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In 2018, the company`s revenue is expected to be between 460-500 million euros (2017:432 million euros) and comparable EBITDA to be between 11-14 million euros (13 million euros).

CEO PANU PORKKA`S REVIEW

Verkkokauppa.com`s revenue returned to double-digit growth, at 11% in Q3, amounting to 116.8 million euros. Revenue growth in Q3 was significantly higher than in Q2 (Q2/2018 3.2%), and in line with expectations. Drivers for the top line growth comprised of adjusted marketing mix, increased campaigning, Raisio sales and aggressive pricing. In addition, wholesale revenue had less impact on the growth as it was more in line with the previous year. Market remained tough and competitive, growing just 1.9% in July-August, according to GfK. Verkkokauppa.com again outgrew the market and gained market share in almost every product category, growing over 40% in certain categories.

Gross margin in Q3 stood at 14.9% while EBITDA margin was 3.2% of revenue. EBITDA was 3.7 million euros and higher year-on-year (Q3/2017 EUR 2.1 million) mostly because of the higher gross profit. Personnel and other operating costs grew mainly due to the launch of the Raisio megastore. Costs are expected to remain at a higher level throughout the year due to continued support for the new megastore and investments in marketing. The company expects the market to get even tougher because of flat summer sales for the whole sector. Depending on competition, Verkkokauppa.com is ready to invest in aggressive campaigning to secure faster top-line growth than the market. Higher than experienced revenue growth and profitability in H1 are expected to continue also in Q4, as wholesale revenue in Q4 is likely to be in line with the previous year and additional activities should drive top line growth.

The implementation of a renewed business plan has started. The company will focus on customer experience, omnichannel business model, and improved brand marketing.

The company`s main focus is on growth and the goal is to be a billion-euro company and taking market-share aggressively also in the future. This journey is supported by a strategy focused on future growth, consumer behaviour trends and the launching of new categories suitable for online sales. An estimated one per cent, or approximately 400 million euros of brick-and-mortar retail sales, goes online every year in Finland, with the current share of online sales being approximately 11-12%.

*The number of personnel includes both full- and part-time employees.

** Comparable figures are adjusted according to company release 7 February 2018.

*** Includes treasury shares.

Verkkokauppa.com presents Alternative Performance Measures to reflect the underlying business performance and to enhance comparability between financial periods. In its reporting, Verkkokauppa.com uses terminology in accordance with the guidelines issued by the European Securities and Markets Authority (ESMA) concerning Alternative Performance Measures. Comparable performance measures exclude the income statement impact of certain non-operational items affecting comparability. Items affecting comparability are presented in the financial table section.

An item affecting comparability is an income or expense arising from non-recurring or rare events. Items affecting comparability are recognized in the profit and loss statement within the corresponding income or expense group.

REVENUE AND PROFITABILITY DEVELOPMENT

July-September 2018

In July-September, Verkkokauppa.com Oyj`s revenue grew by 10.8% year on year. Revenue grew by 11.4 million euros, totalling 116.8 million euros (105.4). Revenue increased particularly in televisions, small domestic appliances (SDA), computers, mobile phones and major domestic appliances (MDA).

According to GfK, the demand for consumer electronics increased by 1.9% during July-August in Finland.

Personnel costs increased in July-August by 18.8% to 6.7 million euros (5.7). The increase resulted mainly from the new Raisio megastore personnel. During the third quarter, other operating expenses increased by 0.9 million euros to 7.0 million euros (6.1). The increase resulted mainly from the new megastore in Raisio.

The Raisio megastore has gained market share. The store opening costs have been slightly higher than expected.

Operating profit in July-September 2018 was 3.4 million euros (1.7) and net profit 2.7 million euros (1.4).

Earnings per share were 0.06 euros (0.03).

January-September 2018

In January- September, Verkkokauppa.com Oyj`s revenue grew by 5.6% year on year. Revenue grew by 17.1 million euros, totalling 321.5 million euros (304.4). Revenue increased particularly in televisions, small domestic appliances (SDA), major domestic appliances (MDA), Audio & Hi-Fi and sports.

According to GfK, the demand for consumer electronics increased by 1.9% during January- August in Finland.

In the comparison period, a part of the sales increase was due to large wholesale volumes to customers who export the goods. This part of sales decreased year on year. The volume of these sales is typically difficult to estimate, and their profitability is low. However, these sales contribute to the company`s purchasing volumes and thus improve the company`s position in relation to its suppliers.

