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2018-08-15 09:00 CEST
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Lauritz.com Group A/S interim report January - June 2018

No. 25/2018
Copenhagen, 15 August 2018

  • EBITDA of DKK 43.3m (26.9m), an increase of 61 percent and the highest ever for the first 6 month period.
  • Cost level reduced by 10 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 4 percent YTD. Auction Turnover amounted to DKK 366.8m (432.8), corresponding to a decrease of 15 percent. In addition to the reduction in core business, 7.5 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 amounted to DKK 2,640 (2,646), and number of knockdowns excluding QXL was 135,341 (157,395).
  • Revenue amounted to DKK 58.0m (103.6), the reduction is primarily due to lower fees from sale of partnership agreements DKK 0m (21m) as well as the divested businesses DKK -17.1m. The remaining reduction is due to lower Auction Turnover impacting Revenue by DKK -5.8m and impact of depreciation of the Swedish krone DKK -1.7m
  • Gain from sale of Stockholms Auktionsverk's Fine Art business DKK 39.9m is included in other income.
  • Auction Turnover Margin amounted to 11.8 (6.2) percent.
  • Profit amounted to DKK 27.8m (8.6) an increase of 222 percent, and earnings per share amounted to DKK 0.681 (0.212).
  • The property at Rovsingsgade 68 was sold.
  • Lauritz.com A/S complies with applicable financial covenants at 30 June 2018.

In line with expectations, the 2018 Q2 EBITDA is lower than 2017 Q2 EBITDA. The reduction is primarily due to the sale of Stockholm Autionsverk's Fine Art business as well as no income from sale of Partnership agreements in Q2 2018.

After the sale of the Fine Art business, the seasonality in the business is changing. Fine Art sales have historically been placed in Q2 and Q4, giving peaks in earnings in Q2 and Q4 in Fine Art and in Lauritz.com Group A/S business as a whole. After the sale of the Fine Art business there will still be seasonal differences since late autumn and spring are stronger periods.

In Q2 2017, the Fine Art business generated EBITDA of DKK 4.6m and the sale of partnership agreements generated EBITDA of DKK 3.0m, whereas there is no income from these in 2018.
For the remaining part of the business, EBITDA reduced by DKK 3.8m compared to last year, primarily due to lower Auction Turnover impacting revenue negatively and due to cost in 2 new owned Auction Houses.

In Q2 2018, the core Auction Turnover was down by 2.5 percent in local currency compared to last year. During the first half of 2017 Auction Turnover declined by 18 percent in Q1 and 19 percent in Q2. Towards the end of 2017 Auction Turnover began to stabilize. The stabilization in core 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.

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 January to June 2018
In February and March 2018, the group 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 the first 6 months of 2018.

The total EBITDA amounted to DKK 43.3m for the six months period compared to DKK 26.9m the same period last year. The 61 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 5.6m compared to last year. These improvements have been partly offset by lower revenue from sale of partnership agreements and lower revenue due to reduction in Auction Turnover.

Excluding the divested businesses, impact of changes in accounting for leases, the fees from sale of partnership agreements and income from the sale of the Fine Art business the EBITDA of the remaining business has reduced by DKK 4.6m compared to last year. The like for like EBITDA has reduced by DKK 2.8m, and EBITDA from the 2 new owned auction houses has contributed negatively by DKK 1.8m in the first 6 month of 2018.

Comparing like for like figures costs have been reduced by DKK -4.9m (including DKK -1.8m due to the depreciation of the Swedish krone) in the first half of the year compared to last year. Further cost reductions have been implemented in the beginning of 2018 that will impact the cost in the second half, driving cost to an even lower level going forward.

Revenue was 44 percent lower in the first 6 months of 2018 compared to last year, and amounted to DKK 58.0m (103.6m). The decrease is mainly explained by the lower income from sale of partnership agreements DKK 0m (21.0m). Lower revenue due to sold auction houses not being included in the groups figures after the sale is resulting in a decline of DKK -17.1m primarily due to one big auction house owned in Q1 2017 that was not owned in Q1 2018 and due to the sale of the Fine Art business not owned in Q2 2018. The remaining part of the reduction  is due to lower auction turnover impacting revenue by DKK 5.8m and impact of depreciation of the Swedish krone of DKK -1.7m.

The sale of the Stockholms Auktionsverk's Fine Art business has resulted in a gain of DKK 39.9m positively affecting EBITDA in Q1. The sale of the property at Rovsingsgade 68 has not impacted the result in 2018 as the property was sold at book value.

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.

Management focus on the business has been strengthened in 2018, 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.

We are confident that the ongoing 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 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.

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 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 April - 30 June 2018
Auction Turnover
Core business Auction Turnover down by 2.7 percent in Q2. Auction Turnover amounted to DKK 189.7m (241.3), corresponding to a decrease of 21 percent. Excluding currency effects and QXL the decrease is 17.7 percent whereof 15 percent is due to lower Auction Turnover in the Fine Art business. The remaining 2.7 percent reduction is due to a lower number of knockdowns excluding QXL of 67,693 (79,365) partly offset by a higher average knockdown price in the online business in Q2 2018 compared to Q2 2017.

