Verkkokauppa.com focused on profitability in a declining market
INTERIM REPORT for 1 January – 31 March 2024
VERKKOKAUPPA.COM FOCUSED ON PROFITABILITY IN A DECLINING MARKET
Verkkokauppa.com Oyj INTERIM REPORT 25 April 2024, 8:00 a.m. EEST
Verkkokauppa.com arranges two virtual news conferences on a result publication day. The news conference in Finnish will be held at 10:00 am Finnish time. The news conference for analysts and institutional investors in English will be at 11:00 am Finnish time. Details of the events and how to participate can be found at the end of this release.
This is a summary of Verkkokauppa.com’s Financial Statements Review for 1 January – 31 December 2023. The complete report is attached to this release and also available at https://investors.verkkokauppa.com/en
Unless otherwise stated, the comparison figures in brackets refer to the corresponding period in the previous year (reference period). Figures are unaudited.
January – March 2024 in brief
- Revenue was EUR 108.0 million (122.0)
- Gross profit was EUR 18.7 million (20.2) or 17.3 % of the revenue (16.6 %).
- Operating result (EBIT) was EUR -0.4 million (0.0) or -0.4 % of revenue (0.0 %)
- Comparable operating result (comparable EBIT) was EUR 0.5 million (1.4) or 0.5% of revenue (1.1 %)
- Items affecting comparability were EUR 0.9 million, mainly relating to an administrative fine from the Office of the Data Protection Ombudsman
- Net result was EUR -1.0 million (-0.4)
- Earnings per share were EUR -0.02 (-0.01)
- Investments were EUR 0.3 million (1.0)
- Operating cash flow was EUR -13.0 million (-3.6)
| KEY RATIOS | 1-3/2024 | 1-3/2023 | Change | 1-12/2023 | |
| Eur million | |||||
| Revenue | 108.0 | 122.0 | -11.5 | % | 502.9 |
| Gross profit | 18.7 | 20.2 | -1.6 | MEUR | 80.9 |
| Gross margin, % | 17.3% | 16.6% | 0.7 | pp | 16.1% |
| EBITDA | 1.3 | 1.6 | -0.3 | MEUR | 11.1 |
| EBITDA, % | 1.2% | 1.3% | -0.1 | pp | 2.2% |
| Operating result | -0.4 | 0.0 | -0.5 | MEUR | 4.7 |
| Operating margin, % | -0.4% | 0.0% | -0.4 | pp | 0.9% |
| Comparable operating result | 0.5 | 1.4 | -0.9 | MEUR | 6.1 |
| Comparable operating margin, % | 0.5% | 1.1% | -0.7 | pp | 1.2% |
| Net result | -1.0 | -0.4 | -0.6 | MEUR | 2.1 |
| Investments | 0.3 | 1.0 | -0.6 | MEUR | 1.9 |
| Operating cash flow | -13.0 | -3.6 | -9.4 | MEUR | 20.3 |
FINANCIAL GUIDANCE FOR 2024 UNCHANGED (published in connection with the Financial Statements Bulletin 2023 on 8 February 2024)
Verkkokauppa.com expects revenue for 2024 to remain at the level of 2023 (2023: EUR 502.9 million) and comparable operating profit (comparable EBIT) to increase from 2023 (2023: EUR 6.1 million).
CEO PANU PORKKA’S REVIEW
The start of the year has shown that the key characteristics of the market dynamics and operating environment have remained unchanged. Consumers' confidence in their own economy has remained weak and it continued to impact private consumption. Also, businesses have postponed investments due to uncertainties in general economic outlook.
In the context of current highly price-driven market dynamics, we have strategically prioritized improving gross margin, even at the expense of lower revenue level. Our first quarter revenue totaled EUR 108 million and it declined -11.5%. We improved our gross margin to 17.3% (16.6%). We are confident that our focus on profitability, while declining revenue in short-term, will ensure our successful financial performance going forward.
In line with our strategy, we are accelerating the online transition by making shopping fast, extremely easy, and affordable. In the first quarter, express deliveries increased by 33 percent compared to the previous year. As the only operator in Finland, we deliver orders for an assortment of nearly 30,000 products already in an hour, every day of the week, around the clock to almost 700,000 consumers in the capital region. In this area, more than every fourth Verkkokauppa.com customer order is delivered by express delivery. Our goal is to be the primary shopping destination for as many Finns as possible, regardless of the time of day.
According to our strategy, we continued to focus on own brand products. In the first quarter, our own brand products sales grew by 7 percent and accounted for 6 percent of sales.
