Qliro Group AB (Publ.): Interim Report for 1 January – 30 September 2016

STOCKHOLM–(BUSINESS WIRE)–Regulatory News:

Qliro Group AB (STO:QLRO)

Third quarter (1)

· Net sales for continuing operations decreased by 1%, and amounted to
SEK 917.1 (930.3) million

· Gross margin for continuing operations, excluding items affecting
comparability, rose by 3.0 percentage points to 17.8 % (14.8 %)

· Operating earnings before depreciation and amortization (Ebitda) for
continuing operations, excluding items affecting comparability, improved
to SEK -12.7 (-18.5) million

· Operating earnings (Ebit) for continuing operations, excluding items
affecting comparability, amounted to SEK -31.8 (-28.3) million

· Items affecting comparability affected operating earnings (Ebit) by
SEK -20.0 (-13.0) million

· Net income after tax amounted to SEK -45.8 (-32.0) million

· Earnings per share excluding discontinued operations amounted to SEK
-0.30 (-0.21) before and after dilution

· Earnings per share including discontinued operations, before and after
dilution, amounted to SEK -0.31 (-0.21)

· Cash flow from continuing operations amounted to SEK -109.1 (-111.3)
million

First nine months (1)

· Net sales for continuing operations amounted to SEK 2,945.1 (2,943.0)
million

· Gross margin for continuing operations, excluding items affecting
comparability, rose by 1.3 percentage points to 17.0% (15.7%)

· Operating earnings before depreciation and amortization (Ebitda) for
continuing operations, excluding items affecting comparability, amounted
to SEK -30.0 (-34.2) million

· Operating earnings (Ebit) for continuing operations, excluding items
affecting comparability, amounted to SEK -76.8 (-60.9) million

· Items affecting comparability affected operating earnings (Ebit) by
-35.4 (-30.9) million

· Net income after tax amounted to SEK -206.4 (-72.2) million

· Earnings per share excluding discontinued operations amounted to SEK
-0.64 (-0.49) before and after dilution

· Earnings per share including discontinued operations, before and after
dilution, amounted to SEK -1.38 (-0.48)

· Cash flow from continuing operations amounted to SEK -338.3 (-376.1)
million

(1) Qliro Group’s sale of subsidiary Tretti AB was completed in the
third quarter. Thus, continuing operations exclude Tretti, which is
recognised under Discontinued operations in the consolidated income
statement. Comparative figures in the consolidated income statement and
cash flow statement have been adjusted correspondingly. The table below
also presents continuing operations.

Doubled operating revenue in Qliro FS and significantly improved
profitability in Nelly

During my first two months at Qliro Group, I have focused on getting to
know the organisation better, and together with our new CFO, taken a
more detailed look at our operations. In general, I am impressed by the
growth and opportunities within Qliro Financial Services, the standard
of operations within Gymgrossisten as well as by the significant
earnings improvements in Nelly. CDON continues to grow its sales to
external merchants on CDON Marketplace, but we will need to focus on the
balance between this growth and profitability. Lekmer still has clear
challenges linked to its warehouse operations, affecting growth as well
as earnings, which we are adressing. In summary, we have a very strong
platform to build from, but with challenges and opportunities relating
to operational efficiency.

Our review of operations has also resulted in the decision to reduce
operational risks in the group by introducing a more conservative
approach to several aspects of financial accounting policies, i.a.
capitalization of development expenditures and inventory management.
This has resulted in a negative impact of SEK 20 million in the quarter.
We are confident that this approach will provide a clearer picture of
our underlying earnings going forward, and enable more efficient
governance, tie up less capital and generate improved cash flow.

In parallel, we have initiated a strategy review which we expect to
conclude by year-end. We are reviewing each segment and their respective
challenges and opportunities, while also conducting a review of the
operational structure to evaluate synergies, optimise scalability and
highlight the potential of Qliro Financial Services.

Operational efficiency

Qliro Group’s sales decreased by one percent in the third quarter, while
the gross margin increased by three percentage points to 17.8 percent.
The increase was driven by Qliro Financial Services’ continued earnings
improvement and Nelly’s successful efforts in improving its assortment
strategy and continued focus on private label. On an overall level, our
e-commerce businesses’ sales are not growing in line with the market.
This, however, is partly reflecting a conscious decision to focus on
profitability rather than growth.

A foundation for future growth will be set through more efficient
operations, driven by a structured approach focusing on continuous
improvement.

As it stands today, Lekmer is not profitable. However, Lekmer has a
strong offering towards a segment with high growth potential and the
company has also regained high customer satisfaction, showing that the
underlying business model is attractive. In order to realise this
potential, we will continue to invest time and resources into Lekmer. We
have started by strengthening the company’s management team and
initiated projects focusing on strengthening customer exerience,
IT-innovation and warehouse efficiency.

Significant potential in financial services

Qliro Financial Services continued to grow strongly, and total revenues
increased by 113% in the quarter. Earnings have continuously improved
and reached break-even before tax in the quarter. The company remains
focused on product development to further broaden and strengthen the
offer to both consumers and merchants. Regarding the license application
to operate as a credit market company, we expect that the Swedish FSA,
Finansinspektionen, will revert with their decision before the end of
the year.

Overall, my initial observations are that Qliro Group has well
established brands, a strong product portfolio as well as highly skilled
and dedicated employees. In a rapidly changing environment, it is
necessary to understand and adapt to customer needs and thus to develop
a corporate culture that promotes simplicity, speed and innovation. We
still have some challenges to overcome within our businesses, but I
confidently look forward to working with all employees to create
shareholder value by developing a more competitive and stronger group.

Stockholm, October 2016

Marcus Lindqvist, CEO

For additional information, please visit www.qlirogroup.com

About Qliro Group

Qliro Group is a leading e-commerce group in the Nordic region. Since
the start in 1999, the Group has expanded and broadened its product
portfolio and is now a leading e-commerce player in consumer goods and
lifestyle products through CDON.com, Lekmer, Nelly (Nelly.com,
NLYman.com, Members.com) and Gymgrossisten
(Gymgrossisten.com/Gymsector.com, Bodystore.com, Milebreaker.com and
Fitness Market Nordic). The group also comprises the payment and
consumer financing solution Qliro. In 2015, the group generated over 4.4
billion SEK in revenue. Qliro Group’s shares are listed on Nasdaq
Stockholm’s Mid-cap list under short name “QLRO”.

This information is information that Qliro Group AB is obliged to make
public pursuant to the EU Market Abuse Regulation. The information was
submitted for publication, through the agency of the contact persons set
out above, at 08:00 CET on 20 October 2016.

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Contacts

Qliro Group
Marcus Lindqvist, Chief Executive Officer
Tel: +46
10 703 20 00
or
Mathias Pedersen, Chief Financial Officer
Tel:
+46 10 703 20 00
or
Questions from media, investors and
research analysts:
Erik Löfgren, Head of Communications
Tel:
+46 700 80 75 06
E-mail: press@qlirogroup.com
ir@qlirogroup.com