Yahoo Finance Verkkokauppa.com Oyj Financial Statements Bulletin January - December 2022
FINANCIAL STATEMENT BULLETIN for 1 January – 31 December 2022
Consumer market in Q4 remained challenging – revenue declined by -8%
Verkkokauppa.com Oyj – Financial Statement Bulletin 9 February 2023, 8:00 a.m. EET
Verkkokauppa.com arranges two virtual news conferences on a result publication day. News conference in Finnish will be held at 10:00 am Finnish time. 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 Bulletin for 2022. 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.
October – December 2022 in brief
Revenue was EUR 154.9 million (168.9)
Gross profit was EUR 21.9 million (26.2) or 14.1% of the revenue (15.5%). This includes an inventory write-down of EUR 1.6 million related to streamlining of assortment.
Operating profit (EBIT) was EUR 0.8 million (5.3) or 0.5% of revenue (3.2%)
Comparable operating profit was EUR 0.8 million (5.3) or 0.5% of revenue (3.2%)
Net profit was EUR 0.5 million (4.0)
Earnings per share were EUR 0.01 (0.09)
Investments were EUR 2.6 million euros (1.9)
Operating cash flow was EUR 15.5 million (4.6)
January – December 2022 in brief
Revenue was EUR 543.3 million (574.5)
Gross profit was EUR 80.6 million (91.2) or 14.8% of revenue (15.9%). This includes an inventory write-down of EUR 1.6 million related to streamlining of assortment.
Operating profit (EBIT) was EUR 2.3 million (20.3) or 0.4% of revenue (3.5%)
Comparable operating profit was EUR 3.5 million (20.3) or 0.6% of revenue (3.5%)
Net profit was EUR 0.3 million (15.1)
Earnings per share were EUR 0.01 (0.34)
Investments were EUR 9.3 million (4.9)
Operating cash flow was EUR 1.5 million (6.7)
The Board of Directors’ dividend proposal: The board of directors proposes to the Annual General Meeting that Verkkokauppa.com Oyj deviates from its dividend distribution policy, and no dividend will be distributed from the profit of the 2022 financial year.
KEY RATIOS | 10-12/2022 | 10-12/2021 | Change % | 1-12/2022 | 1-12/2021 | Change % |
Eur million |
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Revenue | 154.9 | 168.9 | -8.3% | 543.1 | 574.5 | -5.5% |
Gross profit | 21.9 | 26.2 | -16.4% | 80.6 | 91.2 | -11.6% |
Gross margin, % | 14.1% | 15.5% |
| 14.8% | 15.9% |
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EBITDA | 2.2 | 6.6 | -66.4% | 7.8 | 25.3 | -69.0% |
EBITDA, % | 1.4% | 3.9% |
| 1.4% | 4.4% |
|
Operating profit | 0.8 | 5.3 | -84.9% | 2.3 | 20.3 | -88.7% |
Operating margin, % | 0.5% | 3.2% |
| 0.4% | 3.5% |
|
Comparable operating profit | 0.8 | 5.3 | -85.8% | 3.5 | 20.3 | -82.7% |
Comparable operating margin, % | 0.5% | 3.2% |
| 0.6% | 3.5% |
|
Net profit | 0.5 | 4.0 | -86.9% | 0.3 | 15.1 | -97.9% |
Investments | 2.6 | 1.9 | 37.4% | 9.3 | 4.9 | 90.8% |
Operating cash flow | 15.5 | 4.6 | 234.7% | 1.5 | 6.7 | -77.3% |
FINANCIAL GUIDANCE FOR 2023
In 2023, the company expects the revenue to decline (2022: EUR 543.3 million) and comparable operating profit (comparable EBIT) to improve (2022: EUR 3.5 million) compared to 2022.
CEO PANU PORKKA’S REVIEW
In 2022, the market environment was exceptionally challenging. The crisis in Ukraine that started in February led to deepening economic uncertainty over the course of the year. The strong acceleration of inflation, the energy crisis, and the rise in interest rates weakened consumers' purchasing power and confidence in their own finances, and thus postponed discretionary spending. Purchase intentions, especially for larger items such as TV’s and other home electronics, fell sharply, especially in the last quarter of the year.
In the campaign season that started in November, customer activity was at a moderate level, but demand was directed more strongly at products and offers with a lower price point than before. The market's uncertainty was also reflected in corporate sales. Verkkokauppa.com's revenue declined in the last quarter of the year and was EUR 154.9 million. However, positive development was seen in Verkkokauppa.com's own brands, whose sales developed favorably. The export business grew by 5.1 percent in the last quarter.
