Lauritz.com Group A/S interim report January - September 2018
Copenhagen, 30 October 2018
- EBITDA of DKK 43.3m (22.4m), an increase of 93 percent.
- Cost level reduced by 9 percent comparing like for like with last year, showing the way to a new leaner organization with ability to deliver strong earnings
- Core business Auction Turnover down by 5.6 percent YTD. Auction Turnover amounted to DKK 523.3m (603.1), corresponding to a decrease of 13.2 percent. In addition to the reduction in core business, 4.1 percent is due to lower Auction Turnover in Fine Art business in Sweden which was sold in Q1, 2 percent is due to the depreciation of the Swedish krone, and 1.5 percent is due to QXL.
- Average knockdown price increased by 1.5 percent to DKK 2,597 (2,559), and number of knockdowns excluding QXL was 196,401 (227,256).
- Revenue amounted to DKK 81.7m (135.8). The reduction is primarily due to lower fees from sale of partnership agreements DKK 0m (21.7m) as well as the divested businesses DKK -22.0m. The remaining reduction is due to lower Auction Turnover impacting Revenue by DKK -6.9m and impact of depreciation of the Swedish krone DKK -2.5m
- Gain from sale of Stockholms Auktionsverk's Fine Art business DKK 40.4m is included in other income.
- Auction Turnover Margin amounted to 8.3 (3.7) percent.
- Profit amounted to DKK 17.4m (-2.9) and earnings per share amounted to DKK 0.427 (-0.071).
- The property at Rovsingsgade 68 was sold.
- Lauritz.com A/S complies with applicable financial covenants at 30 September 2018.
In line with expectations, the 2018 Q3 EBITDA improves compared to Q3 2017. The improvement is primarily a result of a number of actions to reduce cost, divested operations and the change in accounting for leases.
For the first 9 month of 2018 EBITDA amounted to DKK 43.3m compared to DKK 22.4m in the same period last year. The improvement is primarily driven by the increase in income from sale of the Fine Art business and Partnership agreements. The result from the auction operations is increasing by DKK 2.2m primarily as a result of cost reductions, divested operations and the change in accounting for leases.
After many years of growth, Lauritz.com experienced a significant drop in Auction Turnover in 2017 due to a more aggressive competition from an increasing number of both traditional and new players within sales of vintage items. In the first 9 month of 2018, the core Auction Turnover shows signs of stabilization with a decrease of 5.6 percent in local currency compared to last year. However, in Q3 2018, the core Auction Turnover was down by 7.7 percent in local currency compared to last year, resulting in lower revenue. This latest development is mainly due to an extraordinary hot summer which historically tends to slow down the number of seller visits and thereby consignments in the auction houses.
Sales- and marketing initiatives are now further intensified in order to secure a high inflow of items for auction in a typically strong Q4. However, as a consequence of the Q3 performance, we have now chosen a more prudent estimate of Q4 in our guidance for the year.
Our strategic review aimed at developing a long-term strategy that secures long-term growth and profitability is ongoing. We are closely reviewing e.g. how to develop our business model, value proposition and product experience on the digitized market for auctions.
The sale of Stockholms Auktionsverk's Fine Art business is aimed at creating an ultimate focus by all our online auction houses in Sweden towards driving the online business in the middle segment market, and at the same time achieve a higher focus by the Fine Art team on the exclusive high end segment of the Swedish and international auctioning world.
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.
In order to return Lauritz.com to the growth path followed for many years, except for the last two, a number of ambitious commercial initiatives has been taken. Some are already in operation, and others will follow in the near future to motivate and drive sales as well as increasing the number of individual sellers. Below follows some examples of initiatives.
Lauritz.com's brand values are all about a democratic approach to auctions, making auctions accessible and convenient for modern consumers - in a contemporary and trendsetting way. After having launched our successful app and mobil website in recent years, we are now developing a new state-of-the-art, fashionable responsive (desktop) website.
