publishes results for H1/Q2 2019: Progress in profitability in Europe and business development in China

Munich, August 8, 2019: SE ("", "Group" or "Group"), one of the leading online retailers for family products in Europe and for customers in China, today published its financial figures for the first half of the year (H1) and the second quarter (Q2) of 2019. The Group generated sales of EUR 40.9 million in H1 2019 (H1 2018: EUR 56.4 million) and EUR 20.1 million in Q2 2019 (Q2 2018: EUR 23.5 million). The adjusted (ber.) EBIT amounted to EUR -7.3 million in H1 2019 (H1 2018: EUR -11.1 million) and EUR -3.3 million in Q2 2019 (Q2 2018: EUR 5.9 million).

Sales development characterized by profitability orientation

Sales in the DACH region (Germany, Austria, Switzerland) amounted to EUR 9.0 million in H1 2019 (H1 2018: EUR 12.6 million) and EUR 4.3 million in Q2 2019 (Q2 2018: EUR 5.3 million). DACH thus contributed around 22% of Group sales in H1 2019. Over the past year and a half, has consistently focused on improving profitability in Europe. Due to the reduction of the existing product portfolio and the focus on products with higher margins, the Group is operating on a lower, but significantly more sustainable sales base. As a consequence, the margin based on product sales in the DACH region has already increased by around five percentage points since the beginning of the year compared to 2018 as a whole.
The business covered by the Bebitus shops in the rest of Europe (Spain, Portugal and France) generated sales of EUR 7.0 million in H1 2019 (H1 2018: EUR 14.7 million) and EUR 3.2 million in Q2 2019 (Q2 2018: EUR 6.6 million). This corresponds to around 17% of Group sales. Similar to the DACH region, the Bebitus shops focus on improving profitability by increasing product margins and focusing on marketing expenses. The margin based on product sales for the Bebitus shops has already increased by around one percentage point since the beginning of the year compared to 2018 as a whole.
In China, sales revenues in H1 2019 of EUR 25.0 million were below the previous year's level (H1 2018: EUR 29.1 million) due to the strong revenue base in Q1 2018, but in Q2 2019 sales revenues were EUR 12.7 million above the same quarter of the previous year (Q2 2018 EUR 11.6 million) and also above Q1 2019 (EUR 12.3 million). Business in China accounted for around 61% of Group sales in H1 2019. With the support of the two new Asian investors who participated in the capital increase in March 2019, is pursuing a growth strategy in China. Growth measures in China include i) the opening of a second bonded warehouse, (ii) additional online sales channels, (iii) the continuous expansion of the product range, (iv) possible cooperations with local Chinese companies and (v) the potential expansion of the business model into a hybrid (including stationary) sales model. The hybrid model is strategically important to reduce customer acquisition costs and reach a broader audience in Tier 2 and Tier 3 cities in China, which requires short-term investment. Such an expansion of the business model is based on the Group's good supplier relationships in Europe and the high level of awareness of in China and offers advantages through low offline customer acquisition costs. In order to drive forward the growth projects in China, the Group has already expanded its local team in Shanghai from one to six employees and one member of the Executive Board in recent months.

Further improvements in product margins, contribution margin and cost structure

The Group's long-term strategy of concentrating on high-margin products, especially consumer goods such as clothing and toys, as well as the renegotiation of supplier conditions, had a positive impact on the gross margin of the European business. As a result, the gross profit margin (gross profit from sales) increased by 1.1% year-on-year to 25.0%.
Selling expenses decreased from EUR 21.6 million in H1 2018 to EUR 14.2 million in H1 2019 (minus 34%) and from EUR 9.3 million in Q2 2018 to EUR 6.5 million in Q2 2019 (minus 30%). The savings result from lower fulfillment costs (including storage costs), personnel and marketing costs. The ber. Fulfillment costs amounted to EUR 6.1 million in H1 2019 (H1 2018: EUR 9.8 million) and EUR 2.7 million in Q2 2019 (Q2 2018: EUR 4.6 million). Storage costs were reduced due to the sale of old inventory, while logistics costs were reduced by shipping more Tmall orders from the low-cost bonded warehouse for Tmall in Guangzhou, China. The ber. At EUR 9.5 million in H1 2019 (H1 2018: EUR 12.3 million) and EUR 4.6 million in Q2 2019 (Q2 2018: EUR 5.8 million), other selling and administrative expenses are also significantly below the previous year's level.
The operating contribution margin amounted to EUR 2.2 million in H1 2019 (5.3% of sales) and in Q2 2019 to EUR 1.3 million (6.4% of sales). This is a significant improvement compared to the previous year (H1 2018: EUR 1.3 million; Q2 2018: EUR -0.5 million), which is due to the improvement in the gross margin and the better fulfillment expense ratio.
Reported EBIT improved to EUR -7.8 million in H1 2019 compared to EUR -12.4 million in H1 2018 (Q2 2019: EUR -3.7 million compared to Q2 2018: EUR -5.5 million). The ber. EBIT amounted to EUR -7.3 million in H1 2019 compared to EUR -11.1 million in H1 2018 (Q2 2019: EUR -3.3 million compared to Q2 2018: EUR -5.9 million). The ber. EBIT thus improved by 34% compared to the same period of the previous year, while the ber. EBIT margin improved by 1.9%.
The Group continues to aim to achieve break-even on the basis of adjusted EBIT at the beginning of 2020, which is mainly due to increasing sales and profitability of the China business and the further progress of margin improvement in the European shops. For 2019, the Group expects slight sales growth compared to 2018 due to the growth measures in China and as the second half of the year is generally stronger. In addition, a significant improvement in the operating contribution margin, a further improvement in the ber. EBIT and a significant reduction in cash outflow despite a moderate increase in net working capital to drive growth in China.

Cash outflow reduced; Financing options evaluated

In H1 2019, a lower operating cash outflow of EUR 8.6 million was recorded after EUR 13.8 million in the previous year. The operating cash outflow in Q2 2019 was EUR 3.3 million and thus below the value of Q1 2019 at EUR 5.3 million (EUR 2.4 million cash inflow in Q2 2018). As a result, the Group's available liquidity amounted to EUR 12.1 million as of June 30, 2019, EUR 3.4 million less than as of March 31, 2019. Due to the operating cash outflow and to finance the various growth measures in China, the Group is examining financing options.
CEO Matthias Peuckert: "In the first half of 2019, the Group made significant progress in terms of profitability and the further reduction of cash outflows. Strategically, we see many growth opportunities in China and are implementing them with our expanded team and capabilities in China. For the remainder of 2019 and the beginning of 2020, we need to invest in further growth, especially in China."

Selected key figures for the first half and second quarter of 2019 (excluding Feedo)

H1 2019 H1 2018 Q2 2019 Q2 2018
Revenue (million euros) 40,9 56,4 20,1 23,5
China 25,0 29,1 12,7 11,6
ROOF 9,0 12,6 4,3 5,3
Rest of Europe 7,0 14,7 3,2 6,6
Contribution margin (million euros) 2,2 1,3 1,3 -0,1
in % of turnover 5,3% 2,3% 6,4% -0,2%
Adjusted EBIT (EUR million) -7,3 -11,1 -3,3 -5,9
in % of turnover -17,9% -19,8% -16,2% -24,9%