On 8 March 2018 Verkkokauppa.com opened a new megastore in Raisio. It is the company`s fourth megastore. The Raisio store has generated slightly higher costs than expected.

Personnel costs increased in January- September by 18.9% to 21.1 million euros (17.8). The increase resulted mainly from the growing number of personnel in stores and in customer service and administration. During the reporting period, other operating expenses increased by 3.5 million euros to 20.6 million euros (17.1). The increase resulted mainly from the launch of the new megastore in Raisio and the increase in the company`s own customer finance, Apuraha, portfolio. The portfolio growth increased the credit loss provision.

Operating profit in January- September 2018 was 5.8 million euros (6.1) and net profit 4.6 million euros (4.7).

Earnings per share were 0.10 euros (0.11).

FINANCE AND INVESTMENTS

Operating cash flow was -18.3 million euros (-4.1) in January- September 2018. In the reporting period, the negative impact of the operating cash flow mainly resulted from a decrease in accounts payable.

Ordinary seasonal fluctuations are reflected in cash and cash equivalents, cash flow and accounts payable, which usually reach the highest point at year-end and the lowest point at the end of the second quarter. Verkkokauppa.com`s practice has been to utilize the maximum amount of cash discounts in the current interest rate environment.

During the reporting period, the company invested in the development of new ERP features, which resulted in the capitalization of 0.3 million euros in the IT department`s salary expenses and external technology consulting fees. The company also invested in ordinary store equipment and furniture. Net capital expenditures were 1.0 million euros (1.2) in January- September 2018.

On 30 September 2018, Verkkokauppa.com had a revolving credit facility of 15 million euros, which had not been utilized.

FINANCIAL TARGETS

The company targets an annual revenue growth of 10-20% in the medium term. The company`s medium-term objective is a growing EBITDA and an EBITDA margin of 3-5%. The company`s dividend policy is to pay out a quarterly growing dividend.

SHARES AND SHARE TRADING

The total number of shares in the company was 45,065,130 on 30 September 2018, including the treasury shares.

Over the reporting period 5,547,823 shares were exchanged on the NASDAQ First North Finland market, representing 12.3% of all shares in the company. The highest share price was 8.09 euros and the lowest 4.30 euros. The average price in share trading was 5.41 euros. The total of the share trading was 30 million euros. The closing price was 4.35 euros, and the market value of all shares was 196 million euros at the end of the period.

On 30 September 2018 the company held 76,138 own shares as treasury shares. These treasury shares accounted for 0.17% of the number of shares. The Company cannot vote with own shares held by it as treasury shares and no dividend is paid on them.

The Board holds a valid authorization to issue a maximum of 4,506,513 shares on a share issue by one or several decisions (share issue authorization of 2018). The Board has not utilized its share issue authorization.

PERSONNEL AND MANAGEMENT

During the reporting period, the number of employees increased by 51, and the total number of employees was 659 (608) at the end of September 2018. The number of employees includes both full- and part-time employees.

Verkkokauppa.com Oyj`s CEO Panu Porkka assumed his duties as the CEO on 22 March 2018.

On 3 April 2018 the company appointed Tommi Jylhä-Vuorio as Sales Director and Seppo Niemelä as Marketing and Communications Director. Niemelä started in his role on 6 August 2018 and Jylhä-Vuorio started in his role on 13 August 2018. Sales Director Jylhä-Vuorio resigned from his duties on 5 September 2018. As a result of the appointments, the Company also established an Extended Management Team, to which Services Director Timo Halonen, Web Sales Director Esa Hjerppe, and Sales Director, Retail Stores, Markus Pätilä joined from the current Management Team. Taina Suorsa was appointed as HR Director and Extended Management Team member as of 1 October 2018.

Verkkokauppa.com Oyj`s Management Team:

• Panu Porkka, CEO

• Jussi Tallgren, CFO

• Henrik Weckström, CTO

• Miika Heinonen, Logistics Director

• Vesa Järveläinen, Purchasing Director

• Seppo Niemelä, Marketing and Communications Director, started on 6 August 2018

Verkkokauppa.com Oyj`s Extended Management Team:

• Panu Porkka, CEO

• Jussi Tallgren, CFO

• Henrik Weckström, CTO

• Miika Heinonen, Logistics Director

• Vesa Järveläinen, Purchasing Director

• Seppo Niemelä, Marketing and Communications Director, started 6 August 2018

• Taina Suorsa, HR Director, started 1 October 2018

• Timo Halonen, Services Director

• Esa Hjerppe, Web Sales Director

• Markus Pätilä, Sales Director, Retail Stores

RISKS AND UNCERTAINTIES

Verkkokauppa.com Oyj`s risks and uncertainties reflect the market and general economic trends, for example, demand for consumer electronics, wholesale trade business, the business environment and competition. The company`s business operations are also influenced by risks and uncertainties relating to, for example, business strategy, investments, procurement and logistics, information technology, and other operative aspects of the business. The aforementioned risks and uncertainties may affect the company`s operations, financial position and performance both positively and negatively. Risks and uncertainties have been presented in more detail in the Annual Report 2017.