In October-December, we managed to adapt our spending to the declined demand, e.g. by lowering inventory levels and optimizing marketing costs. Other operating expenses were 11 percent lower than in the comparison period. Profitability was weakened by a EUR 1.6 million inventory write-down related to streamlining of the assortment.
Improving operational efficiency and competitiveness will be our main focus during 2023. As announced in January 2023, Verkkokauppa.com aims for a profit improvement of EUR 10 million on annual level, of which approximately EUR 5-8 million is expected to be realized during 2023. The key efficiency measures are related to the company's assortment, inventory, delivery flow and organization structure. As part of the profit improvement program, change negotiations were started in the company.
We are constantly investing in an even better multi-channel customer experience. The largest reform of our digital channel in the company's history is underway. We stick to our vision to remain a pioneer of ecommerce through continuous innovation and development.
I would like to thank our employees for the past year. We took numerous measures to improve profitability last year already, but the restructuring that has been initiated is unfortunately necessary in order to ensure that our organization and cost base are aligned with the current challenging market conditions. With current measures, we are shaping our core business and making it more profitable by utilizing recent investments in automation. By focusing on our core business and its profitability we ensure the company’s future success and make sure that we are fully benefitting from the online transition in retail. We are confident that the consumers’ shift to shopping online continues and is permanent. We will succeed in taking advantage of this transition and increase our market share in the chosen categories.
FINANCIAL DEVELOPMENT
REVENUE AND PROFITABILITY
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EUR million | 10-12/2022 | 10-12/2021 | Change% | 1-12/2022 | 1-12/2021 | Change% |
Revenue | 154.9 | 168.9 | -8.3% | 543.1 | 574.5 | -5.5% |
Operating profit | 0.8 | 5.3 | -84.9% | 2.3 | 20.3 | -88.7% |
Operating margin, % | 0.5% | 3.2% |
| 0.4% | 3.5% |
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- costs related to acquisition | 0.0 |
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| 1.2 |
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Comparable operating profit | 0.8 | 5.3 | -85.8% | 3.5 | 20.3 | -82.7% |
Comparable operating margin, % | 0.5% | 3.2% |
| 0.6% | 3.5% |
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Share of sales, %
| 10-12/2022 | 10-12/2021 | 1-12/2022 | 1-12/2021 |
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Customer segments |
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Consumer | 70% | 72% | 69% | 72% |
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B2B | 22% | 20% | 24% | 21% |
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Export | 8% | 7% | 7% | 7% |
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On-line | 61% | 63% | 61% | 61% |
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Off-line | 30% | 30% | 32% | 32% |
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Core categories (CE) | 83% | 84% | 84% | 86% |
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Evolving categories | 17% | 16% | 16% | 14% |
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Website visits, million | 24.4 | 25.2 | 82.4 | 79.6 |
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Sales include orders and deliveries in transit. On-line and off-line sales exclude export sales.
Core categories includes IT (with sub product groups like computers, peripherals, components), Entertainment (TV and video, Audio and hifi, gaming and musical instruments), Mobile devices (telecom, cameras and watches), and small & major domestic appliances. Evolving categories are new and growing in our assortment, and include sports, home and lightning, food and drink, toys, baby and family, BBQ and cooking, pets and luggage and
travel.
October-December 2022
In October–December 2022, Verkkokauppa.com’s revenue declined by 8.3 percent year on year, totaling EUR 154.9 million (168.9). The decline was mainly impacted by -10.9 percent lower consumer demand. The corporate segment was more quiet in the last quarter of the year and declined -3.3 percent from the comparison period. Consumer sales share from total sales was 70 percent (72%), and corporate sales share was 22 percent (20%). The campaign season that started in November was negatively impacted by consumers' uncertainty.
The e-ville.com acquisition that took place in April increased Verkkokauppa.com's revenue for the fourth quarter by EUR 1.0 million.
Sales of core categories (CE) declined 10.3 percent and their share of sales was 83 percent (84%). Sales of major household appliances increased, while sales of computers, televisions, components and games fell from the comparison period. Sales of evolving categories were almost at the level of the comparison period and declined only 1.7 percent, their share of total sales was 17 percent (16%). Among the evolving categories, Home & lighting and luggage & travel sold better than in the comparison period.
Verkkokauppa.com's online sales fell 10.1 percent. Online accounted for 61 percent of all sales (63%). The sales in brick-and-mortar stores declined 7.4 percent and accounted for 30 percent (30%) of the company's sales.
