authenticity guaranty to avoid falsification and copies.
Assortment
Lauritz.com sold over 300.000 lots on auction in 2017. The wide assortment comprises everything from luxury flee market finds to costly international art works - from DKK 800 and up. The categories cover e.g. modern and antique art and sculptures, furniture, lamps, carpets, ceramics, silver, glass, jewellery, clocks, wine, hunting equipment, collectables. Lauritz.com is exceptionally strong in modern design classics and probably the leading auction house internationally for 20th century design icons. High volumes are sold daily of the most famous furniture by Scandinavian architects as Arne Jacobsen, Wegner, Finn Juhl, Poul Kjærholm etc. The modern furniture categories add up to approx. 40 percent of Lauritz.com's auction turnover.
Customers
Lauritz.com's customer profile stretches from trendsetters to pensioners, students to top executives. Lauritz.com strives to create a universe that appeals to everyone, whatever their taste, budget or age. The division between men and women between customers is approx. 50/50, typically with a middle to higher income, and in age mainly between 30 to 60 years. Lauritz.com has over 3 million customer registrations and up to 5 million visits monthly. Customers come from approx. 200 countries.
Market position
Lauritz.com focuses on the middle market segment for lots with a value between DKK 800 and 50.000. This segment positions Lauritz.com between classified platforms with high volume at low prices and the fine art market with low volume and high prices. Lauritz.com can be described as an innovative combination of EBay and Sotheby's.
Business model
Lauritz.com has a simple business model, based on a healthy premium structure. All auction items are sold in commission (which means that Lauritz.com has no inventory). When an item is sold, the buyer pays 22.5 percent in buyer's premium plus a knockdown fee of DKK 150. The seller pays 15 percent in seller's premium plus a knockdown fee of DKK 150. The buyer pays the knockdown and premiums within 3 days. Lauritz.com pays the seller within 35 days.
Geographical expansion
The main challenge in the auction business is to create a sufficient in-flow of items from local private and professional sellers to present to global buyers. Lauritz.com has a strong track record establishing physical auction houses for this vital local sourcing of items. Lauritz.com can open local auction houses in 3 ways; by opening own operations greenfield, by finding local partners to start in a franchise-like model or by acquiring regional auction houses to convert their traditional physical auctions to online auctions. Germany is considered the next growth market with a potential of up to 20 Lauritz.com houses (at present 3). Furthermore, UK is an attractive market to open on long term for local consignments in the up to 10 major cities.
Scalable platforms
Lauritz.com's platforms - and head-quarter set-up - is highly scalable as to; increasing the number of items on auction, increasing online traffic, establishing new auction houses and opening new countries. Lauritz.com already exist in 6 languages, and more can be added.
Business opportunities
Many opportunities are still to be explored and possibly launched. E.g. management sees a considerate potential in; introducing a 'Buy now' feature, increasing the number of new-produced items on auction (from design producers/retailers), shortening payment time to sellers, a new payment service, optimizing even quicker/cheaper shipment to buying customers, introducing adds on the platforms and offering new products like consumer loans.
Owners
Lauritz.com A/S is wholly owned by Lauritz.com Group A/S. 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 and Bure Equity AB.
1 January 31 March 2018
Auction Turnover
Auction Turnover amounted to DKK 177.1m (191.5), corresponding to a decrease of 8 percent. Excluding currency effects and QXL the decrease is 4 percent which is due to a lower number of knockdowns excluding QXL of 66,971 (78,030) partly offset by a higher average knockdown price 2,563 (2,333) in Q1 2018 compared to Q1 2017.
Revenue
Revenue amounted to DKK 29.0m (56.1), corresponding to a decrease of 48 percent. The decrease is mainly explained by the lower income from sale of partnership agreements, lower auction turnover and a negative net effect on revenue from sold and acquired auction houses of DKK -5.7m primarily due to one big auction house owned in Q1 2017 that was not owned in Q1 2018.
No (2) partnership agreements were signed in Q1.
Other income
The sale of the Fine Art business has resulted in a gain of DKK 40.0m in Q1 2018.
EBITDA and Auction Turnover margin
EBITDA amounted to DKK 36.4m (15.0), corresponding to an increase of 243 percent. The increase is mainly explained by the gain from sale of the Fine Art activities, implementation of IFRS 16 regarding Leasing, improved EBITDA from core business by approx. DKK 1.5m in Q1 2018 compared to Q1 2017, partly offset by lower fees from sale of new partnership agreements.