LITIGATION AND DISPUTES

Verkkokauppa.com has no open litigation issues nor any significant disputes.

ANNUAL GENERAL MEETING 2018

The Annual General Meeting was held in Helsinki on 21 March 2018. The financial statements for the year 2017 were approved and the Board Members and the CEO were discharged from liability with respect to financial year 2017. It was resolved to pay a dividend of 0.044 euros per share, totalling 1,982,865.72 euros.

The Annual General Meeting authorized the Board of Directors to decide in its discretion on the distribution of dividends as follows:

The total amount of the dividend distribution based on this authorization shall not exceed EUR 0.138 per share (the instalments may differ from each other), in total not exceeding EUR 6,218,987.94. The authorization is valid until the opening of the next Annual General Meeting.

Unless the Board of Directors decides otherwise, the authorization will be used to distribute dividend three times during the period of validity of the authorization and the payment dates of the dividends will be on 16 May 2018, 21 August 2018 and 6 November 2018. The Board of Directors will decide on the record date in connection with each dividend payment decision and the company will make separate announcements of Board resolutions. Before the Board of Directors implements the resolution regarding the distribution of dividend, it must assess, from the viewpoint of Company`s solvency and/or financial position, whether the requirements in the Finnish Companies Act for dividend distribution are fulfilled.

At the Annual General Meeting held on 21 March 2018, all Board Members were elected until the end of the next Annual General Meeting. Christoffer Häggblom, Robert Burén, Mikael Hagman, Kai Seikku, Arja Talma and Samuli Seppälä were elected as members of the Board of Directors. The Board elected Christoffer Häggblom as the Chairman of the Board. Panu Porkka is the company`s Chief Executive Officer since 22 March 2018.

The Authorized Public Accountant PricewaterhouseCoopers Oy was re-elected as the auditor, who has notified the company that Authorized Public Accountant Ylva Eriksson will be acting as the Principal Auditor.

After the Annual General Meeting Verkkokauppa.com Oyj Board of Directors held an organizational meeting, where it resolved on the Board committees. It decided to continue with the following board committees: Audit Committee, Nomination and Remuneration Committee and Strategy Committee. The Audit Committee consists of Board Members Kai Seikku (Chairman), Samuli Seppälä, Arja Talma and Christoffer Häggblom. The Nomination and Remuneration Committee consists of Board Members Christoffer Häggblom (Chairman), Samuli Seppälä and Kai Seikku. The Strategy Committee consists of Board Members Samuli Seppälä (Chairman), Christoffer Häggblom, Robert Burén and Mikael Hagman.

DIVIDEND

Annual General Meeting 2018 resolved to pay 0.044 euros (1,982,865.72 euros in total) per share as dividend. The record date for the dividend distribution was 23 March 2018 and the dividend payment date was 3 April 2018.

Verkkokauppa.com`s Annual General Meeting authorized the Board of Directors to decide in its discretion on the distribution of dividends not exceeding 0.138 euro per share to be paid in three instalments during 2018.

The Board has resolved 4 May 2018 to pay dividend of 0.045 euros per share (2,027,930.85 euros in total). The record date for the dividend distribution was 8 May 2018 and the dividend payment date was 16 May 2018.

The Board has resolved 10 August 2018 to pay a dividend of 0.046 euros per share (2,072,995.98 euros in total). The record date for the dividend distribution was 14 August 2018 and the dividend payment date was 21 August 2018.

OTHER EVENTS DURING THE REPORTING PERIOD

On 16 January 2018, Verkkokauppa.com gave preliminary information on the company`s revenue and comparable operating profit in 2017.

On 27 January 2018 Verkkokauppa.com ended its co-operation with customer loyalty programme PINS.

On 9 May 2018 Verkkokauppa.com started to acquire the company`s own shares and ended the process on 8 June 2018. The company acquired a total of 82,500 own shares for an average price per share of EUR 6.05.