Furthermore, in order to keep a high visibility in the market, we continuously and persistently communicate our standard free pickup-service and personal booking of experts for private home visits towards sellers in advertising campaigns in larger national printed media where a new campaign will be launched in Q4. For digital media we are preparing for a significant increase in digital campaigns.
Parallelly, we have launched an initiative to encourage our professional sellers to consign larger lot stocks, like previous season's product inventories or surplus items that are suitable for selling at auctions. The benefits of selling at auction are many for our professional sellers -some of the major benefits are massive exposure and a higher stock turnover rate as well as storage room, logistics and resales all being handled by the auction house.
Also, to give both private and professional sellers more comfort in relation to the price they will achieve in an auction, we are working at a more flexible and individual setup for setting minimum prices and the starting bid for the auction.
The financial analysis previously initiated 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. We are confident that the ongoing financing initiatives will materialize before the end of the year 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 5 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.
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.
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.
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.
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.
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.
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.
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.
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 July - 30 September 2018
Core business Auction Turnover down by 7.7 percent in Q3. Auction Turnover amounted to DKK 156.5m (170.2), corresponding to a decrease of 8.1 percent. The reduction is due to a lower number of knockdowns excluding QXL of 61,060 (69,861) partly offset by a 3 percent higher average knockdown price in the online business in Q3 2018 compared to Q3 2017.
Revenue amounted to DKK 23.7m (32.1). The decrease is primarily due to the expected reduction following the sale of the branch in Roskilde DKK -2.8m, lower income from sale of partnership agreements DKK -0.7m and lower auction turnover in the remaining business impacting revenue by DKK -4.1m and impact of depreciation of the Swedish krone of DKK -0.8m.
EBITDA and Auction Turnover margin
EBITDA amounted to DKK 0.0m (-4,4). The increase is primarily due to the expected reduction in cost due to cost reductions in the like for like business of DKK 1.9m in Q3, impact of change in accounting for leases DKK 2.1m and lower cost following the sale of the Fine Art business, partly offset by lower revenue including no fees from sale of partnership agreements in 2018 and cost in two new auction houses.
The Auction Turnover Margin amounted to 0.0 (-2.6) percent.
Operating profit/loss for the period amounted to DKK -5.5m (-8.5).
Net financials was DKK -7.7m (-5.2). Net financials mainly consists of interest on the issued bond DKK 4.1, (4.7) as well as calculated interest on leasing contracts DKK 0.2m in Q3 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 -3.2m in Q3 2018 (0.0m).
Tax amounted to DKK 2.9m (2.2), corresponding to an effective tax rate of 21.6 percent (19.1).
Profit for the period and earnings per share
Profit for the period was DKK -10.4m (-11.5). Earnings per share amounted to DKK -0.254 (-0.284).
Cash flow from operating activities was DKK -20.8m (-22.4). The Cash flow from operating activities in Q3 2018 is mainly impacted by a lower amount payable to sellers at the end of the period.
Financial position, cash and cash equivalents
Equity at the end of the quarter was DKK 46.5m (56.2) and the group's total assets were DKK 395.4m (426.9). The equity/assets ratio is 11.8 percent (13.2).
Cash and cash equivalents amounted to DKK 19.0m (29.5).
Investments amounted to DKK 0.9m (2.3m).
The average number of full-time employees in Lauritz.com Group A/S and its subsidiaries (FTE) was 125 (186) in the period.
1 January - 30 September 2018
Core business Auction Turnover down by 5.6 percent YTD. Auction Turnover amounted to DKK 523.3m (603.1), corresponding to a decrease of 13.2 percent. Excluding currency effects and QXL the decrease is 9.7 percent whereof 4.1 percent is due to lower Auction Turnover in the Fine Art business. The remaining 5.6 percent reduction is due to a lower number of knockdowns excluding QXL of 196,401 (227,256) partly offset by a 6 percent higher average knockdown price in the online business in 2018 compared to 2017.
Revenue amounted to DKK 81.7m (135.8). The decrease is primarily due to the expected reduction following the sale of auction houses (3 in DK and Fine Art in total DKK -22.0m), lower income from sale of partnership agreements (DKK -21.7m), QXL DKK -1.0m and lower Auction Turnover impacting revenue by DKK -6.9m, and impact of depreciation of the Swedish krone DKK -2.5m.