Sales growth in the export business leveled off towards the end of the year and grew by 5.1 percent in October-December. Exports accounted for 8 percent of the company's sales (7%). The increase in exports came mainly from the new sales channels and customers from e-ville acquisition. Verkkokauppa.com's sales excluding exports fell -10 percent in October-December.
The revenue from Verkkokauppa.com's self-financed customer financing services was EUR 1.2 million (1.2), including both interest income and commissions.
Personnel costs rose 15.0 percent in October-December and amounted to EUR 11.1 million (9.7). The increase in costs was mainly due to talent investments in IT and group functions related to the promotion of long-term strategic growth projects. Other operating expenses for the review period declined and amounted to EUR 8.9 million (10.0). The decline was mainly due to the personnel costs of the outsourced warehouse, which fell due to lower sales volumes. Marketing measures were also adapted to quieter demand, and marketing costs were clearly lower, -22 percent from the comparison period. On the other hand, the acquisition made in the spring increased other business expenses from the comparison year.
The company's operating profit (EBIT) in October-December declined 4.5 million euros and was a total of EUR 0.8 million (5.3) and its share of revenue was 0.5 percent (3.2%). The profitability was weakened by an inventory write-down of EUR 1.6 million related to streamlining of assortment. Operationally, profitability was impacted by the weaker sales margin level derived by fierce price competition and the lower volumes of consumer sales with better margins. In addition, general cost inflation weakened the result. Comparable operating profit was 0.8 million euros (5.3) and the result for the period was EUR 0.5 million (4.0). Items affecting comparability were related to the acquisition of e-ville.com.
Earnings per share in the last quarter of the year were EUR 0.01 (0.09).
January–December 2022
Verkkokauppa.com's revenue in 2022 declined -5.5 percent compared to the previous year and was EUR 543.1 million (574.5). The impact of the e-ville.com acquisition that took place in April on Verkkokauppa.com’s revenue in 2022 was EUR 5.4 million.
Verkkokauppa.com's self-financed customer financing income was EUR 4.7 million (4.3), including both interest income and commissions. Provisions for credit losses remained at the level of the comparison period and amounted to EUR 0.8 million (0.8) at the end of December.
Personnel costs increased 10.0 percent in January–December and amounted to EUR 40.2 million (36.6). The growth was mainly due to talent investments in IT and procurement organizations related to the promotion of long-term strategic growth projects. Other operating expenses for the review period increased and amounted to EUR 33.4 million (30.3). The increase was mainly due to higher costs related to warehouse, logistics and technology development.
In 2022, the company's operating profit (EBIT) declined by EUR 18.0 million and was EUR 2.3 million (20.3) and its share of total revenue was 0.4 percent (3.5%). Profitability was weakened by an inventory write-down of EUR 1.6 million related to streamlining of the assortment. The comparable operating profit was EUR 3.5 million (20.3) and the result for the period was EUR 0.3 million (15.1). The profitability of the whole year was weakened by the tight price competition seen in all product categories and the resulting lower sales margins, as well as the lower sales volume resulting from declined consumer demand. In addition, the increase in fixed costs and the e-ville.com acquisition also affected the operating profit.
Earnings per share in January–December were EUR 0.01 (0.34).
FINANCE AND INVESTMENTS
In 2022, the operating cash flow was a total of EUR 1.5 million (6.7). Operating cash flow before the change in working capital was EUR 8.5 million (25.6). The operating cash flow was mainly impacted by the development of EBITDA. The positive impact of the declined inventories was offset by lower accounts payable.
Ordinary seasonal fluctuations are reflected in cash and cash equivalents, cash flow and accounts payable, which usually reach their highest points at the end of the fourth quarter and their lowest points at the end of the second quarter.
Investments totaled EUR 9.3 million euros (4.9) in 2022. The investments were mainly aimed at the Jätkäsaari warehouse automation project and the e-ville.com acquisition. During the year, the company capitalized EUR 0.8 million (0.5) of wage costs in the balance sheet. In January-December, a dividend of EUR 11.1 million (20.1) in total was distributed to shareholders.
At the end of 2022, the Verkkokauppa.com group had a total of EUR 24.1 million loans from financial institutions (0.00). The company has revolving credit facilities totaling EUR 25 million, which have not been utilized and that are valid until 2025.
PERSONNEL
In 2022, the number of employees increased, and the total number of employees was 838 (825) at the end of December. This includes both full- and part-time employees.
