publishes Q1 2019 financial results

 In 2019

Munich, May 28, 2019: SE (”“, “Company” or “Group”), one of the leading online retailers for family products in Europe and to customers in China, published its financial results for the first quarter (Q1) 2019 today. The Company achieved revenues of EUR 20.8 million and adjusted (adj.) EBIT of EUR -4.0 million (-19.5% margin in % of revenues). These results are in line with expectations in terms of profitability, taking into account the restructuring measures initiated in February 2018, especially the reduction of marketing expenses and the strong focus on margins. To lay the path for future profitable growth in 2019 and beyond, the Group is pursuing several growth projects in the attractive Chinese market. For 2019 the Management Board continues to expect clear revenue growth in 2019 on a year over year basis, a further improvement in adj. EBIT and break even on basis of adjusted EBIT in early 2020.

Q1 revenue development impacted by typically lower quarter than Q4 and ongoing focus on margin and cost improvements in European business

Revenues in China in Q1 2019 amounted to EUR 12.3 million (Q1 2018: EUR 17.5 million) accounting for approximately 59% of Group revenues. The Chinese market keeps slowly recovering from the negative effects in 2018, which led to a significant decrease in revenues from Q2 onwards last year. Revenues in Q1 are also seasonally lower given Chinese New Year. For the rest of 2019, sees a lot of growth potential and puts a lot of strategic and operational focus on the Chinese market: (1) new Chinese investors for China have been added in the first quarter, (2) a second Bonded Warehouse in China will be launched in the course of this year, (3) at least one additional distribution channel in China will be added. These measures are supported by recently increased order thresholds for products acquired through cross-border e-commerce from RMB 2,000 to RMB 5,000.
The revenue development in the European business, DACH (Germany, Austria and Switzerland) and Rest of Europe (RoE; Spain, Portugal and France), reflects the implementation of the Group´s focus on improving profitability. Due to the reduction of the existing product portfolio, the focus on higher margin products as well as the introduction of a new pricing tool and the improvement of purchasing terms, the product margins after fulfilment costs were successfully increased by approx. 6% between Q1 2018 and Q1 2019 in the DACH region. Revenues in the DACH region amounted to EUR 4.7 million in Q1 2019 (Q1 2018: EUR 7.3 million). This accounts for approximately 23% of Group revenues. RoE covered by the Bebitus shops, generated revenues of EUR 3.8 million in Q1 2019 (Q1 2018: EUR 8.1 million). This accounts for approximately 18% of Group revenues.

Improved adj EBIT underlines more sustainable basis

Selling and distribution expenses decreased by 37% and EUR 4.6 million compared to prior year quarter and thus developed in line with revenues. The main cost savings relate to personnel expenses, logistic and marketing costs. Operating contribution margin (difference between gross profit and expenses for adj. marketing and adj. fulfillment costs) amounted to EUR 0.9 million in Q1 2019 (4.2% of revenues). This is a small improvement by 0.1pp compared to Q1 2018 (EUR 1.3 million or 4.1% of revenues). This is mainly the result of an increased gross profit margin of 25.1% in Q1 2019 (Q1 2018: 24.0%). Adj. other selling, general and administrative costs (SG&A costs) have decreased and were with EUR -4.9 million in Q1 2019 (Q1 2018: EUR -6.5 million) significantly lowered compared to the prior year quarter and stable compared to the previous quarter (Q4 2018: EUR -4.8 million).
Adj. EBIT amounted to EUR -4.0 million in Q1 2019 and could be improved compared to EUR -5.2 million in the same period last year (EUR -5.9 million including Feedo which was divested in the meantime). This is a positive development in absolute numbers compared to the prior year quarter Q1 2018 but lower than in the previous quarter Q4 2018, which was positively affected by sales events, the Christmas season and low new working capital.

Capital increase strengthened liquidity position and supports China growth strategy

With entry in the commercial register on March 14, 2019, the Group has successfully completed the capital increase with gross proceeds of EUR 10.1 million. The Group’s total cash available amounted to EUR 15.5 million as of March 31, 2019.
With the proceeds of the capital increase, intends to realize projects for the announced growth path in China and to conclude the restructuring program. Two new Asian investors participated in the capital increase who will actively support the projects with local know-how and network in order to improve the development on the Chinese market. In that context, also two candidates, Mr. Weijian Miao and Ms. Xiao Jing Yu are up for the election of the Supervisory Board at the upcoming Annual General Meeting on June 6, 2019. Furthermore, the Group is planning on extending the local team in Shanghai in order to support the strategy and development of the China business.
For 2019, the Group continues to follow the 2018 initiated restructuring path and confirms its outlook with clear revenue growth compared to 2018, improvement of adjusted EBIT and a moderate build-up of net working capital to enable the growth of the China business. In addition, new product categories shall be developed in order to position as international business for families with young children in Europe and China. The Management Board also expects a clear improvement of the operating contribution margin (in % of revenues). Achieving break even on the basis of adjusted EBIT is expected in early 2020.

Select key figures for the first quarter 2019

Q1 2019Q1 201820182017
Revenues (EUR million)20.832.8104.8188.3
Rest of Europe3.88.123.928.5
Operating contribution (EUR million)
in % of revenues4.2%4.1%3.8%5.8%
Adjusted EBIT (EUR million)-4.0-5.2-18.5-21.3
in % of revenues-19.5%-16.2%-17.8%-11.3%

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