FINANCIAL STATEMENT RELEASE for 1 January – 31 December 2021
SOLID PERFORMANCE DURING 2021 – LAST QUARTER IN A CHALLENGING MARKET ENVIRONMENT
Verkkokauppa.com arranges two virtual news conferences on a result publication day. 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 and how to participate, 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
Verkkokauppa.com Oyj – Financial Statement Release 10 February 2022, 8:00 a.m. EET
Unless otherwise stated, the comparison figures in brackets refer to the corresponding period in the previous year (reference period). Figures are unaudited.
October – December 2021 in brief
- Revenue was EUR 168.9 million (176.0)
- Gross profit was EUR 26.2 million (26.7) or 15.5% of revenue (15.1%)
- Operating profit (EBIT) was EUR 5.3 million (6.2) or 3.2% of revenue (3.5%)
- Comparable operating profit was EUR 5.3 million (6.2) or 3.2% of revenue (3.5%)
- Net profit was EUR 4.0 million (4.7)
- Earnings per share were EUR 0.09 (0.10)
- Investments were EUR 1.9 million euros (0.4)
- Operating cash flow was EUR 4.6 million (10.4)
January – December 2021 in brief
- Revenue was EUR 574.5 million (553.6)
- Gross profit was EUR 91.2 million (88.4) or 15.9% of revenue (16.0%)
- Operating profit (EBIT) was EUR 20.3 million (19.6) or 3.5% of revenue (3.5%)
- Comparable operating profit was EUR 20.3 million (20.4) or 3.5% of revenue (3.7%)
- Net profit was EUR 15.1 million (14.6)
- Earnings per share were EUR 0.34 (0.33)
- Investments were EUR 4.9 million (1.4)
- Operating cash flow was EUR 6.7 million (16.9)
- The Board of Directors proposes to the Annual General Meeting that a total dividend of EUR 0.246 per share be paid for the financial year 2021. The total dividend is to be divided into a payment of EUR 0.060 per share following the Annual General meeting. In addition, it is proposed to the AGM to authorize the Board of Directors to decide at its discretion the distribution of total of EUR 0.186 per share to be divided in three quarterly instalments.
|KEY RATIOS||10–12/2021||10–12/2020||Change %||1–12/2021||1–12/2020||Change %|
|Gross margin, %||15.5%||15.1%||15.9%||16.0%|
|Operating margin, %||3.2%||3.5%||3.5%||3.5%|
|Comparable operating profit||5.3||6.2||-14.0%||20.3||20.4||-0.5%|
|Comparable operating margin, %||3.2%||3.5%||3.5%||3.7%|
|Operating cash flow||4.6||10.4||-55.5%||6.7||16.9||-60.5%|
FINANCIAL GUIDANCE FOR 2022
The company expects the revenue to be between EUR 590–640 million (EUR 574.5 million) and adjusted operating profit (adjusted EBIT) to be between EUR 19–25 million (EUR 20.4 million) in 2022.
CEO PANU PORKKA’S REVIEW
The year 2021 provided some exceptional circumstances due to the coronavirus pandemic. Verkkokauppa.com's revenue reached a new record level at EUR 574.5 million. This growth was driven in particular by corporate sales, which increased by 19 percent, year-on-year. The pandemic further boosted consumer preference for online shopping, and online sales increased by 13.5 percent to previous year. Getting customers used to online shopping and helping them find the delivery methods best suited to them from range of services, helped make their day-to-day lives easier and more convenient.
Q4 revenue declined by 4.0 percent from a strong comparative period and stood at EUR 168.9 million. The quarter was dominated by the campaign season, which started in November. Demand for the period was lower than expected and below that of previous year. Christmas sales also started on a more quiet note and the Omicron variant kept customers from visiting the stores. The consumer electronic market, measured by GfK*, declined by 7.9 percent during the quarter. Also, sales in certain product categories were affected by availability challenges. One of our strategic growth areas, corporate sales, remained buoyant in the fourth quarter, with a year-on-year increase of 11 percent. Best-selling product categories were computers, gaming, toys and sports products.