We continue to be a forerunner in the market. Verkkokauppa.com is ranked among Finland's most innovative companies for the fourth time in a row. Hanken's annual Finnish Innovation Index (FII) lists the most innovative companies in the opinion of Finnish consumers. During 2024, we will continue to implement our strategy to accelerate the online transition. We will develop our operations to provide the most efficient order-delivery process and superior customer experience to our customers, and we work determinedly toward our long-term targets.
FINANCIAL DEVELOPMENT
REVENUE AND PROFITABILITY
| 1-3/ | 1-3/ | Change | 1-12/ | ||
| EUR million | 2024 | 2023 | 2023 | ||
| Revenue | 108.0 | 122.0 | -11.5 | % | 502.9 |
| Operating result | -0.4 | 0.0 | -0.5 | MEUR | 4.7 |
| Operating margin, % of revenue | -0.4% | 0.0% | -0.4 | pp | 0.9% |
| Items affecting comparability | 0.9 | 1.3 | -0.4 | MEUR | 1.4 |
| Comparable operating result | 0.5 | 1.4 | -0.9 | MEUR | 6.1 |
| Comparable operating margin, % of revenue | 0.5% | 1.1% | -0.7 | pp | 1.2% |
Sales distribution
Information on the comparative quarters of 2023 can be found in the tables section of this report (p 27).
| Sales, EUR million | 1-3/ 2024 | 1-3/ 2023 | Change, % | 1-12/ 2023 |
| Customer segments | ||||
| Consumers | 68.5 | 79.0 | -13.3 % | 344.1 |
| B2B (inc. wholesale) | 36.2 | 40.2 | -9.9 % | 146.7 |
| Sales channels | ||||
| Online | 69.2 | 75.9 | -8.7 % | 316.8 |
| Offline | 35.5 | 43.3 | -18.1 % | 173.9 |
| Product categories | ||||
| Core categories* | 94.5 | 105.1 | -10.1 % | 428.6 |
| Other product categories | 10.3 | 14.1 | -27.2 % | 62.1 |
| Own brands** | 6.0 | 5.6 | 7.1 % | 28.5 |
| Website visits, million | 17.4 | 19.5 | -10.5 % | 79.8 |
*Core categories include five main categories: IT, Entertainment, mobile devices, SDA, and MDA.
** Own brands are included in Core and other product categories accordingly.
January–March 2024
Verkkokauppa.com revenue totaled EUR 108.0 million (122.0) and it declined by -11.5 percent year on year. Consumer sales accounted for 65 percent (66%) of product sales, and the B2B sales share for 35 percent (34%). Consumers' confidence in their own economy has remained weak and it continued to impact private consumption. Consumer sales declined by -13.3 percent and B2B sales by -9.9 percent.
Sales of core categories declined by -10.5 percent and accounted for 90 percent (88%) of product sales. Product categories that sold better than in the comparison period included large and small household appliances and components in the IT category. Own brand products’ sales increased by 7.1 percent and accounted for 6 percent (5) of sales.
Online sales declined by -8.7 percent and accounted for 66 percent of product sales (64 %). The offline declined by -18.1 percent and accounted for 34 percent (36%) of the product sales.
The revenue from Verkkokauppa.com’s self-financed customer financing services increased to EUR 2.1 million (1.4), including interest income, fees, and commissions.
Personnel costs were 9.5 percent lower than in the comparison period, mainly due to a lower number of personnel, and amounted to EUR 9.0 million (9.9). Other operating expenses were on par with the comparison period, EUR 7.6 million (7.5). The credit loss provision at the end of March amounted to EUR 1.2 million (0.9)
Operating result (EBIT) totaled EUR -0.4 million (0.0) and it declined by EUR -0.5 million. The operating margin was -0.4 percent (0.0%). Comparable EBIT was EUR 0.5 million (1.4) and declined by EUR 0.9 million from the comparison period. Comparability was affected by EUR 0.9 million mainly related to a provision for an administrative fine from the Office of the Data Protection Ombudsman. In the comparison period, comparability was affected by EUR 1.2 million of restructuring costs.
The result for the period was EUR -1.0 million (-0.4).
Earnings per share in the third quarter were EUR -0.02 (0,01).
FINANCE AND INVESTMENTS
In January-March 2024, the operating cash flow totaled EUR -13.0 million (-3.6). Operating cash flow before the change in working capital was EUR 1.3 million (1.6). The Company's net financial expenses were
EUR -0.3 million (-0.5).
Ordinary seasonal fluctuations are reflected in cash and cash equivalents, cash flow and accounts payable, which usually reach their highest levels at the end of the fourth quarter and their lowest levels at the end of the second quarter.