In 2022, Verkkokauppa.com put efforts on corporate and learning culture, coaching management, well-being and occupational safety. More than 30 different types of coaching and training were offered to supervisors during the year. An internal mentoring program and a Talent management process was launched. Also, a new online learning platform was launched, which improved the way we produce learning content and learn in everyday life. Almost 60 of the employees trained in studies leading to a degree, and skills were also developed in face-to-face and hybrid training.
SUSTAINABILITY
In 2022, Verkkokauppa.com advanced its goals in accordance with its responsibility program. The responsibility program is based on priorities and themes selected based on materiality.
At the core of Verkkokauppa.com's responsibility work is selling to meet the need, while minimizing customer returns and waste. Success is measured through the return rate, which was 0.7 percent (1.1).
Verkkokauppa.com carried out an extensive customer survey on the responsibility of electronics and online stores, the results of which showed consumers' interest in consumer electronics responsibility issues, such as thoughtful consumption, product longevity, maintenance and repair services, energy efficiency, and willingness to purchase used electronics.
Verkkokauppa.com added used computers to its selection and is actively expanding the selection of used products, with the aim of offering products and services that support the circular economy. The maintenance services offered for own-brand products were significantly expanded.
The company's first emission calculation covering the entire value chain (scopes 1, 2, 3) for 2021 was carried out during spring 2022, and work on the emission reduction plan started.
Personnel responsibility was implemented by investing in company and learning culture, coaching management, and well-being and job security.
The introduction of new operating methods in procurement continued with the joining to the international amfori BSCI responsibility system. The company e.g. develops and monitors the realization of human rights and working life rights in the supply chains of own brands in cooperation with suppliers. In 2022, the company renewed the operating principles concerning suppliers covering more broadly e.g. human rights, social and environmental responsibility and risk materials.
Verkkokauppa.com's personnel operating principles are trained to all personnel annually, and in the reporting year, 92 percent of the employees completed the online training.
ACQUISITIONS
On 1 April 2022, Verkkokauppa.com Oyj completed the acquisition of e-ville.com online store. The purchase price
amounts to approximately EUR 5.3 million, and an additional purchase price installments of up to approx. EUR 6.7
million. The total aggregate purchase price can amount to EUR 12.0 million at the maximum. For more information
on the acquisition, see Note 1.9.
COMPANY STRATEGY
Verkkokauppa.com reviews and updates its long-term strategy during the first half of 2023. The vision to remain a pioneer of ecommerce is strong, and the customer focus continues to be emphasized in innovation and operational development. In the coming years, the company will continue to invest in optimizing and enhancing core business functions through technology and data. Through this, the company is increasingly seeking to free up resources for scaling new profitable growth innovations and renewing the trade sector.
DIVIDEND
Verkkokauppa.com Oyj’s Annual General Meeting resolved to distribute a dividend of EUR 0.060 per share to be paid on 4 April 2022. In addition, the Board of Directors resolved to pay the first dividend installment of EUR 0.061 per share on 9 May 2022; the second dividend installment of EUR 0.062 per share on 25 July 2022; and the third dividend installment of EUR 0.063 per share on 7 November 2022.
The Board has now used its authorization.
EVENTS AFTER THE REPORTING PERIOD
On 16 January 2023, Verkkokauppa.com issued a profit warning and intends to adjust its business to meet the declined demand. As part of the adjustment, the company streamlines its assortment and makes a write-down of EUR 1.6 million related to the inventory, which negatively impacted the Q4 and full year 2022 results. At the same time, preliminary information on the financial development of 2022 was announced.
On 16 January 2023, Verkkokauppa.com launched of a profit improvement program to secure profitability, and in connection with that started change negotiations in January. The annualized profit improvement goal of a program was approximately EUR 10 million, of which around EUR 5-8 million is expected to be realized in 2023. The change negotiations cover Verkkokauppa.com's entire personnel, approximately 770 employees. Possible redundancies, part-time shifts and essential changes to employment contracts apply to a maximum of 110 people. The planned measures aim to achieve annual savings of EUR 6 million in personnel costs. Of the savings, EUR 3-4 million are expected to be realized in the second half of 2023 and in full in 2024. Depending on the outcome of the negotiations, the planned restructuring is estimated to result in costs of approximately EUR 1.3 million.
SHORT-TERM RISKS AND BUSINESS UNCERTAINTIES
Verkkokauppa.com’s risks and uncertainties reflect the operating environment and general consumer behavior, such as demand for consumer electronics, availability of products, the competitive environment and circumstances impacting export trade. The company’s business operations involve risks and uncertainties relating to, for example, business strategy, execution of corporate transactions and investments, risks related to the sourcing operations and logistics, and risks related to information technology, and other operational factors of the company’s business, financial position or performance.