Lower sales during fourth quarter affected profitability with the operating profit (EBIT) declining to EUR 5.3 million. Despite a tough market, the year-on-year gross profit margin improved to 15.5 percent of sales.
We have spent the year determinedly moving toward the objectives of our renewed strategy and vision to maintain position as a leader in e-commerce through continuous innovation and development. Investment in warehouse automation at Jätkäsaari and the increase in the number of own brand products in the assortment have both been executed rapidly. AutoStore warehouse automation will be ramped up during the Spring as planned. Also, the first acquisition in the company's history, announced yesterday, will significantly accelerate the development and efficient sourcing of own brand products. These are important steps on the journey toward the long-term growth target of EUR 1 billion in revenue by the end of 2025. We will continue to develop our business in the long term, focusing on customer experience and service, resulting in profitable growth.
I remain confident about the future. We have adapted to a constantly changing market and been able to respond quickly to new customer needs and changing consumer behavior.
I would like to thank our staff for the past year. We have survived a challenging year with varying degrees of exceptional measures, while maintaining a high level of service. This has required flexibility and a determined service attitude from everybody in the company.
* GfK panel market. GfK is an independent intelligence platform and consulting service for the consumer products industry (www.gfk.com).
REVENUE AND PROFITABILITY
|Operating margin, % of revenue||3.2%||3.5%||3.5%||3.5%|
|- advisory costs related to transfer to official list of Nasdaq Helsinki||0.0||0.0||0.0||0.8|
|Comparable operating profit||5.3||6.2||-14.0%||20.3||20.4||-0.5%|
|Comparable operating margin, % of revenue||3.2%||3.5%||3.5%||3.7%|
|Share of sales|
|Website visits, million||25.1||29.9||80.0||87.0|
Sales includes orders and deliveries in transit. On-line and off-line sales exclude export sales.
In October–December 2021, Verkkokauppa.com’s revenue declined by 4.0 percent year on year, totaling 168.9 million euros (176). The campaign season, which was characteristic of the last quarter of the year, was quieter than expected. In addition, the Corona situation, which significantly deteriorated in December, affected our customer’s visits in brick and mortar stores. The best-selling product categories were computers, games and sports as well as toys.
During the fourth quarter, share of Verkkokauppa.com’s online sale represented 63 percent of the total sales (62%). Visits to the Verkkokauppa.com website declined year on year, totaling 25.1 million (29.9) during the fourth quarter. However, the company succeeded well in converting many online visitors to regular buying customers during the comparison period, with an improvement in conversion rate. Sales to corporate customers (B2B) increased 10.7 percent, representing 20 percent of total sales (18%). The export business picked up during the campaign season and its share of total sales was 7 percent (6%). Revenue excluding export declined in October–December 5.4 percent.
The proceeds from consumer financing were 1.2 million euros (1.0) including both interest income and fee income.
Personnel costs decreased in October–December by 7.2 percent to 9.7 million euros (10.4). In the comparison period, personnel costs were higher due to COVID year bonus paid to all personnel. During the reporting period, other operating expenses increased slightly to 10.1 million euros (8.9). Logistics and warehouse related costs were higher to mitigate possible availability shortages as well as to prepare for high season sales and campaigns.
Operating profit (EBIT) in October–December decreased 0.9 million euros, totaling 5.3 million euros (6.2), representing 3.2 percent of revenue (3.5%). Profitability was impacted especially by a decline in sales. Comparable operating profit was 5.3 million euros (6.2) and profit for the period 4.0 million euros (4.7).
For the final quarter, earnings per share were 0.09 euros (0.10) in October–December.
In January–December, Verkkokauppa.com’s revenue grew by 3.8 percent year on year, totaling a record high level, 574.5 million euros (553.6).
The proceeds from consumer financing were 4.3 million euros (3.6) including both interest income and fee income. The credit loss allowance was 0.8 million euros (1.1) at the end of December.