Investments totaled EUR 0.3 million (1.0). Investments were mainly related to the development of the online platform and business automation. During the period investments included capitalized wages and salaries at the amount EUR 0.2 million (0.3).
At the end of March 2024, loans from financial institutions totaled EUR 20.8 million (23.5). The Company has revolving credit facilities totaling EUR 25 million, which have not been utilized and are valid until 2025.
PERSONNEL
At the end of March 2024, the total number of employees was 644 (720). This includes both full and part-time employees. The majority of the decline in the number of personnel related to the change negotiations carried out in the spring of 2023.
SUSTAINABILITY
Sustainability Report for 2023 was published on April. The report extensively presents Verkkokauppa.com's sustainability work and its progress during 2023, including, among other things, the Company's sustainability program and targets, as well as emissions calculation as a whole. In 2023, special emphasis was placed on offering products and services that support the circular economy and on our personnel. Sustainability is a key part of Verkkokauppa.com's strategy, which also aims to expand its service business by offering sustainable alternatives to purchasing products.
Greenhouse gas emissions from the Company's operations (scope 1 and 2) amounted to 97 tonnes of carbon dioxide (tCO2 eq.) in 2023 (67 tCO2 in 2022). In a longer-term examination, emissions have declined by 77 percent compared to the comparison year 2019. The majority, 99.95 percent of Verkkokauppa.com's climate impact was generated by indirect scope 3 emissions, which declined by 16 percent from the previous year to 209,426 tCO2eq. The decline was due to the contraction in business operations and efficient inventory management.
The Company actively monitors the evolving corporate sustainability legislation and prepares to report in accordance with the EU Sustainability Reporting Directive for the financial year 2024. The double materiality analysis required by the Directive is ongoing. In addition to the impacts on the Company's operations, the analysis assesses the financial impacts of sustainability topics on the Company's operations. In addition, Verkkokauppa.com has launched an update of its sustainability program to correspond to the results of the dual materiality analysis and the updated strategy for 2024–2028 published by the company in November 2023.
PROPOSALS OF THE SHAREHOLDERS' NOMINATION BOARD
On 18 January 2024, the Shareholders' Nomination Board submitted its proposal to the Annual General Meeting for the composition and remuneration of Verkkokauppa.com's Board of Directors for a term ending at the end of the Annual General Meeting 2025. The proposals of the Nomination Board were approved at the Annual General Meeting on 4.4.2024.
LONG-TERM INCENTIVE PLANS
Verkkokauppa.com has a share-based incentive plan (Performance Marching Share Plan 2023–2027) for the CEO and the members of the Management Team. The plan has three performance periods covering the financial years 2023–2025, 2024–2026 and 2025–2027. The Board of Directors decides annually on the commencement of the performance period and its details. The performance criterion for the first performance period 2023–2025 is Total Share Return.
The Board has on 13 February 2024 resolved on the commencement of the second matching period for years 2024–2026. The performance criterion for the period is the Total Shareholder Return (TSR) of the company’s shares. The prerequisite for participation in the plan and receiving the reward is that the person allocates freely transferable Verkkokauppa.com Oyj shares held by him or her to the plan or acquires the company’s shares in a number determined by the Board.
The target group of the plan is the CEO and the management Team, total 8 persons. The gross rewards from the second performance period 2024–2026 correspond to the value of an approximate maximum total of 267,500 Verkkokauppa.com Oyj shares, including the proportion to be paid in cash. The final number of shares depends on the number of shares acquired by participants and the achievement of the TSR levels.
The plan aims to align the objectives of the shareholders and the management to increase the value of the company in the long-term, to encourage the management to personally invest in the company’s shares, to retain the target group at the company, and to offer them a competitive incentive plan in which the participants may earn shares as a reward for performance and their investment.
No new shares will be issued in connection with the payment of the share rewards and therefore the resolution will not have a dilutive effect.
For more detailed information on the share-based incentive plan, see Note 1.10.
ANNUAL REPORTING PACKAGE FOR 2023
The annual reporting package for 2023 was published on 28 February. The package included the Company brochure, Report of the Board of Directors and the Financial Statements including the statement of non-financial information, and Corporate Governance statement including the Remuneration report. In addition, on 2 April, the company published its Sustainability Report. The Financial Statements were published also in accordance with European Single Electronic Format (ESEF) reporting requirements. The audit firm PricewaterhouseCoopers Oy has provided an independent auditor’s reasonable assurance report on Verkkokauppa.com’s ESEF financial statements in accordance with ISAE 3000 (Revised).