Revenue
Revenue amounted to DKK 29.0m (47.6). The decrease is primarily due to the expected reduction following the sale of the Fine Art business (DKK -11.4m), lower income from sale of partnership agreements (DKK -3.0m) and lower auction turnover in the remaining business impacting revenue by DKK -3.0m and impact of depreciation of  the Swedish krone of DKK -1.2m.

EBITDA and Auction Turnover margin
EBITDA amounted to DKK 1.4m (12.8). The decrease is primarily due to the expected decrease of DKK -4.6m due to the sale of the Fine Art business that contributed strongly in Q2 in 2017, and no fees from sale of partnership agreements in 2018 compared to DKK 3.0m in 2017. EBITDA for the remaining part of the business is down DKK 3.8m in Q2 compared to last year, primarily driven by the impact of lower Auction Turnover on revenue and cost in 2 new owned auction houses.
The Auction Turnover Margin amounted to 0.8 (5.3) percent.

Operating profit
Operating loss (profit) for the period amounted to DKK -4.3m (8.9).

Net financials
Net financials was DKK -0.9m (-2.3). Net financials mainly consists of interest on the issued bond DKK 4.4, (4.7) as well as calculated interest on leasing contracts DKK 0.3m in Q2 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 3.7m in Q2 2018 (2.7m).

Tax
Tax amounted to DKK 1.0m (-1.5), corresponding to an effective tax rate of 19.6 percent (22.3).

Profit for the period and earnings per share
Profit for the period was DKK -4,2m (5.1). Earnings per share amounted to DKK -0.102 (0.126). 

Cash flow
Cash flow from operating activities was DKK -4.8m (7.5). The Cash flow from operating activities in Q2 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 55.3m (34.6) and the group's total assets were DKK 416.0m (444.6). The equity/assets ratio increased to 13.3 percent (7.8).
Cash and cash equivalents amounted to DKK 40.4m (60.1).

Investments
Investments amounted to DKK 0.0m (2.4m).

Human resources
The average number of full-time employees in Lauritz.com A/S and its subsidiaries (FTE) was 137 (192) in the period.

1 January - 30 June 2018

Auction Turnover
Core business Auction Turnover down by 4 percent YTD. Auction Turnover amounted to DKK 366.8m (432.8), corresponding to a decrease of 15 percent. Excluding currency effects and QXL the decrease is 11.5 percent whereof 7 percent is due to lower Auction Turnover in the Fine Art business. The remaining 4 percent reduction is due to a lower number of knockdowns excluding QXL of 134,664 (157,395) partly offset by a higher average knockdown price in the online business in 2018 compared to 2017.

Revenue
Revenue amounted to DKK 58.0m (103.6). The decrease is primarily due to the expected reduction following the sale of auction houses and the Fine Art business (DKK -17.1m), lower income from sale of partnership agreements (DKK -21m) and lower Auction Turnover  impacting revenue by DKK -5.8m, and impact of depreciation of the Swedish krone DKK
-1.7m.

Other income
The sale of the Fine Art business has resulted in a gain of DKK 39.9m in 2018.

EBITDA and Auction Turnover margin
EBITDA amounted to DKK 43.3m (26.9), corresponding to an increase of 61 percent. The increase is mainly explained by the gain from sale of the Fine Art activities DKK 39.9m, cost reductions in like for like business DKK 3.1m, implementation of IFRS 16 regarding Leasing DKK 5.6m, partly offset by lower fees from sale of partnership agreements DKK -21m, lower Auction Turnover impacting revenue negatively by DKK -5.8m and  other changes of DKK -5.3m mainly due to income in sold auction houses and cost in the 2 new owned auction houses.
The Auction Turnover Margin amounted to 11.8 (6.2) percent. The increase is mainly explained by the increase in EBITDA combined with lower auction turnover in 2018.

Operating profit
Operating profit for the period amounted to DKK 30.3m (19.1) an increase of 59 percent.

Net financials
Net financials was DKK 4.6m (-7.9). Net financials mainly consists of interest on the issued bond DKK 8.9, (9.4) as well as calculated interest on leasing contracts DKK 0.5m 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 14.1m in 2018 (2.1).

Tax
Tax amounted to DKK -7.1m (-2.6), corresponding to an effective tax rate of 20.5 percent (23.2).

Profit for the period and earnings per share
Profit for the period was DKK 27.8m (8.6) an increase of 222 percent. Earnings per share amounted to DKK 0.681 (0.212). 

Cash flow
Cash flow from operating activities was DKK -52.9m (-14.6). 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 55.3m (34.6) and the group's total assets were DKK 416.0m (444.6). The equity/assets ratio increased to 13.3 percent (7.8).
Cash and cash equivalents amounted to DKK 40.4m (60.1).   

Investments
Investments amounted to DKK 1.0m (5.7). 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 143 (191) in the period.

Shares
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.

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 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 2018.
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 Q2 2018.

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 224.4m (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 2.46.
The second covenant is EBITDA/Net finance charges, which as at 30 June 2018 must exceed 2.50. The ratio was 3.07.
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. Following the sale of the Fine Art business the seasonality is changing, with Q1-Q3 being more even and Q4 being a stronger quarter.

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 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/

Best regards

Lauritz.com Group 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 15 August 2018.

HUG#2210827