Personnel costs increased in January–December by 2.8 percent to 36.6 million euros (35.6). The increase came mainly from IT as well as from purchasing and assortment handling functions. During the reporting period, other operating expenses increased slightly to 30.3 million euros (28.8).
In January-December, operating profit increased by 0.7 million euros, totaling 20.3 million euros (19.6), representing 3.5 percent of revenue (3.5%). Comparable operating profit was 20.3 million euros (20.4) and profit for the period 15.1 million euros (14.6). In the comparison period, 0.8 million euros of costs relating to the stock listing process impacted comparability.
Earnings per share were 0.34 euros (0.25) in January–December.
FINANCE AND INVESTMENTS
Operating cash flow was 6.7 million euros (16.9) in January–December 2021. Operating cash flow was impacted by change in working capital. Drivers for change in working capital were mainly growth in inventories when mitigating possible availability shortages, preparing for high season sales and campaigns.
Ordinary seasonal fluctuations are reflected in cash and cash equivalents, cash flow and accounts payable, which usually reach their highest points at the end of the fourth quarter and their lowest points at the end of the second quarter.
Investments totaled 4.9 million euros (1.4) in January–December 2021. The majority of investments were directed to the Jätkäsaari automation warehouse project. During the reporting period the company capitalized 0.4 million euros (0.6) in salary costs. In January-December, a dividend of EUR 20.1 million (9.6) in total was distributed to shareholders.
Verkkokauppa.com has revolving credit facilities totaling 20 million euros, which have not been utilized.
EVENTS AFTER THE REPORTING PERIOD
On 9 February 2022, Verkkokauppa.com announced the acquisition of e-ville.com online store. The acquisition supports Verkkokauppa.com's strategy to strengthen and expand its assortment in own brands. The purchase price amounts to approximately EUR 5.3 million, of which EUR 3.3 million will be paid in cash and EUR 2.0 million in new shares to be issued in a directed share issue to the seller at closing. The parties have also agreed to additional purchase price installments of up to approximately EUR 6.7 million payable solely if the combined sales of own brand products exceeds set target levels during 2022, 2023 and/or 2024. The total aggregate purchase price can amount to EUR 12.0 million at the maximum.
The transaction will close in the beginning of April 2022 and the acquired business operations will be consolidated into Verkkokauppa.com's figures from the beginning of the second quarter of 2022. E-ville’s operations are estimated to have a positive impact of EUR 5–8 million on Verkkokauppa.com's revenue in 2022.
SHORT-TERM RISKS AND BUSINESS UNCERTAINTIES
Verkkokauppa.com’s risks and uncertainties reflect the operating environment and general consumer behavior, for example, demand for consumer electronics, circumstances impacting export trade, availability of products, and the competitive environment. The company’s business operations are also influenced by risks and uncertainties relating to, for example, business strategy, company transactions, investments, procurement and logistics, information technology, and other operative aspects of the business. These risks and uncertainties may affect the company’s operations, financial position, and performance both positively and negatively.
General uncertainty in the global economy and with it the uncertainty of the financial market behavior in Finland, Europe and the world may adversely affect Verkkokauppa.com’s business and growth opportunities. Inflation and a possible tightening of monetary policy may have to an increasing extent an impact on consumer confidence in the economy and thus on consumer behavior.
The COVID-19 pandemic continues to affect people’s lives. We estimate that new virus variants and a possible re-emergence of the pandemic could have an impact on the company’s operations in the short-term. The resurgence of the pandemic could lead to uncertainty in household confidence in the economy and this could have an impact on consumer purchasing behavior. Challenges in the production chain and logistics efficiency, including for example, availability of products and certain components, as well as containers, continue. On the other hand, we have prepared for the availability shortages with optimizing our stock levels accordingly.
Verkkokauppa.com’s business operations are estimated to develop positively. The company believes that it will benefit from online shift and 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 sales in the online channel have shown growth. The company estimates that the increasing shift of customers to online sales is permanent.