The sale of the Fine Art business has resulted in a gain of DKK 40.4m in 2018.
EBITDA and Auction Turnover margin
EBITDA amounted to DKK 43.3m (22.4), corresponding to an increase of 93 percent. The increase is mainly explained by the gain from sale of the Fine Art activities DKK 40.4m, cost reductions in like for like business DKK 6.6m, implementation of IFRS 16 regarding Leasing DKK 7.8m, partly offset by lower fees from sale of partnership agreements DKK -21.7m and lower Auction Turnover impacting revenue negatively by DKK -6.9m.
The Auction Turnover Margin amounted to 8.3 (3.7) percent. The increase is mainly explained by the increase in EBITDA combined with lower auction turnover in 2018.
Operating profit for the period amounted to DKK 24.8m (10.7) an increase of 131 percent.
Net financials was DKK -3.1m (-13.1). Net financials mainly consists of interest on the issued bond DKK 13.0m, (14.2) as well as calculated interest on leasing contracts DKK 0.7m in 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 10.8m in 2018 (2.1).
Tax amounted to DKK -4.3m (-0.4), corresponding to an effective tax rate of 19.8 percent (16.7).
Profit for the period and earnings per share
Profit for the period was DKK 17.4m (-2.9). Earnings per share amounted to DKK 0.427 (-0.071).
Cash flow from operating activities was DKK -73.6m (-37.0). The Cash flow from operating activities in the period 2018 is impacted by settlement of working capital items. The amounts payable to sellers at the beginning of the year is high due to high activity in December 2017. Cash flow from operating activities in the period 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 46.5m (56.2) and the group's total assets were DKK 395.4m (426.9). The equity/assets ratio increased to 11.8 percent (13.2).
Cash and cash equivalents amounted to DKK 19.0m (29.5).
Investments amounted to DKK 1.9m (8.1). Sale of Rovsingsgade and Fine Art affected the cash flow positively by DKK 43.5m.
The average number of full-time employees in Lauritz.com A/S and its subsidiaries (FTE) was 133 (174) in the period.
The number of shares registered is 40.792.542.
In April a share buy-back programme in the amount up to DKK 0.85m was initiated (max. 1,250,000 shares). The purpose of the programme is to meet obligations arising from allocations of shares to employees or to the Executive Management.
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.
As a consequence of the Q3 performance, we have now chosen a more prudent estimate of Q4 in our guidance for the year.
The EBITDA for 2018 is expected to be DKK 50-55m (previously DKK 65-70m).
Profit before tax is expected to be DKK 15-20m (previously DKK 30-35m).
The EBITDA margin excluding the gain from the sale of Stockholms Auktionsverk's Fine Art business is expected to be around 10 percent (previously 20 percent) including the gain from the sale of Stockholms Auktionsverk's Fine Art business the EBITDA margin is expected to be approx. 40-45 percent (previously 45-50 percent).
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 the sold auction houses, including the decrease caused by the sale of Stockholms Auktionsverk's Fine Art business at the end of Q1 2018.
The cash flow for 2018 is expected to be neutral (previously: 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 Q3 2018.
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.
The Group is partly funded by a bond debt, which amounted to DKK 228.1m (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 30 June 2018 must not be greater than 3.00. The ratio was 2.81.
The second covenant is EBITDA/Net finance charges, which as at 30 June 2018 must exceed 2.50. The ratio was 3.45.
The covenants for the bonds are described in detail in the terms and conditions for the bond available on www.lauritz.com.
Lauritz.com's net revenue and profitability are affected by the nature of operations. Following the sale of the Fine Art business the seasonality is changing, with Q1-Q3 being more even and Q4 being a stronger quarter.
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 owning 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/
Lauritz.com Group A/S
For press enquiries, please contact:
Susanne Sandsberg Klubien,
For other enquiries, please contact:
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 30 October 2018.