with strong financial result in the second quarter; focus on executing financing to support growth of China business in the second half of the year

 In 2020e

• Revenues (excl. Bebitus) EUR 28.8 million in Q2 2020 (+68% growth compared to EUR 17.2 million in Q2 previous year); H1 2020 revenues EUR 43.7 million (+27% year over year)
• Adj. EBIT (excl. Bebitus) close to break-even EUR -0.0 million in Q2 2020 (-0.2% adj. EBIT margin) after EUR -2.4 million in Q2 previous year (-14.0% margin); H1 2020 adj. EBIT EUR -2.5 million (-5.7% margin) after -EUR 5.4 million (-15.8% margin) in H1 of the previous year
• Positive impact in Q2 from higher Covid-19 driven online sales and sale of hygiene products sourced from China as well as China VAT refund for previous periods
• Total cash available EUR 6.0 million as of June 30, 2020; impacted by continuing build-up of inventory for China business
• Financial target of reaching sustainable adj. EBIT break-even early 2021 dependent on securing financing in H2 given long cash conversion cycle and team build-up of Chinese business

Munich, August 14, 2020: SE (“”, “Group” or “Company”; ISIN DE000WNDL201) today reported strong financial results for the second quarter (Q2) and first half (H1) of 2020. The Company generated revenues of EUR 28.8 million in Q2 2020 which corresponds to a +68% increase to Q2 of the previous year (EUR 17.2 million in Q2 2019) and H1 revenues EUR 43.7 million (+27% yoy) for its continuing operations (i.e. excluding the Bebitus business which is reported as “discontinued operation”). Adjusted (adj.) EBIT amounted to EUR -0.0 million in Q2 2020 (Q2 2019: EUR -2.4 million) and EUR -2.5 million in H1 2020 (H1 2019: EUR -5.4 million).
From Q2 2020 going forward, the Company reports two Segments: Europe (which effectively includes the business in the German speaking region, DACH) and China. Even though both segments are interdependent this helps the company to increase transparency, better allocate resources and costs and therefore help steering the company towards sustainable profitability.

Strong Q2 revenue in China with +83% growth year over year; growing Europe revenues (excl. Bebitus) with +25% growth year over year; positive impact of VAT correction for China segment

EUR 23.2 million revenues were generated in Q2 2020 in China which is an increase of +83% year over year (H1 2020 EUR 33.4 million; +34% yoy) including revenues from the new business model selling hygiene articles to business customers of EUR 6.9 million in Q2 2020 and China VAT refund for earlier years (revenue impact EUR 2.8 million in Q2 2020 and EUR 3.6 million in H1 2020). Excluding the China VAT refund, Group revenues would have been EUR 26.1 million in Q2 2020 (+52% yoy) and EUR 40.2 million in H1 (+17% yoy). The China business accounted for 80% (78% excl. China VAT refund) of the Company revenues in Q2 2020.
Revenues in Europe (excl. Bebitus) amounted to EUR 5.6 million in Q2 2020. Compared to the same quarter of the previous year, this represents an increase of +25% (Q2 2019: EUR 4.5 million). Covid-19 driven higher demand in March and April, further improvements in the pricing tool Omnia and more vendor-funded promotions are key drivers of this positive development in Europe/the German speaking markets which account for approximately 20% of Company revenues in Q2 2020 (22% excl. China VAT refund).
Reported group revenues exclude the Bebitus business in Spain, Portugal and France which is accounted for as “discontinued operation”. Bebitus revenues amounted to EUR 3.8 million in Q2 2020 which implies a growth rate of +28% year over year. Revenues growth was supported by higher Covid-19 driven demand and operational improvements like the introduction of the pricing tool Omnia in Portugal. This is also reflected in the higher site visits in Q2 2020 which have increased constantly since the beginning of the year. The evaluation of the divestiture of Bebitus is still ongoing.