The effects of the COVID-19 pandemic will gradually begin to ease. As travel opens up, we expect to see a reopening of export business. At the same time it’s possible that consumers may direct their spending towards services and travelling. We estimate that many side effects caused by the pandemic, such as component shortages, may still have an impact on the availability of some products through 2022. The resurgence of the pandemic could lead to uncertainty in household confidence in the economy and this could have an impact on consumer purchasing behavior.
The economic growth in the early part of the year will be slower impacted by pandemic related restrictions*. We estimate that this may have an impact on consumers behavior and demand during first half. In addition to the pandemic, it’s more difficult to estimate the outlook and predict the demand due to uncertainties related to overall economic development, inflation, availability of products and geopolitical situation.
*source: Economic survey from the Finland’s Ministry of Finance, winter 2021: http://urn.fi/URN:ISBN:978-952-367-886-6
FINANCIAL GUIDANCE FOR 2022
The company expects revenue to be between EUR 590–640 million (EUR 574.5 million) and comparable operating profit to be between EUR 19–25 million (EUR 20.4 million) in 2022.
BOARD PROPOSAL FOR PROFIT DISTRIBUTION
The company's distributable funds on 31 December 2021 were EUR 35,080,298.13.
The Board of Directors proposes to the Annual General Meeting that Verkkokauppa.com Oyj's profit of EUR 15,093,137.88 for the financial year be transferred to the retained earnings account. The Board of Directors proposes to the Annual General Meeting that a total dividend of EUR 0.246 per share be paid for the financial year 2021, divided into a dividend of EUR 0,060 per share to be paid in accordance with the Annual General meeting. In addition to that, to authorize the Board of Directors to decide at its discretion the distribution of quarterly dividend in total not exceeding EUR 0.186 per share. The proposal is based on the company's result in 2021 and its liquidity position.
Verkkokauppa.com continues its dividend policy, according to which the company pays an increasing dividend to its owners on a quarterly basis.
VERKKOKAUPPA.COM’S ANNUAL GENERAL MEETING 2022
Annual general meeting is planned to be held on Thursday 24 March 2022. The Board of Directors will summon the meeting separately later.
Helsinki, Finland, 10 February 2022
Board of Directors
A press conference for analysts, investors and media will be held in Finnish over Livestream webcast on Thursday, 10 February 2022 at 10:00 a.m. (EEST), in which Verkkokauppa.com’s CEO Panu Porkka will present the developments in the reporting period.
A press conference in English will be held over Livestream webcast on Thursday, 10 February 2022 at 11:00 a.m. (EEST). Questions can be sent beforehand or during the presentation via e-mail to email@example.com.
Presentation materials for both events are available at https://investors.verkkokauppa.com/en/presentations. For both press conferences, the Livestream webcast is available at www.verklive.com.
COMPANY RELEASES AND EVENTS
Verkkokauppa.com will arrange events and publish its financial reports as follows:
- The Financial Statements for 2021 during the week beginning 28 February (week 9) in 2022
- AGM on 24 March 2022
- Interim report for January – March 2022 on Thursday 28 April 2022
- Half-year financial report for January – June 2022 on Thursday 14 July 2022
- Interim report for January – September 2022 on Thursday 27 October 2022
- Financial statements bulletin for the year 2022 on Thursday 9 February 2023.
Panu Porkka, CEO, Verkkokauppa.com Oyj
Mikko Forsell, CFO, Verkkokauppa.com Oyj
Tel. +358 50 434 2516
Marja Mäkinen, Head of Investor Relations, Verkkokauppa.com Oyj
Tel. +358 40 671 2999
Verkkokauppa.com empowers its customers to follow their passion by providing a wide product assortment of around 80,000 products. Verkkokauppa.com Oyj serves its retail and corporate customers through its webstore, megastores, 24h kiosk and network of collection points as well as fast deliveries and various services. As Finland’s most popular and most visited domestic online retailer, its deliveries cover around 75 percent of the Finnish population within the next day. The Company has four megastores: in Oulu, Pirkkala, Raisio and Helsinki, where its headquarters is also located. Verkkokauppa.com employs more than 750 people and its shares are listed on the Nasdaq Helsinki stock exchange with the ticker VERK.