MANAGEMENT TEAM
On 1 March 2024, Satu Berlin started as Chief HR Officer in Verkkokauppa.com. The Company announced the appointment in December 2023.
LEGAL DISPUTES AND POSSIBLE LEGAL PROCEEDINGS
On 15 March 2024, the Company announced that the Office of the Data Protection Ombudsman had imposed an administrative fine of EUR 856,000 on Verkkokauppa.com. The penalty is based on the Data Protection Ombudsman's interpretation, according to which Verkkokauppa.com would have neglected to define a retention period for the customer data of its online store customers in accordance with the EU's General Data Protection Regulation. Verkkokauppa.com considers the penalty to be unjustified. The decision of the Office of the Data Protection Ombudsman is not legally binding. Verkkokauppa.com has appealed the decision to the Administrative Court.
The Company has recognized a provision for the penalty and the cost is reported as item affecting comparability.
EVENTS AFTER THE REPORTING PERIOD
ANNUAL GENERAL MEETING 2024
The Annual General Meeting was held as a remote meeting in Helsinki on 4.4.2024. The Annual General Meeting adopted the Annual accounts for the financial year 2023 and decided not to pay dividend, discharged the members of the Board of Directors and the President and CEO from liability for the financial year 2023, approved the remuneration report for the Company's governing bodies and authorized the Board of Directors to decide on the repurchase and issuance of the Verkkokauppa.com's own shares. In addition, the Annual General Meeting approved the proposals of the Shareholders' Nomination Board concerning the election and remuneration of the Board of Directors and the auditor. The firm of authorized public accountants PricewaterhouseCoopers Oy was elected as the Company's auditor, and Mikko Nieminen, APA, acts as the auditor with principal responsibility. PricewaterhouseCoopers Oy will also act as the sustainability reporting assurance provider of the Company.
Composition of the Board of Directors 2024
The Annual General Meeting confirmed the number of board members to be seven, and the following persons were re-elected: Robin Bade, Henrik Pankakoski, Kati Riikonen, Samuli Seppälä and Arja Talma. As new members of the Board of Directors were elected Irmeli Rytkönen and Enel Sintonen. Authorized the Board of Directors to decide on a repurchase of the Company’s own shares and the issuance of shares. At the Board of Directors constitutive meeting held after the Annual General Meeting, Arja Talma was elected as Chairperson of the Board of Directors of Verkkokauppa.com Oyj.
The compositions of the Board committees were decided to be as follows: members of the Remuneration Committee are Arja Talma (Chairperson), Robin Bade and Henrik Pankakoski. Members of the Audit Committee are Enel Sintonen (Chairperson), Arja Talma (Vice Chairperson), Kati Riikonen and Irmeli Rytkönen.
On 4 April 2024, Verkkokauppa.com published a stock exchange release on the decisions of the Annual General Meeting and the constitutive meeting of the Board of Directors, the release is available on the company's website.
Dividend
The Annual General Meeting resolved that the Company deviates from its dividend distribution policy to improve its equity ratio and that no dividend be distributed from the profit of the 2023 financial year.
CAPITAL MARKETS DAY
Verkkokauppa.com announced on 9 April 2024, that the company will organize a Capital Markets Day in Helsinki on Thursday 30 May 2024. At the event, the company's management will talk about the cornerstones of the updated strategy for accelerating profitable growth and the journey towards financial targets during the strategy period.
SHARE TRADING AND SHARES
Verkkokauppa.com shares (VERK) in Nasdaq Helsinki stock exchange in January-March 2024:
| No. of shares traded | Share of no. of total shares, % | The total value of traded shares, EUR million | Last, EUR | High, EUR | Low, EUR | Average, EUR |
| 3,124,017 | 6.9 | 7,418,689 | 2.37 | 2.71 | 2.29 | 2.27 |
Verkkokauppa.com Market Capitalization and Shareholders
| 31 March 2024 | |
| Market capitalization (excl. own shares), EUR million | 107.2 |
| Number of shareholders (of which nominee shareholders) | 20,073 (8) |
| Nominee registrations and direct foreign shareholders, % | 10.83 |
| Households, % | 51.58 |
| Financial and insurance corporations, % | 16.29 |
| Other Finnish investors, % | 21.30 |
At the end of March, the company's largest shareholders were Samuli Seppälä (30.1%), Varma Mutual Pension Insurance Company (9.6%), Ilmarinen Mutual Pension Insurance Company (4.8%), Mandatum Life Insurance Company Limited (4.7%), and Nordea Small Cap Fund (3.1%).