On 16 May 2018 Verkkokauppa.com resolved on a long-term incentive plan for key employees.

SUBSEQUENT EVENTS

On 1 October 2018 Verkkokauppa.com appointed Taina Suorsa HR Director and a member of Extended Management Team as of 1 October 2018.

The Board has resolved 26 October 2018 to pay a dividend of 0.047 euros per share (2,118,061.11 euros in total). The record date for the dividend distribution is 30 October 2018 and the dividend payment date is 6 November 2018.

There are no other subsequent events that differ from usual business events, after the reporting period.

PRESS CONFERENCES

A press conference for analysts, investors and media will be held in Finnish at the Jätkäsaari premises in Helsinki at Tyynenmerenkatu 11, 6th floor, at 10:00 a.m. (EET) on Friday, 26 October 2018, in which Verkkokauppa.com Oyj`s CEO Panu Porkka will present the developments in the reporting period.

A press conference in English will be held by LiveStream webcast on Friday, 26 October 2018 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 www.verkkokauppa.com in the section Investors > Presentations. For both press conferences, a LiveStream is available at www.verklive.com.

COMPANY RELEASES IN 2019

Verkkokauppa.com Oyj will publish its financial reports as follows:

• Financial statements bulleting for the year 2018 on Friday 15 February 2019

• Interim report January - March on Friday 10 May 2019

• Interim report January - June on Friday 9 August 2019

• Interim report January - September on Friday 25 October 2019

Helsinki, Finland, 26 October 2018

Verkkokauppa.com Oyj

Board of Directors

More information:

Panu Porkka, CEO
e-mail panu.porkka@verkkokauppa.com
Telephone +358 10 309 5555

Jussi Tallgren, CFO
e-mail jussi.tallgren@verkkokauppa.com
Telephone +358 10 309 5555

Certified Adviser Nordea Bank Plc
Telephone +358 9 5300 6785

Distribution:

NASDAQ Helsinki
Key media
www.verkkokauppa.com

FINANCIAL INFORMATION

The financial statements release has been prepared in accordance with Finnish Accounting Standards and local legislation, and in compliance with the accounting principles in the financial statements of 31 December 2017. The quarterly report has not been audited. The financial statements are audited at year-end.

Numbers presented in the quarterly report have been rounded and therefore columns or rows do not necessarily add up to the total amounts presented.

* Comparable figures are adjusted according to company release 7 February 2018

* Comparable figures are adjusted according to company release 7 February 2018

* Comparable figures are adjusted according to company release 7 February 2018

* Comparable figures are adjusted according to company release 7 February 2018

CALCULATION PRINCIPLES FOR THE COMPANY`S KEY RATIOS

1) Fixed costs = Personnel expenses + other operating expenses
2) Fixed costs, % = (Personnel expenses + other operating expenses) / Revenue x 100
3) Gross profit = Revenue - Cost of goods and services
4) Gross margin, % = (Revenue - Cost of goods and services) / Revenue x 100
5) EBITDA = Operating profit before depreciation
6) EBITDA, % = Operating profit before depreciation / Revenue x 100
7) Operating margin, % = Operating result / Revenue x 100
8) Comparable operating margin, % = Comparable operating result / Revenue x 100
9) Equity ratio = (Equity + depreciation difference x (1 - tax rate)) / (Total sum of the balance sheet - advances received) x 100
10) Return on capital employed (ROCE), rolling 12 months, % = (Net profit + financial expenses + taxes) / (Average equity + interest-bearing debt) x 100
11) Net gearing, % = (Interest-bearing debt - cash and cash equivalents - interest-bearing receivables) / Equity x 100
12) Earnings per share = Profit for the financial period / Monthly average number of shares adjusted by share issues
13) Comparable earnings per share = Comparable profit for the financial period / Monthly average number of shares adjusted by share issues
14) Earnings per share (diluted) = Profit for the financial period / Monthly average number of shares adjusted by share issues + number of shares according to subscription rights
15) Comparable earnings per share (diluted) = Comparable profit for the financial period / Monthly average number of shares adjusted by share issues + number of shares according to subscription rights
16) Average number of shares at end of the period revised by share split = Monthly average number of shares at the end of the period revised by share split
17) Number of employees at the end of the period = Average number of employees on the last week of the period

Verkkokauppacom Oyj INTERIM REPORT 2018 January - September

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This announcement is distributed by West Corporation on behalf of West Corporation clients.

The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: Verkkokauppa.com Oyj via GlobeNewswire
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