The Auction Turnover Margin amounted to 20.6 (7.8) percent. The increase is mainly explained by the increase in EBITDA combined with lower auction turnover in Q1 2018.
Operating profit
Operating profit for the period amounted to DKK 29.2m (11.2) an increase of 261 percent.
Net financials
Net financials was DKK 5.6m (-5.6). Net financials mainly consists of interest on the issued bond DKK 4.4m (4.7) as well as calculated interest on leasing contracts DKK 0.3m in Q1 2018 (new from 2018) and exchange gain/loss on the bond debt. The currency exchange rate gains on the bond debt issued in SEK amounted to DKK 10.4m in Q1 2018 (0.6 loss).
Tax
Tax amounted to DKK 7.0m (-1.4), corresponding to an effective tax rate of 20.0 percent (24.3).
Profit for the period and earnings per share
Profit for the period was DKK 27.8m (4.3) and increase of 647 percent. Earnings per share amounted to DKK 52.28 (8.02).
Cash flow
Cash flow from operating activities was DKK -48.5m (-25.0). The Cash flow from operating activities in Q1 2018 is impacted by settlement of working capital items. The amounts payable to sellers at the beginning of the quarter is high due to high activity in December 2017. Cash flow from operating activities in Q1 2017 was more positive than normal due to payments from buyers of the extraordinary art collection (Lundberg) that was received in Q1 2017.
Financial position, cash and cash equivalents
Equity at the end of the quarter was DKK 70.3m (45.4) and total assets were DKK 431.8m (446.3). The equity/assets ratio increased to 15.8 percent (10.2).
Cash and cash equivalents amounted to DKK 48.2m (60.1).
Investments
Investments amounted to DKK 1.0m (3.4). Sale of Rovsingsgade and Fine Art affected the cash flow positively by DKK 42.4m.
Human resources
The average number of full-time employees in Lauritz.com A/S and its subsidiaries (FTE) was 146 (191) in the period. The adjustments made in Q1 2018 to streamline the organization further, as well as the impact on headcount from the sale of the Fine Art business is not showing in the average number of FTE's for the quarter. These changes are reducing the number of FTE's by approx. 25.
Shares
The number of shares registered is 530,900.
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
The EBITDA for 2018 is expected to be DKK 65-70m, and Profit before tax is expected to be DKK 30-35m.
The EBITDA margin excluding the gain from the sale of Stockholms Auktionsverk's Fine Art business is expected to be around 20 percent (previous guidance was 20-25 percent) including the gain from the sale of Stockholms Auktionsverk's Fine Art business the EBITDA margin is expected to be approx. 45-50 percent which is the new guidance.
Net revenue is expected to decrease. Partly due to not including any sale of partnership agreement, and partly due to revenue from fees and commissions expected to decrease by around 15 percent due to the impact of not having revenue from sold auction houses, including the decrease caused by the sale of Stockholms Auktionsverk's Fine Art business at the end of Q1.
The cash flow for 2018 is expected to be positive, although the seasonality of the business will impact the quarterly cash flows, and we expect to comply with applicable financial covenants.
All numbers in future prospects are based on exchange rates at the end of Q1 2018.
Lauritz.com
On occasion, Lauritz.com A/S is referred to as Lauritz.com. In this Report, such references are to Lauritz.com A/S's consolidated financial statements, unless clearly stated otherwise.
Finance
Lauritz.com is partly funded by a bond debt, which amounted to DKK 227.6m (237.0). 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 March 2018 must not be greater than 3.00. The ratio was 1.86.
The second covenant is EBITDA/Net finance charges, which as at 31 March 2018 must exceed 2.50. The ratio was 3.72.
The calculation of the covenants are available in note 10 of this report.
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 A/S, being the parent company, is listed with a senior secured bond on Nasdaq in Stockholm and Lauritz.com A/S's primary operations are within online auctions.
The presentation can be viewed from 9.05 am via https://www.facebook.com/Lauritzcom/
Best regards
Lauritz.com A/S
Preben Lindgaard
CFO
For press enquiries, please contact:
Susanne Sandsberg Klubien,
+45 26891909
E-mail: press@lauritz.com
For other enquiries, please contact:
Preben 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 CEST on 03 May 2018.