On 31 March 2024, the share capital was EUR 100,000 and the total number of shares in the company was 45,354,532 including 132,958 treasury shares held by the company. The treasury shares have no voting rights, and no dividend is paid to them. The treasury shares accounted for 0.29 percent of all shares. During January–March, the company transferred a total of 12,761 treasury shares as part of the remuneration of Board members and key employees.
Share-related authorizations
At the end of March 2024, the Board had valid authorization to decide on the repurchase of a maximum of 4,535,453 own shares in one or several installments and to decide on a share issue of a maximum of 4,535,453 shares by one or more decisions. The proposed maximum authorized number represents ten percent of the total number of shares in the company. Authorizations were valid until the Annual General Meeting held in 4 April 2024.
More information about Verkkokauppa.com's shares and shareholders and management holdings can be found on the company's investor website https://investors.verkkokauppa.com/en
SHORT-TERM RISKS AND BUSINESS UNCERTAINTIES
Verkkokauppa.com's business operations involve risks and uncertainties related to its overall strategy, execution of corporate transactions and investments, sourcing operations, logistics, information technology, compliance and other operational factors. These risks can impact the Company's operations, financial position or performance and may require the Company to make changes to its business model.
The demand for our assortment, availability of products, and competitive environment are factors that impact Verkkokauppa.com's business. The Company faces risks related to changes in both consumer and B2B customer behavior and preferences, supply chain disruptions, and intensified competition from other players in the market.
Verkkokauppa.com is also subject to macroeconomic and geopolitical risks that could impact its operations and financial performance. For example, the number of distributed denial-of-service attacks against companies has increased. Uncertainties related to intensified geopolitical conflicts, the crisis in Ukraine, and global macroeconomic factors such as inflation and the development of financial markets as well as changes in the employment situation can weaken the purchasing power and investment ability of consumers and corporates. Uncertainties in Finnish economy growth may lead to decisions by Finnish Government, such as raising consumer taxes, that are further weakening consumers’ purchasing power. The Company provides financing and flexible payment terms to its customers, which involves a risk of possible credit losses. The development of the economy may affect the Company's operational or financial performance.
The assessment of the most significant business risks and uncertainties is presented in the Report of the Board of Directors 2023.
FINANCIAL GUIDANCE FOR 2024 UNCHANGED (published in connection with the Financial Statements Bulletin 2023 on 8 February 2024)
Verkkokauppa.com expects revenue for 2024 to remain at the level of 2023 (2023: EUR 502.9 million) and comparable operating profit (comparable EBIT) to increase from 2023 (2023: EUR 6.1 million).
Helsinki, Finland, 25 April 2024
Verkkokauppa.com Oyj
Board of Directors
NEWS CONFERENCES
A press conference for analysts, investors and media will be held in Finnish over a Livestream webcast on Thursday, 25 April 2024 at 10:00 a.m. (EET), in which Verkkokauppa.com’s CEO Panu Porkka will present the developments in the reporting period.
A press conference in English will be held over Livestream webcast on Thursday, 25 April 2024 at 11:00 a.m. (EEST). Questions can be sent beforehand or during the presentation via e-mail to [email protected].
Presentation materials for both events are available at https://investors.verkkokauppa.com/en. For both press conferences, the Livestream webcast is available at verklive.com
COMPANY RELEASES AND EVENTS
Verkkokauppa.com will arrange events and publish its financial reports as follows:
- Capital Markets Day on Thursday 20 May 2024 in Helsinki
- Half-year financial report for January – June 2024 on Thursday 18 July 2024
- Interim report for January – September 2024 on Thursday 24 October 2024
- Financial statements bulletin for the year 2024 on Thursday 6 February 2025.
More information:
Panu Porkka, CEO, Verkkokauppa.com Oyj
[email protected]
Mikko Forsell, CFO, Verkkokauppa.com Oyj
[email protected]
Tel. +358 50 434 2516
Marja Mäkinen, Head of Investor Relations and Corporate Communications, Verkkokauppa.com Oyj
[email protected]
Tel. +358 40 671 2999
Verkkokauppa.com is an e-commerce pioneer that stands passionately on the customer’s side. Verkkokauppa.com accelerates the transition of commerce to online with Finland’s fastest deliveries and ultimate convenience. The company leads the way by offering one-hour deliveries to almost 700,000 customers, a winning assortment and probably always cheaper prices. Everyday, the company strives to find more streamlined ways to surpass its customers´ expectations and to create a new norm for buying and owning.
Verkkokauppa.com was founded in 1992 and has been online since day one. The company’s revenue in 2023 was EUR 503 million and it employs around 700 people. Verkkokauppa.com is listed on the Nasdaq Helsinki stock exchange.
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