There is uncertainty about geopolitical conflicts in the world, the crisis in Ukraine, and macroeconomics. General economic uncertainty, growing inflation, and thereby the uncertainty about the behavior of financial markets can further weaken the purchasing power and investment ability of consumers and companies. Potential impacts on Verkkokauppa.com's business may be visible throughout the product supply chain, logistics, product and service prices, and the consumption behavior of our customers. Finland's economy is expected to shrink, and due to the slowdown in economic growth in the euro area, the risk of a recession overshadows the development of Finland's economy. At the moment, the visibility of economic development is very limited.
BUSINESS OUTLOOK
Due to the factors mentioned in the Short-term risks section, the consumer demand and business is estimated to continue to be challenging and it is difficult to predict the development of business environment for this year.
The company believes that it will succeed in taking advantage of the online consumer transition and increasing its market share in its chosen product categories. The company estimates that the shift of customers to online is permanent.
FINANCIAL GUIDANCE FOR 2023
In 2023, Verkkokauppa.com expects the revenue to decline (2022: EUR 543.3 million) and comparable operating profit (comparable EBIT) to improve (2022: EUR 3.5 million) compared to 2022.
BOARD PROPOSAL FOR PROFIT DISTRIBUTION
The dividend distribution policy of Verkkokauppa.com states that the company pays out a quarterly growing dividend. The dividend policy is based on Verkkokauppa.com’s ambition to continuously grow its business and profit. During the financial year 2022, the company’s revenue declined, and its profit and equity ratio declined markedly.
Due to the company’s financial performance during 2022, and the prevailing uncertainties in the economic development going forward, the board of directors proposes to the Annual General Meeting that Verkkokauppa.com deviates from its dividend distribution policy and no dividend will be distributed from the profit of the 2022 financial year.
VERKKOKAUPPA.COM’S ANNUAL GENERAL MEETING 2023
Annual general meeting is planned to be held on Thursday 30 March 2023 in Helsinki. The Board of Directors will summon the meeting separately later by stock exchange release.
Helsinki, Finland, 8 February 2023
Verkkokauppa.com Oyj
Board of Directors
NEWS CONFERENCES
A press conference for analysts, investors and media will be held in Finnish over Livestream webcast on Thursday, 9 February 2023 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, 9 February 2023 at 11:00 a.m. (EET). Questions can be sent beforehand or during the presentation via e-mail to investors@verkkokauppa.com.
Presentation materials for both events are available at https://investors.verkkokauppa.com/en/presentations. For both press conferences, the Livestream webcast is available at https://livestream.com/verkkokauppacom/events/10750606.
COMPANY RELEASES AND EVENTS
Verkkokauppa.com will arrange events and publish its financial reports as follows:
The Financial Statements for 2022 during the week starting on 27 February (week 9) in 2023
Annual general meeting is planned to be held on Thursday 30 March 2023 in Helsinki.
Interim report for January–March 2023 will be published on Thursday 27 April 2023
Half-year financial report for January–June 2023 on Thursday 20 July 2023
Interim report for January–September 2023 on Thursday 26 October 2023
Financial statements bulleting for the year 2023 on Thursday 8 February 2024.
More information:
Panu Porkka, CEO, Verkkokauppa.com Oyj
panu.porkka@verkkokauppa.com
Mikko Forsell, CFO, Verkkokauppa.com Oyj
mikko.forsell@verkkokauppa.com
Tel. +358 50 434 2516
Marja Mäkinen, Head of Investor Relations and Corporate Communications, Verkkokauppa.com Oyj
marja.makinen@verkkokauppa.com
Tel. +358 40 671 2999
Distribution:
Nasdaq Helsinki
Main media
www.verkkokauppa.com
Verkkokauppa.com empowers its customers to follow their passion by providing a wide product assortment of around 90,000 products. Verkkokauppa.com Oyj serves its retail and corporate customers through its webstore, megastores, kiosk and network of collection points as well as fast deliveries and various services. As Finland’s most popular and most visited domestic online retailer, its deliveries cover around 75 percent of the Finnish population within the next day. The Company has four megastores: in Oulu, Pirkkala, Raisio, and Helsinki, where its headquarters is also located. Verkkokauppa.com employs more than 750 people and its shares are listed on the Nasdaq Helsinki stock exchange with the ticker VERK.
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