Significant improvement in adj. EBIT in Q2 2020 also without impact form China VAT refund

The continuous focus on improving profitability is reflected in the contribution margin (the difference between gross profit and expenses for marketing and fulfillment) as an important indicator for steering the company. Whereas, the gross profit margin decreased to 23.3% in Q2 2020 as a result of business mix with a higher share of business customers (Q2 2019: 25.4%), Marketing costs were significantly reduced from 4.6% of revenues in Q2 2019 to 1.6% in Q2 2020 and fulfillment costs were materially lowered from 13.1% in Q2 2019 to 5.2% in Q2 2020. This development is a result of the business mix, more fulfillment from our bonded warehouses in China and lower warehouse rental costs after the reduction of product assortment in Germany. We are still in the process of assessing various alternatives with regards to the planned warehouse move in Germany. The resulting operating contribution margin on Group level was EUR 4.8 million (16.5% of revenues) in the second quarter of 2020 and therefore grew 8.8 percentage points in relative terms above the previous year’s level (Q2 2019: EUR 1.3 million or 7.7% of revenues). In China, contribution margin in the second quarter of 2020 grew to EUR 4.8 million from EUR 1.6 million in Q2 2019 inter alia as a result of the China VAT refund and sale of hygiene products from China. In the Segment Europe (DACH), contribution margin improved to EUR -0.0 million compared to the second quarter of the previous year (EUR -0.3 million) even though negatively affected by liquidations of slow-moving inventory in the first half of 2020. Contribution margin of Bebitus improved to EUR 0.3 million in Q2 2020 from EUR -0.0 in the previous year. Based on internal management reporting even margin IV for Bebitus, i.e. contribution margin after channel expenses was positive with EUR 0.1 million in Q2 2020 after EUR -0.2 million in the previous year.
Adj. other selling, general and administrative (SG&A) expenses decreased in relation to Group revenues and represent 16.7% of revenues (EUR 4.8 million) in Q2 2020 compared to 21.7% of revenues (EUR 3.7 million) in the same period of the previous year. The increase in absolute terms compared to the second quarter of 2019 is primarily the result of compensation related to the China VAT refund and the build-up of the local team in China which consists of 41 employees as of July 31st.
The adj. EBIT margin of the Group improved notably to EUR -0.0 million (-0.2% margin) in the second quarter of the current year after EUR -2.4 million (-14.0% margin) in the same period of the previous year. For the first half of 2020 ad. EBIT improved to EUR -2.5 million (-5.7% margin) compared to EUR -5.4 million (-15.8% margin) in the previous year. Excluding the EBIT impact from the China VAT refund of EUR 2.0 million from earlier years in Q2 2020 (EUR 2.6 million in H1 2020) the adj. EBIT would have been EUR -2.1 million (-8.0% margin) in Q2 2020 and EUR -5.1 million (-12.7% margin) in H1 2020. Reported EBIT improved to positive EUR 0.7 million in Q2 2020 compared to EUR -2.8 million in the same quarter of the previous year.

Cash outflow in Q2 increased due to inventory build-up in China; growth in China requires further financing in H2

In Q2 2020, the cash outflow (incl. Bebitus) amounted to EUR 5.9 million mainly due to the inventory/net working capital build-up for major sales events in the second half of the year in China (11.11,12.12. and Cyber Week). Inventory build-up is required given that sales through the bonded warehouses in China have a long cash conversion cycle of more than 100 days as products need to be purchased, shipped to China and go through the customs and warehousing process before selling and receiving customer payments. Net working capital as of June 30, 2020 was EUR 10.1 million compared to EUR 4.1 million as of March 31, 2020, i.e. EUR 6 million higher. The Group’s total cash available was EUR 6.0 million as of June 30, 2020 with the current amount of approx. EUR 3.9 million being lower due to further required build-up of inventory. The main financial target of reaching adjusted EBIT breakeven early 2021 remains in place but is subject to further financing to support profitable revenue growth in the Chinese market.
Matthias Peuckert, CEO of, and Nikolaus Weinberger, CFO of, state: “We are glad to see that revenues have been strong and steps to improve our margins paid off in the second quarter. We generated substantial revenue growth and EBIT improvement. However, the target of reaching sustainable adj. EBIT break-even early 2021 that we have been working towards so hard these past months is dependent on securing further financing including a potential capital increase which is currently being assessed. This is primarily necessary given the long cash conversion cycles for the Chinese business and mandatory inventory and team build-up in this fast-changing but highly attractive market that we operate in.”


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