Convocation of Extraordinary General Meeting to resolve on ordinary capital reduction and capital increase
• Good progress on restructuring since beginning of the year and further progress ahead
• Operational and financial improvements continue in fourth quarter; longer recovery of Chinese business delays adj. EBIT break-even to early 2020
• Capital reduction and capital increase to provide further funding
Munich, November 22, 2018: Since the beginning of the year, windeln.de SE (“windeln.de”, “Group” or “Company”) has made good progress on the restructuring of the Company and is continuing to do so. However, reaching adjusted EBIT break-even will take one year longer than previously targeted for early 2019, primarily due to the Chinese business not having reached previous year levels yet despite improvements in the fourth quarter. Therefore, the Management Board decided to convene an Extraordinary General Meeting on January 9, 2019, to resolve on an ordinary capital reduction by way of a 10 : 1 reverse stock split in relation to the Company´s shares to enable the Company to subsequently conduct a capital increase. In addition, the Management Board will propose to resolve on a capital increase of the existing share capital with subscription rights. The objective of these measures is to provide funding for the Group’s ongoing restructuring.
Good progress on the restructuring since the beginning of the year
Since the beginning of the year, windeln.de successfully implemented several efficiency and profitability measures, including selling the unprofitable business in Eastern Europe and closing the loss making Italian shop. These measures result in a positive EBIT impact of approx. EUR 5 to 6 million annually. Additionally, the management team has been reduced, business department in all regions re-organized and headcount reduced from more than 400 to 218 active full-time equivalents (FTEs) by September 30, 2018. Furthermore, a new pricing mechanism, a new search tool, a pregnancy app, a baby starter box and new product categories have been introduced. Product margins of the shops in the DACH region and Rest of Europe increased by more than 2% points. Other SG&A expenses decreased from EUR 8.1 million on average per quarter in 2017 to EUR 5.3 million in Q3 2018. Net working capital improved from EUR 10.6 million to EUR 6.8 million as of September 30, 2018. Cash outflow was reduced from EUR -23.4 million in the first nine months of 2017 to EUR -17.9 million in the same time period of 2018.
Further progress ahead for both the Chinese and European business
The Chinese business was impacted by temporary stricter custom controls and product relaunches in the second and third quarter of this year but has started to gradually improve. In addition to this recovery, the Company pursues a product and channel diversification strategy: windeln.de will add the new category “Beauty”, one of the largest and fastest growing categories in cross-border e-commerce to China, as well as further market platforms in 2019. In this context, a second permanent bonded warehouse in China will be opened early 2019. The implementation of these strategic projects will further strengthen the Company´s set up toward China and will help the Chinese business to recover to previous year levels. The European business is expected to further improve through category extension, organizational improvements, SG&A cost reductions and the planned relocation of its central warehouse in 2020.
Operational and financial improvements in Q4 2018; adjusted EBIT break-even target early 2020
windeln.de expects double digit % revenue growth in the current fourth quarter compared to the third quarter of this year due to major sales events in China (11.11 and 12.12) and in Europe (Black Friday) as well as the Christmas season impact. In addition, the Group expects further structurally improved margins, SG&A expenses and net working capital in the current quarter. However, full recovery of the profitable Chinese business to previous year sales levels will take longer. As a result, the Company expects that adjusted EBIT break-even will be delayed by one year to early 2020.
Capital reduction and capital increase with subscription rights
In order to provide funding for the Group’s ongoing restructuring, the Management Board decided to convene an Extraordinary General Meeting on January 9, 2019 to resolve on an ordinary capital reduction according to §§ 222ff. AktG (German Stock Corporation Act) by way of a reverse stock split of the Company´s shares. The capital reduction reduces the current share capital of the Company from EUR 31,136,470.00 by EUR 28,022,823.00 to EUR 3,113,647.00. The difference of EUR 28,022,823.00 is utilized to cover losses of the Company. The sum of equity and balance sheet remains unchanged.
The currently issued 31,136,470.00 bearer shares of the Company will be merged with a ratio of 10 : 1 (reverse stock split). As a result, one new share is created out of each ten existing shares and the calculated share price will be above EUR 1.00, which is the statutory minimum issue amount for capital increases pursuing German Stock Corporation Act (AktG). The capital reduction has no impact on the valuation of the company.
In addition, the Management Board will propose to the Extraordinary General Meeting to approve a capital increase of the existing share capital with subscription rights, targeting proceeds of a high single digit million Euro amount. Large shareholders of windeln.de have signalized that they would participate in such capital measure. The subscription period shall start once the capital increase has become effective by registration with the commercial register.
The full invitation to the Extraordinary General Meeting of windeln.de including the agenda will be published in the German Federal Gazette and on the website of the Company in the course of next week.